Augusta Chronicle Editorial Staff
When both the markets and the economy went into collapse mode last fall, recall how Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, among others, understandably justified the financial industry rescue.
They kept saying how some banking, investing and mortgage institutions were too large to let fail -- that if any one of them went under, they could bring down the entire industry and probably the economy as well.
Truth be known, the feared financial meltdown was like global warming: You weren't sure whether the dire warning were true, but it was too scary not to try to prevent.
In short, something had to be done.
But with the benefit of hindsight, it's instructive to now ask: Why did anything have to be done in the first place?
In other words, how do things get so big that we can't allow them to fail?
As a new administration prepares to take office, one wonders how to restore confidence in a regulatory regime that has failed the nation so badly. The answer, of course, isn't more regulations -- it's better regulations. Under some conditions, that could even mean fewer regulations.
For instance, we don't need more regulations in hopes of keeping huge institutions in line so their collapse won't threaten to bring down an entire industry and damage the economy, thereby necessitating more mega-billion dollar bailouts.
Rather, no private institution or corporation should ever be allowed to grow so huge that the rest of society can't afford to let it fail!
That doesn't require more regulations; it requires commonsense application of antitrust laws. Break up the entities before they grow "too large to fail."
This means putting a few reins on the "merger mania" that lets a handful of institutions swallow up a lot of smaller ones until they become too big, or too interconnected, to fail. The proper role of government isn't just to write rules and regulations, but to create a climate of fair and energetic competition that benefits both commerce and consumers.
Congress is doing exactly the wrong thing by trying to save Fannie Mae and Freddie Mac, the giant quasi-government institutions that contributed so mightily to the subprime mortgage catastrophe that triggered the ongoing economic turmoil. Those are the kind of institutions that the government should be breaking up and selling off -- not keeping afloat until the day comes again when they'll almost surely need another humongous taxpayer bailout.
