From the point of view of economic philosophy, I have been mostly a free-market conservative so far, but the current issue of the mortgage crisis has shaken my beliefs. Should the markets be allowed to correct themselves, at the risk of many individual homeowners getting badly burnt ? One could argue that the marketplace is setup so that people learn from their mistakes, but in such a big bet as a house, someone who is burnt once may not get a second chance for a very long time. And there will be newer crop of prospective homeowners who will take the same risks, because it is THEIR first time.
The so-called true conservatives seem to be torn on this issue also. They seem to have drawn a line in the sand at some point, Bear Stearns in this case. So their dictum seems to be : the market should be allowed to function, and the painful effects of taking bad risk should be borne by the risk-takers, unless the risk takers are so big that they will cause a complete collapse of the system. The problem with this approach is that it reinforces the liberal view that the big guy eventually gets off easy.
It is quite a spectacle to see Paulson advocating a major addition to the Fed's powers, while at the same time John McCain calls for a laissez-faire approach. Paulson's proposal is quite in keeping with the current administration's modus operandi - that any additional powers should fall only in the hands of a few ( the Fed in this case) without any oversight or rules attached.
I want to continue carrying my core beliefs, so someone please educate me in the flaws of my viewpoint.
