The bailout runs into a populist backlash
One online group goes so far as to call the financial rescue plan 'the biggest con job ever' on taxpayers.
Walter Howard was living in Corona a few years ago, he said, when he realized that the country's financial system was being run by crazy people.
How else to explain the working-class folk he kept encountering who were receiving loans of $800,000, $900,000, even $1 million to buy homes they couldn't possibly afford?
Howard, 50, a computer programmer who now lives in upstate New York, told me he felt vindicated in having bailed out of the California housing market while the getting was good. But he's deeply upset with the government's plan to spend more than $700 billion bailing out financial institutions saddled with increasingly rancid mortgage debt.
This week, Howard decided to channel his displeasure by joining an online grass-roots movement called Fed Up USA, which opposes spending even a nickel of taxpayer money on rescuing financial firms.
"These are the same geniuses who got us into this mess," he said. "They can get themselves out."
Many people, myself included, have come to grudgingly accept that a massive bailout of the financial sector is necessary to stave off greater calamity, such as a collapse of the global banking industry or a worldwide economic depression. The stakes, by most accounts, are that high.
But as the scope of the bailout takes shape, a populist backlash is emerging, with some people concluding that the only fair outcome would be for failed firms to fail.
"To some extent, it's economic Darwinism," said Todd Zywicki, a law professor at George Mason University who believes the bailout concocted by Treasury Secretary Henry M. Paulson and Federal Reserve chief Ben S. Bernanke goes too far. "That's the nature of a free economy.
"I have no problem with someone making a lot of money if they take risks and all goes well," he added. "The downside of that, however, is that they have to eat any losses."
Like many bailout bashers, Zywicki is a libertarian who prefers less government in virtually all aspects of life. He said federal authorities had no business handing money to companies that, through misfortune or mismanagement, got themselves in trouble.
This is a fair point. In fact, it cuts to the very heart of capitalism.
But as I wrote in Sunday's column, market forces can't always be relied upon to determine winners and losers in the marketplace. In the absence of strong regulation, businesses can and will easily go astray amid their constant search for profit.
