My “let the storm pass” theory now has verification from a guy who looks like this. Dan 1, Paulsen 0.

His name is Jeffrey A. Miron and he’s a senior lecturer in economics at Harvard. Says he:

This bailout was a terrible idea. Here’s why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

…

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

See? Just come to BipolarNation, and you’ll get Harvard-quality opinionation for free.

In related news, it seems that pressure from us - the American people - was able to get politicians worried about elections and vote the way the people wanted it. Sometimes the system works. Yahoo News says the most vulnerable politicians voted “no.”

In related related news, it looks like stocks aren’t going to go haywire again today. In Europe they seem stable, and apparently the U.S. market is going to open up some points when it opens in about ten minutes.

In related related related news, Bush is warning of “painful” and “lasting” damage apparently; first of all, Bush has been wrong on this bailout, and second, siding with Nancy Pelosi gets you nowhere and it gets you blasted by Nancy Pelosi.

This crisis is an economic storm that’s correcting an imbalance (an imbalance that came from too much regulation, not too little).

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