The Role of Government

With the government injecting itself in the business of...well, business (i.e. the most recent federal bailouts of AIG to the tune of $85 billion and a request from the Bush administration for Congress to grant the Treasury Department the power to acquire $700 billion in bad mortgages) , I thought it would be a good idea to take a look at the responsibilities of two facets of our government that are charged with monitoring the economy: the Securities and Exchange Commission (SEC) and the Federal Reserve.

The SEC (http://www.sec.gov/about/whatwedo.shtml) is essentially responsible for regulating the stock market and preventing corporate corruption related to corporate reporting. The SEC is responsible for licensing and regulating stock exchanges and administering various laws that regulate the stock market.

The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies found to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation (http://en.wikipedia.org/wiki/SEC#Overview).

The Federal Reserve is essentially responsible for monetary policy (http://www.federalreserve.gov/default.htm). The Federal Reserve is the central banking system of the United States. It's primary focus is to addressing banking panics, to strike a balance between the private interests of banks and the centralized responsibility of government, to manage the nation's money supply through monetary policy, to maintain the stability of the financial system and markets, and to strengthen the standing of the United States in the world economy (http://en.wikipedia.org/wiki/Federal_reserve#Purpose).

My essential point is these two organizations bear much of the responsibility for the recent mortgage/credit crisis. However, I do not think it is right to the federal government to bail out these corporations, at least without major consequences. At the end of the day, the corporations who have been bailed out by the government signed off on the loans that sent this portion of the economy off track. They should bear full responsibility for their actions, and pay a hefty price doing so.

If pumping government money towards these corporations is really our only option (and I am not in any way qualified to make that distinction) the federal government must also take steps to make sure a large quantity of bad loans is never signed off on again. Corporations can not go around conducting business knowing if they get too far in over their heads, the government (meaning you and I) will bail them out.

Until we meet again, goodbye!