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Harvard Libertarian Thinks Bailout Is A Bad Idea

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Sep 30, 2008 9:57 pm US/Eastern

Harvard Libertarian Thinks Bailout Is A Bad Idea

 See How House Representatives Voted

 Timeline: U.S. Credit Crunch & Financial Failures
Reporting
Eileen Curran
BOSTON (WBZ) ― While Wall Street rides its whiplash ups and downs, and Congress tries to hammer out a bailout plan, a Harvard economist is promoting bankruptcy over bailout.

Jeffrey Miron is senior lecturer in economics at Harvard University. He's also a Libertarian. He joined 165 other academic economists, from schools including MIT, Columbia, Stanford and Northwestern, who signed a letter asking Congress not to pass the bailout bill.

"I signed the letter because I felt the proposed bailout was a very bad idea and I thought it was, at a minimum, important that we stop and think about it before we rush to something that was an enormous intervention in the economy."

Miron says it would be better to let some of these big companies fail, than to rescue them with taxpayer dollars.

"If we allow some of the firms, the firms with problems to fail, they'll be taken over by their creditors they will shrink." He says, "They will confine themselves to those activities that do make good sense going forward; commercial lending and things like that."

Miron believes the problems actually started in 1938, when the federal government created the Fannie Mae mortgage program. The goal was to help Americans afford the American dream, home ownership. But, Miron says, in the 70 years since, the government has encouraged lenders to relax their standards, leading to the sub prime mortgage mess.

"Not fixing the underlying problems of getting rid of Fannie Mae and Freddie Mac and the incentives for excessive lending...that's much worse than just suffering through a mild or moderate recession if that happens."

Miron also feels talk of a U.S. economic collapse, is just a scare tactic.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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