Bloodthirsty Liberal

Under an earlier post about the Muslim woman in Buffalo who was allegedly beheaded by her estranged husband (rather the husband is alleged to have beheaded her; the beheading itself is beyond mere allegation), we’ve had an interesting exchange of comments—upon which I’d like to comment.

Sometimes, the differences between liberals and conservatives are thrown into stark relief, and this tragic story is instructive of one difference.

We would all agree that this woman did not deserve the fate she met. Where we diverge is on how her death might have been prevented. No, let me rephrase. On how she should have lived.

Very generally speaking, a liberal believes in the best in other people. I know this to be true, because that belief sustained me as a liberal far beyond my intellectual certainty that such was not always the case. When a man threatens violence against a woman, we have mechanisms in place to protect her: restraining orders, shelters, etc. But the police will tell you (as I believe Martino pointed out in the comments) that restraining orders are worthless if the man truly intends to follow through on his threat. Like he’s going to care if that charge is added to a murder rap?

A conservative believes in the best in other people, as well, but knows that the best is not all there is. There’s the nasty bit, too. The conservative believes that the hungry should be fed and the homeless should be housed, but also knows the corrosive effect of welfare on will and self-reliance.

More important, the conservative—and maybe I’m actually describing the libertarian—knows that true protection starts with the self. Even the best-intentioned government is less motivated to protect a citizen than is that citizen himself.

Or herself.

Worse, even the best-intentioned government is run by government employees. I remember the first time I ever heard the expression “good enough for government work” (high school, spoken by an older substitute math teacher, describing my best efforts in Algebra 2). I was stunned by its cynicism and its blunt truth.

But good enough for government work wasn’t good enough for Aasiya. It’s too late for her, and reader Carol pointed out that as the wife of such a Muslim man as this, she may never have had a chance. I was going to respond to Carol that Aasiya had five times a day to practice her self-defense when her husband was otherwise occupied, but decided to make this larger point instead.

The conservative/libertarian has the best hopes for people and government, but knows that they are merely hopes. (Trust but verify, as Reagan said.) The liberal may actually understand this, too, but is willing to die for those hopes.

The libertarian would rather live, thank you very much, and would rather that others like Aasiya live. We live in the most civilized country the world has ever known (speaking chauvinistically), but that civilization and a buck could have bought her a cup of coffee (which is as good a weapon as any, by the way, when confronted by an attacker).

I believe it’s important to know this—what we do with that knowledge is up to us.

This is kind of where I come down, only this guy’s a hell of a lot smarter:

If banks were fundamentally sound but temporarily in need of cash, they could sell stock on their own to private investors. Few investors now want bank stock, however, because they cannot tell which banks are merely illiquid — short of cash for new loans because their assets are temporarily sellable only at fire-sale prices — and which are fundamentally insolvent — short of cash and holding assets whose fundamental values are less than the bank’s liabilities.

This lack of transparency is a crucial impediment to new investment, and therefore to new lending.

Government injection of cash, however, does little to improve transparency. A bank with complicated, depreciated assets is in much the same position after the government gives it cash as it was before, since outside investors will still have limited information about the solvency of any individual bank.

Perhaps the new cash will spur the sale of bad assets, or nudge banks to reveal their balance sheets, but that is far from obvious. Banks, moreover, might remain cautious even with this increased liquidity simply because of uncertainty about the economy. Thus it is hard to know whether cash injections will actually spur bank lending.

In any event, government ownership of banks has frightening long-term implications, whether or not it alleviates the credit crunch.

Government ownership means that political forces will determine who wins and who loses in the banking sector. The government, for example, will push banks to aid borrowers with poor credit histories, to subsidize politically connected industries, and to lend in the districts of powerful members of Congress. All of this is horrible for economic efficiency.

Bingo! That much should be obvious to anyone who has bothered to learn how we got into this mess in the first place.

Politicians can swear they will unwind the government’s position once “economic conditions improve,” but no one can enforce this promise. The temptation to use banks as a political tool will be permanent, not temporary, so government ownership will continue for decades, or forever.

Worse yet, government ownership of banks sets a precedent for ownership in every industry that suffers economic hardship. Some might argue that banking is “essential,” but many industries — autos, steel, computers or agriculture — will make similar claims when it is their turn to demand a bailout. Thus banking will be only the first victim in an enormous expansion of the government’s role. This again will have disastrous consequences for economic efficiency.

Say it, brother! Keep preachin’!

The injection means that banks get cash, and they get it now. This benefits current stockholders and bondholders, which is why stocks have jumped on news of the injections.

The government, however, gets stock that might end up being worthless, since some banks will fail anyway. The government gets stock that may never trade in a market or have its value determined by fundamentals. The government gets stock that it cannot sell for years, if ever, without generating turbulence in asset markets as investors interpret the government’s decisions or position themselves to profit from them.

Government purchase of bank stock, therefore, is a transfer from taxpayers to people who took huge risks and lost. The United States, and the world, got into the current mess by trying to insure away risk, which everyone should have known was a fool’s errand. Thus bailing out risk-taking — or providing new guarantees for loans and deposits — will generate even greater problems down the line.

It is time for the government to do the one thing it does well: nothing at all. This might mean serious economic pain in the short term, as more banks fail and the economy suffers through a recession. As for a cancer patient who has a tumor removed, however, the long-term benefit will more than compensate.

I can’t help thinking he’s right. That this mess is taking place during an election means that such tough love and truth telling will get no traction. But his argument has the strength of recognizing how markets work and how interference by well-meaners and do-gooders screws everything all to hell.