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POPSDo Not Let The ‘Cure’ Destroy Capitalism The government has overridden contracts and rewarded many of those whose poor decisions helped create the mess. It proposes to override even more contracts. As a result of the Treasury’s actions, we face further distorted decision-making as government ownership of big financial institutions threatens to substitute political agendas for business judgments in running these companies. While such dramatic measures may be expedient, they are likely to have serious adverse consequences. These problems are symptomatic of three basic flaws in the current approach to the crisis. They are an overly broad diagnosis of the problem, a misconception that market failures are readily overcome by government solutions and a failure to focus on the long-run costs of current actions. The rush to “solve” the problems of the crisis has opened the door to government actions on many fronts. Many of these have little or nothing to do with the crisis or its causes.
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