The New Paternalism: Prevention of Private Risk-Taking
April 1, 2010
I find this troublesome:
“What happened in our country should never happen again,” [Treasury Secretary Timothy Geithner] said. “People were paid for taking enormous risks. It was a crazy way to run a financial system.” Geithner said, “It’s the government’s job … to do a better job of restraining that kind of risk-taking.”
It is? Geithner thinks that the government’s job is to restrain risk-taking? This, after the government has engaged in some of the most heinous forms of risk-taking I’ve ever seen (e.g. bailouts, nationalized healthcare). Both great wealth and great loss are generated by risk-taking. If people do not want to suffer great loss, they should not take great risks, but the decision to do so is theirs, not the government’s.
The government should restrain unfair business practices that undermine free trade, such as fraud. But that is not the same thing as preventing risk-taking. The government’s intrusion into the world of financial risk-taking is questionable at best, but I suspect it will be disastrous.