Stopping The Looting

While Warren Buffett thanked American taxpayers for the bailouts that made him more wealthy, Henry Blodget gets it right when he says the bailouts destroy free market capitalism:

The only self-regulating measure capitalism has--and it's an effective one--is the punishment of those who make mistakes. In a normal free market, when you sell lousy products or make dumb investments, you lose your money. And the fear of losing money encourages better decisions, which helps all of us.

By bailing out Wall Street--preserving equity value, preserving bonuses, subsidizing massive profits through artificially low interest rates--the government suspended this natural law of capitalism. In so doing, it rewarded the folks who had made the worst products and the dumbest decisions of all. And the country is NOT better for that.

Meanwhile, three years into the housing collapse, the FDIC has started criminal prosecutions:

The Federal Deposit Insurance Corp (FDIC) is conducting about 50 criminal investigations at U.S. banks that have failed since the start of the financial crisis, the Wall Street Journal said.

Thousands of criminal indictments should be forth-coming and the outrageous banker bonuses must be clawed back to make Fannie Mae and Freddie Mac whole.