6 highlights
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Someone this week asked me what I thought of policy-makers who ex ante profess a free-market ideology and acute sensitivity to the dangers of moral hazard from financial bailouts, but who toss that ideology overboard when faced with a financial crisis. The reference was to Treasury Secretary Henry Paulson’s lobbying this week in support of a rescue for Fannie Mae and Freddie Mac, the two big home mortgage agencies, following on the rescue of Bear Stearns in March.
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Incidentally, before writing this blog post, I checked into the World War II origins of the sentence “There are no atheists in foxholes.” I discovered to my surprise that this expression was intended, and is still considered, as a put-down of atheists, and that their lobby protests its use.
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Of course the proposition is not literally true; indeed some soldiers lose their pre-existing belief in God when confronted with the horror of war. But let us stipulate that those who suddenly face death more often find religion than lose it.
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Indeed, Richard Dawkins argues that vast numbers of people who would no more bet on the existence of God than on the existence of the Easter Bunny, nonetheless call themselves “agnostics” rather than atheists, to avoid rocking the boat.
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I am in sympathy with the character in a novel who said “That maxim, ‘There are no atheists in foxholes,’ it’s not an argument against atheism — it’s an argument against foxholes.”
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So what’s my point? Not to argue that governments should intervene always (nor that they should intervene never). The lesson for government officials is that wherever they choose to draw the bailout line – one hopes the line strikes an intelligent balance between the short-run advantages of ameliorating a serious financial crisis and the longer-run disadvantages of moral hazard — they should think through the system ahead of time.