Bailout Raises Libertarians' Market Value

David Boaz, executive vice president of the Cato Institute, describes the U.S. financial meltdown as "a crisis of subsidization and intervention."
David Boaz, executive vice president of the Cato Institute, describes the U.S. financial meltdown as "a crisis of subsidization and intervention." (Photos By Katherine Frey -- The Washington Post)   |   Buy Photo
By David Montgomery
Washington Post Staff Writer
Thursday, September 25, 2008

The specter of the most titanic intervention in the markets since Franklin Roosevelt started sewing the safety net has folks at the Cato Institute reaching for something strong.

"I'm thinking of taking up drinking," says David Boaz, executive vice president.

He's kidding, of course. Just a little gallows humor from the author of "Libertarianism: A Primer," who has a Goldwater poster and two busts of Adam Smith in his office.

Instead, in their handsome building on Massachusetts Avenue, faced with a proposed $700 billion government bailout of Wall Street, this town's most gung-ho libertarians and free-marketeers are reaching for their coffee and their keyboards. They are invigorated. The prospect of doom and ruination for everything they hold dear only makes them stronger.

Like Boaz, so many of the 50 or so small-government and individual-liberty scholars at Cato have a twinkle in their eyes, and not just because libertarians have a sense of humor. (It reconciles the chasm between the country as they would like it to be and the country as it has been since the first bank bailout in 1792.) Their cluttered offices -- piled with papers, reports and multiple copies of their own books -- are like battle stations.

They are cranking out op-eds (Wall Street Journal, New York Post), filing dispatches to the Cato @ Liberty Blog (Titles: "The Constant Bailer," "The United States of Permanent Receivership"). Even lighting up Facebook and Twitter: " 'Wall Street' No Longer Exists."

"Our job is to roll up our sleeves and start talking about what the sources of all these problems are," says President Ed Crane, who founded the think tank in 1977.

The main source: Can't you guess? Yes: the government. According to the Cato narrative, Fannie Mae and Freddie Mac were big-government creatures to begin with. Then, ill-advised government subsidies and incentives drove the creation of dubious mortgages and the bundling of rotten mortgage-backed securities, whose disintegration allegedly threatens to wreck the economy from Wall Street to Main Street.

That's the beauty of this moment for Cato, which might explain the slight spring in the step of some scholars: Far from debunking their faith in lightly regulated capitalism, the feared meltdown confirms it.

"Too much regulation got us where we are," Crane says.

And yet, marring the moment is how few people are getting this message so far.

"The biggest emotion we're feeling right now is frustration that the media narrative is that this is a crisis of the free market, a crisis of capitalism, a crisis of under-regulation," Boaz says. "In fact it's a crisis of subsidization and intervention."

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