From The LA Times
Editorial

There’s something un-American about the government rescuing private companies that made bad bets in a competitive marketplace. It runs counter to the mythos of this land of opportunity, where the freedom to fail goes hand in hand with the freedom to succeed. It also violates our sense of fairness: Why should the reckless get help when the prudent do not?

That’s why so many people objected to proposals earlier this year to help homeowners who were defaulting on their mortgages in record numbers. And now, as Washington prepares what may be the largest bailout in history, there may be as much resentment about the proposed lifeline for Wall Street as there is fear of the financial system collapsing. Being politicians, presidential candidates John McCain and Barack Obama have given voice to that anger. But McCain skewed his analysis of the situation in a clumsy effort to link Obama to the problems. And Obama placed too much faith in regulation to protect taxpayers.

Rather than looking backward for someone to blame, McCain and Obama should be focusing on the problem in front of us. Financial institutions are buckling under the weight of hundreds of billions of dollars in investments that have lost their market value. The main question for politicians isn’t whether to act — the comments Friday by congressional leaders and top administration officials made it clear that Washington will undertake something extraordinary — but what to extract from the companies that are helped and how to prevent the problems from recurring.

The year-old credit crunch grew out of the housing bubble, whose roots lie in the low interest rates that the Federal Reserve maintained after the 2001 recession. An array of factors combined to turn the Fed’s spigot of cheap money into a stream of increasingly risky mortgages and related securities, including poor underwriting, financial incentives that promoted predatory lending, inaccurate risk estimates by ratings agencies and new credit derivatives that spread the exposure to bad loans.

Read more Bailing Out