Let’s be honest, Hank Paulson may have screwed over BofA shareholders in the very short term and put the taxpayer on the hook for a pretty big loan, but it’s my belief, as I’ve said here before, that without this massive intervention we’d be in a financial nuclear winter.  Not only would Merrill have gone out of business, but BofA and consequently the entire system would have failed.

Kaffee: *Colonel Jessep, did you order the Code Red?*
Judge Randolph: You *don’t* have to answer that question!
Col. Jessep: I’ll answer the question!
[to Kaffee]
Col. Jessep: You want answers?
Kaffee: I think I’m entitled.
Col. Jessep: *You want answers?*
Kaffee: *I want the truth!*
Col. Jessep: *You can’t handle the truth!*
[pauses]
Col. Jessep: Son, we live in a world that has walls, and those walls have to be guarded by men with guns. Whose gonna do it? You? You, Lt. Weinburg? I have a greater responsibility than you could possibly fathom. You weep for Santiago, and you curse the marines. You have that luxury. You have the luxury of not knowing what I know. That Santiago’s death, while tragic, probably saved lives. And my existence, while grotesque and incomprehensible to you, saves lives. You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that wall, you need me on that wall. We use words like honor, code, loyalty. We use these words as the backbone of a life spent defending something. You use them as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide, and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way, Otherwise, I suggest you pick up a weapon, and stand a post. Either way, I don’t give a damn what you think you are entitled to.
Kaffee: Did you order the Code Red?
Col. Jessep: I did the job I…
Kaffee: *Did you order the Code Red?*
Col. Jessep: *You’re Goddamned right I did!*

Tom Cruise = Chairman Towns?  I don’t think it’s much of a stretch. 

And from Mr. Paulson

“During my tenure, the world experienced a financial crisis unprecedented in our lifetimes. The crisis presented a relentless series of novel challenges that required swift, innovative, and dramatic responses. I am proud to have been among the many public servants—in the Congress and at Treasury, the Federal Reserve, the FDIC, the OCC, and other agencies of the government—who came together to confront these challenges and to prevent a far more damaging meltdown of our financial system.”

…”Our financial system underpins our modern economy; commerce today requires a string of payments, whether that string of payments is for delivering a gallon of milk from farm to consumer or for delivering a new product from idea to production. And that string of payments depends on trust. Our financial system works because consumers and investors have confidence in the strength of financial institutions. Last fall, that confidence was largely gone…”

…”Fortunately, the most dire of consequences were averted. I am proud that, along with many others, I brought what experience, talent, and efforts I could to right our nation’s course.”

…”having had the benefit of some time to reflect, and to consider views expressed by others, I am confident that our responses were substantially correct and that they saved this nation from great peril.”

…”Moreover, all public officials involved, including Mr. Bernanke and me, believed that the failure to consummate the merger would likely create immediate financial market instability, would threaten the viability of both firms, and would call into serious question the judgment of Bank of America’s leadership.”

And finally, “I explained to [Bank of America's CEO, Ken Lewis] that the government was supportive of Bank of America, but that it felt very strongly that if Bank of America exercised the MAC clause, such an action would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system. I further explained to him that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America. By referring to the Federal Reserve’s supervisory powers, I intended to deliver a strong message reinforcing the view that had been consistently expressed by the Federal Reserve, as Bank of America’s regulator, and shared by the Treasury, that it would be unthinkable for Bank of America to take this destructive action for which there was no reasonable legal basis and which would show a lack of judgment.”

Summed up in two sentences:  “Mr. Paulson, did you order the code red?!”  “You’re Goddamn right I did!”

(Find Mr. Paulson’s full testimony here)

Throughout the course of the global financial crisis, I have loosened most of my tightly held beliefs concerning market/capitalist economies and all ideas therein. Like many others, I was on board the Free Market train though out the majority of the decade. Letting go of this has been sobering to say the least, but it is becoming increasingly evident to me that we as a nation are dealing poorly with our enormous hangover.

In econ/philosophy we study a simple term called the “slippery slope.” In this term we come to understand that any deviation from a defined dogma or practice creates a greater propensity to continue to move farther away from the original position. This concept is troubling in terms of market economies with everything from universal health care, and more obviously now, governments taking ownership interests in private entities.

While I have acquiesced to the concepts of “systemic risk” and “too-big-to-fail,” I have struggled with each step. The article mentioned above highlights what happens when we go down the slippery slope. “Dr. Doom” asserts that a major reason for nationalization is because we have effectively done it already. This is of course partially true, but his assertion and reasoning are deeply disturbing. It is now, more than ever, that governments and the populace should most fervently resist outright socialism. If we set the precedent of nationalization, we lose credibility on every front. Investors will be even more reluctant to purchase equities and provide private capital. Just look at Venezuela’s most recent economic troubles resulting directly from socialism and lack of foreign investment. If continued and outright nationalization were to occur, the government would turn into a true Leviathon, and set the table for all manners of other socialist policies. If the media, major economists, and the Obama administration want to not only preserve the heart of our capitalist integrity, but also the “moat” around America that makes it so attractive for investment relative to other countries, they will ardently work towards market solutions- not government ones.