Free Market Status: Dead

The bankruptcy of Lehman Brothers, an international banker with a famous reputation, and the acquisition of Merrill Lynch - my internship site this past summer - by Bank of America Corp. (NYSE: BAC) only added to the list of victims of the sub-prime mortgage crisis that has plagued the Wall Street for the past year. Before that, Bear Stearns, a well-reputed investment banker, was merged rather forcibly by the government with JPMorgan Chase & Company (NYSE: JPM). Our most-wonderful government decided that intervention was in the best interest of our economy's health by taking over Fannie Mae and Freddie Mac. Finally, as the creme du de coup, the government decided to bailout America Insurance Group (AIG) with a $85 billion loan... directly from the taxpayers' pocket (read: every single one of us who earn a dime). This past week alone has been a tough week for the stock market, and it leaves people like myself wondering what will happen in the future with our economy.

As a Management major with a finance concentration and a minor in Economics - hence the reason this topic interests me so much - I have learned one principle that generally is a bad news for the market: big government. When the government decides to grow and expand through control and bureaucracy, that is when the market, our so-called free market, suffers from the strangling hold of the "Big Brother." The bailout of Fannie Mae and Freddie Mac is our most recent evidence of government intervention in the capitalistic market. Instead of letting businesses collapse and fail (this is rather painful, but necessary, for the proper operations of a capitalistic economy), the government thinks that they know the answer to every problem, every crisis, and tells us, "We are here to save the day!" I beg to differ.

In fact, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, along with President Bush, has just announced a possible plan for the government to "buy up bad mortgages and other toxic debts," all while using "a 'significant amount of taxpayers' money.'" This proposed governmental intervention will be - read this carefully - "the biggest proposed government intervention in financial markets since the Great Depression." Read more about the government's lifeline to rescue the financial market.

The free market, I fear, might already be dead. Read U.S. Senator Bunning's statement if you think I'm overreacting.

Your thoughts on what's happening in the economy are welcomed.