Free market deeply flawed

On Oct. 23, Alan Greenspan, the Federal Reserve chairman for 18 ½ years, said there may have been a flaw in his free-market ideology. In a House hearing on Thursday, Greenspan told lawmakers that he "found a flaw ... in the model that I perceived is the critical functioning structure that defines how the world works." He also said that he and others who believed lending institutions would do a good job of protecting their shareholders are in a "state of shocked disbelief." When the state of our economy leaves Alan Greenspan "shocked," you know we're not in a good place. The American taxpayers (and probably their children's children) are going to be left feeling the strain of a (approximately) $700 billion bailout, meant to be loaned out to companies such as AIG and Bear Stearns (Oh, and Fannie May and Freddie Mac, too; can't forget them!). When the government needs to step in to make sure this debacle of a system doesn't take everyone down with it, it might be time totighten a few loose strings in the Fed's policies for banks and lending institutions. It's kind of a pretty thought: the market will carry itself if we sort of just… let it be. Yet substantial deregulation has only proven to really screw things up for financial industries and, more importantly, the everyman. Whenever the housing market was up a few years ago, everybody was clambering for a piece of the pie. Mortgage lenders were going nuts giving difficult mortgages to "subprime" home buyers, with promises of being able to refinance during "favorable terms". Once interest rates started to rise in 2006-2007, housing prices fell. People weren't able to refinance or pay their mortgages, and sooner rather than later, they ended up having to file a foreclosure on their home. It's partly a "living beyond your means" thing, but why was it even like that in the first place? Who decided that it would be okay for companies like New Century and Ameriquest to lend to people who simply couldn't pay back what they borrowed? Nobody did, that's who. The governmentwas letting the market do its "own thing" for a while, which was seen as a window of opportunity for greedy lenders to do their "own thing": take from the poor to give to the already-wealthy. That's real capitalism at work, right? Now, let's see what we have in front of us: a $700 billion (oh yes, billion. Just think about it for a second) bill passed by Congress to get us out of the gutter. Well, sounds great! That is if it actually works, of course. Where is this money going and how is it going to be used, you ask? The money is already starting to go towards banks for… what purposes? According to the Boston Herald, Alabama Sen. Richard Shelby (the top Republican on the Senate Banking, Housing, and Urban Affairs Committee) said that the money has "deviated significantly" from its original purpose. First, it was meant to buy devalued mortgage-backed securities (multiple mortgage loans grouped together to form a collection of debt, then sold to investors who hope to God that the mortgages will be paid) from banks that were on the verge of collapse. Then, purportedly $250 billion would be used to buy stakes in banks. If all would go as planned, the banks would use that money to start making loans again. However, there have been reports that bankers plan on using that precious $250 billion for things such as buying other banks, paying dividends, giving employees a raise and executives a bonus. I don't know about you, but that sounds like a real economy-booster to me. Even having a smidgen more regulation may help prevent future occurrences such as these from happening. The government cannot let banks run amok with our money anymore. We have seen what an economy let loose has done, and man, it's disheartening. Accountability needed to be pressed on the mortgage and lending industries, and it needed to be done by the government. The so-called "free-market" before this financial crisis was lacking necessary oversight and, yes, accountability. The bailout can partially help, but only if the government insists on the proper use of this $700 billion. Any other way would be too unfair to the citizens who are paying for it.