If business at insurer American International Group were booming, no one would say that we, as taxpayers, should be able to share a piece of the pie. Now that AIG is in trouble, the government steps in, and taxpayers ultimately bear the burden of the bailout. This is the epitome of short-sighted "big government" involvement.
Doing nothing may risk a broader downward spiral in the financial markets. But, for all those who trumpet "deregulation" or less government regulation, we should remember that appropriate constraints -checks and balances against institutions behaving irresponsibly - are designed to prevent the type of "Big Government" involvement we're seeing now. When regulations and accountability are missing, and the burden of rescue is subsequently is placed on everyone, the ensuing policy becomes tantamount to a kind emergency socialism. Certainly, neither these troubled institutions nor conservative financial pundits would dare endorse such regulatory policies without the current unfortunate hindsight.
Losses, as well as profits, should be dealt with by those who played by the rules of the game. If taxpayers continue to be the unavoidable "fall guy" for institutional bad behavior, the rules of the game need to be changed.
Published in The Boston Globe editoral page, A14 September 19, 2008