Should the Government Bailout Private Business?

Should the Government Bailout Private Business?

Should the Government Bailout Private Business?

In 2008 the United States economy was on the brink of collapse. Top government officials determined they had to act quickly or the entire country would experience an unprecedented economic melt-down. This crisis was created by large corporate banks on the verge of defaulting as a result of an excessive number of bad loans. These loans were mostly mortgage-backed securities about to default in the aftermath of the bursting housing bubble. Treasury Secretary, Henry Paulson, believed these banks were vital to the country’s economic system, and they could not be allowed to fail. The plan was simple, the federal government would give the banks needed funds to fend off bankruptcy, and they would save the America economy. However, even though the bailout was needed, the government’s role might unintentionally exacerbated the problem because capitalism is undermined when government prevents a privately owned business from failure. Without the possibility of bankruptcy bank executives have no reason to correct their poor management decisions and their irresponsible activities responsible for the financial crisis. In fact, the bailout condoned their actions by allowing them to continue in the same manner.

The foundation of the United States economy is Capitalism. Many American historians will agree that this country was built on the ideology of free enterprise and entrepreneurship. This allows businesses to operate in a competitive market, free from government intervention. There is a widely held belief that the free market will correct itself because when people are free to choose, they will naturally pick what is best suited to their needs. So the standards are set by the consumer and he or she wants the best product for the best price. In order for a business to survive in the free market it must continue to keep up with consumer demand and offer a better product than its...