While doing my economics program back in India, there was always an inherent conflict when we studied International Finance, Monetary Policies and free trade in one semester and rural development, public distribution and Public sector planning and management in another semester. I was always told the government intervention was necessary for a under developed country and especially the ones that followed a socialistic principles. People there lived with inefficiencies that government intervention brings in and the corruption that politicians and bureaucrats injects to the system.America was always a case study for students across the world to demonstrate how a laissez-faire capitalism could work to brings in efficiency. However, today's news is not the best for free market advocates. Following the European governments, the U.S Govt is going to take stake in financial institutions by injecting capital to halt the worst financial crisis. Ben Bernake studied depression and crisis closely before his current job so he probably knows what's needed best at this juncture.
Forget about the ideologies - its a luxury good in times of crisis. And here, the government is not talking about taking over the entire institution or controlling the paycheck of the senior management. What they are talking is using tax payers money to stabilize the market.
When we take a look at the market valuation of financial companies, its probably at rock-bottom compared to other sectors. When the government injects capital, its equivalent to buying their stock in the market. I believe America is fundamentally a strong country so the the market is going to bounce back in 2-3 years so this is a great opportunity for the U.S government to make some money for the tax payers.
Warren Buffet is also doing the same thing but the only difference is he pays tax and keep the rest to himself.
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