A philosophical aspect of the Sub-prime Crisis

I must make this clear first, I am no economist and no core fin guy. When my friends started asking me about the crisis, to get an answer from their old timer all they could get ahs...and ifs and some pure bull-globe talk.

So i tried to comprehend the issues as best i can, consulted the best finance ppl on the campus and read as much of stuff as i could; i assure you there are a lot on the issue on the internet and the finance journals. But, quite naturally, i tried to put it set on some proven frameworks and it does not get any better than Ayn Rand's.

She hypothesizes that every crisis, man made, had been instigated by the governments of the nations. Armed with this one and the knowledge on the web and some disturbed friends i set on to prove this one, at least in part to solace my disturbed mind and finally find some one tangible to castigate my heart out.

I still do not understand fully why all the governments to fight to keep one sector flying and others not; it may be because of lobbyists, ego issues or even ideals. When they do they effectively wipe out the competitive structure of the market of the industry and the associated, with their sheer amount of security and infinite guarantee. All this is fine if the Government is to manage the operations of the business as any private enterprise will do. But speaking historically that is hardly the case (even they faltered monumentally, ask Russia, when they tried to do so).

The US government, in this case, created Freddie and Fannie to support housing sector in mortgaging activities and tacitly backed it. with a clause of bailing them out if they ever defaulted, the bonds of the firms looked as desirable as the US treasury securities to most. Whilst the concerned individual investor will be apprehensive of the risk associated with the Govt led devaluation of the shares in case of the write off, the global markets eagerly lapped up the bonds. with their burgeoned debts and poor supervision of the Government, they tried to rake up huge profits in sub-prime lending and mortgages. before long they cascaded an effect fully capable to collapse the whole economy of the country.

Now the Fed comes into the rescue, in the usual fire fighting mode, take control of the duo and started bailing out companies, those behemoths that required no help from any one as long as US behaved in Smith's way of capitalism, with a blatant proof against its preached free and objective laws.

The governments world wide should take a note of this event and better focus on their core activities of policing and judiciary rather than trying to make adjustments that are so often subject to the whims and fancies of a cheap little bureaucrat sitting idle in some obscure corner of their office, desperately trying to prove to this world that he exists and matters.