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Dear NY Times: Bailouts Undermine Themselves

Editor, The New York Times

620 Eighth Avenue

New York, NY 10018

 

To the Editor:

Editor, The New York Times

620 Eighth Avenue

New York, NY 10018

 

To the Editor:

 

Councilwoman Melinda Katz's letter today reveals an ironic pitfall of government bailouts of private firms – namely, the inevitable demands by demagoguing politicians that recipient firms be hamstrung in their ability to respond to market forces.

 

Ms. Katz argues that credit-card companies that received bailout funds should be prevented from raising their rates. While I have no sympathy for any firm that accepted taxpayer funds, the fact is that a firm must be able to change its prices in response to changing market conditions if it is to survive in the market.

 

By turning private firms into quasi-political entities, bailouts undermine their own ostensible purpose of making these firms strong and nimble competitors.

 

Sincerely,

Donald J. Boudreaux

 

Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.