Fannie and Freddie: Now Too Big to Regulate

The Sting of Sobriety: Lastly, a Journal story called "As Fed Cuts Rates, Retirees Are Forced to Pinch Pennies" discusses a concern I have shared here: the plight of innocent bystanders of the bubble. This is filled with the personal tales of retirees trying to make ends meet in the wake of minuscule returns on their interest income. The following description was especially poignant:

"Low interest rates have always been a threat to retirees relying on interest income. But the relentless decline of the past two years, with no uptick in sight [that might be debatable], is taking a particularly hard toll on elderly CD and money-market investors. These are the people who tried to do everything conservatively with their money. For the most part, they didn't chase Internet stocks, and they didn't load up on debt. They sacrificed to pay off the mortgage while building nest eggs to leave their kids."

Of course, this is one of my objections to Alan Greenspan's series of experiments. It's one thing if rank speculators get destroyed, because if that's what you do, you deserve what you get. But there has been a lot of innocent victims, and a lot of them can count themselves among the unemployed. The Fed's motto is, in essence: "You save, you lose. We bail out the reckless." When you try to suppress the business cycle and stave off the downside, as Greenspan has been trying to do in various ways for the last 10 years, you wind up hurting far more people than you help, and the problems created only become bigger.