During the financial crisis, the Federal Reserve balked at bailing out General Motors (GM). The Fed could have bought the automaker's bad debt, just as it took bad mortgages off banks' books. Ben Bernanke pronounced assisting GM would be industrial policy, and limited the Fed to extraordinary measures to stabilize banks and credit markets.
The next financial crisis could be defined by the sagging fortunes of health insurance companies under Obamacare and American companies who invested in China's allegedly recession-proof economy.New Fed Chairman Janet Yellen is well known for her liberal political views, which in my view color her economics. In a crisis, she could see the limits of Fed policy discretion very differently than Bernanke. If a health insurance crisis erupts, using the Fed's money printing machinery to bail out health insurance companies and Obamacare could put America on a path to inflation and corruption similar to Latin American nations during the 1970s and 80s. It would be up to Republicans in the Senate to force hearings and compel Chairman Yellen to defend the dollar, not debase the currency. Standing up to the failures of liberalism has never been politically easy. Republicans like Speaker Boehner and Congressman Ryan are rightly the targets of Tea Party criticism. All along, at crisis moments like these, they have capitulated. Now standing strong for America is even more difficult, but if not now, when?
This article represents the opinion of a contributor and not necessarily that of The Street or its editorial staff.
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