Here is the letter I submitted to the Daily Lobo:

While I sympathize with Derek Lynch’s point about the disconnection between Republicans and conservative values, his characterization of the bailout was factually inaccurate.

Barack Obama voted for (not against) the bailout. The government did not write Wall Street a “blank check.” It authorized itself to buy distressed securities to stabilize the market. Financial institutions owned assets with real underlying value, but when the real estate bubble burst, housing prices dropped and foreclosures increased. This caused a cascade in the financial market as lenders became hesitant to extend credit when a great deal of ambiguity and uncertainty obscured the stability of other financial institutions. This credit freeze was exacerbated as many of the assets corporations could borrow against were quickly losing value. Many of these institutions rely on credit to execute their operations. While the value of mortgage-backed securities (and securities in general) will recover, financial corporations need cash now, or they will face insolvency. The government could help if it bought distressed securities from firms with cash-flow problems at a hefty discount. When the housing and financial markets recover, the value of those securities will appreciate and the government has a good chance of making money in the long term.

Democrats share some culpability for the financial crisis. The Clinton administration, under the misguided notion of an “affordable housing” policy, directed Fannie Mae and Freddie Mac to accumulate subprime debt – to give loans to people who couldn’t afford them. The deregulation of banks and the financial sector also had roots in that administration, but in many ways, deregulation has been a boon for the consumer and firm alike. Banks today can operate branches in multiple states, attract more deposits, offer lower borrowing rates, and acquire distressed companies like Merrill Lynch. The fallout of the Merrill Lynch collapse, for example, would otherwise be borne by the taxpayer if Bank of America had been barred from acquiring the distressed broker. More importantly, a return to a stricter regulatory regime would cause capital flight as foreign firms would not be similarly constrained.

The collapse of the financial sector would not be confined to “greedy” executives in lower Manhattan. Without efficient financial services, the real economy would severely contract.

If we are looking for instances of the government “stealing” from us to serve special interests, we need only look the “hands-on” entitlements passed by FDR and LBJ. Social Security and Medicare redistribute (steal) from the young and give to the elderly. The elderly are among the wealthiest in the United States in terms of accumulated wealth and income. If students want to protest the political entrenchment of a special interest, I say we start with AARP.

The only adult, responsible option for the economy in the long run was to pass the bailout. Many of us are complicit in the financial crisis. When do we blame people who bought mortgages they couldn’t afford? Where were Moody’s and the other credit analysts? Assigning blame to mythical, greedy powers that be foments unnecessary and polarizing class warfare.