Ron Paul just used his five minutes during today’s AIG hearing to note that the Federal Reserve’s easy money policies and other moral hazards created by government actions helped get us into this mess in the first place. He posed a key set of questions to Ben Bernanke and Tim Geithner — do they believe in the free market? And does the crisis represent a failure of the free market or the failure of the crony capitalism that we’ve been living with for decades? Bernanke responded without addressing Paul’s specific criticisms of the Fed’s policies. He said he believed in the free market, but that sometimes it is subject to bank panics and booms and busts and in those cases the government needed to step in to stabalize the system. Paul asked whether in taking action they were simply creating moral hazards that are making such crises last longer than they needed to, but he ran out of time before Bernanke responded and before Geithner had an oppourtunity to chime in.
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