President Obama and the New, New Deal.

Failure is part of the natural cycle of business. Companies are are born, companies die, capitalism moves forward.--Fortune Magazine.

Now is A Good Time To Read About the Great Depression. I recently read a book by Amity Shlaes entitled, The Forgotten man. She wrote in detail about Hoover and Roosevelt and how they attempted to deal with sudden deflation, high unemployment, and a drastically reduced standard of living for the average lower and middle income family. Her description of that time shows some strong similarities to the economic environment today. As an example, consider the resentment of the working class and the high salaries and bonuses of company executives. In 1931, congress debated legislation barring government loans to companies where the CEO made in excess of $15,000 per year. Recently, there have been similar debates over barring government assistance to companies where the CEO earned more than $500,000 a year. These numbers are equivalent if we allow for increases of 4.7% per year in CEO salaries.

The House Has Passed a Bill Allowing Judges To Reduce The Balance On A Loan.
This bill hasn't passed the senate yet however, there is widespread support among middle class Americans who want to allow many families facing foreclosure to keep their homes. This is similar to the Frazier-Lemke Act of the 1930's which limited the ability of banks to repossess properties. In 1935, the Supreme Court overturned that act saying, "even a contract between a starving farmer and a nasty bank has to be honored, and the government does not have the right to intervene."

Central Planning vs Free Markets. One of the biggest political controversies right now is whether the government should utilize a total "hands off" policies towards business or whether they should utilize a more "heavy handed" approach. Those who favor a total free market approach tend to believe that supply/demand and pricing mechanisms will regulate the markets far better than government attempts to use central planning as a means of providing stability. Free market advocates tend to believe that there are so many complex interactions in the marketplace that it would be impossible for governments to do an adequate job. Those who prefer a central planning approach point to recent abuses by wall street and industry as an example of why we cannot trust the markets to regulate themselves. Both sides have a point; however, I tend to believe we should err on the side of minimal government intervention. Taken to the extreme, either approach can prove disastrous. Even during the great depression, there were numerous examples of government intervention that went too far. Right after a famous case in which the Supreme Court found against the government's intervention attempt to control the operation of a small chicken slaughtering operation, Justice Brandeis warned government lawyers that "This is the end of this business of centralization, and I want you to go back and tell the president that we're not going to let this government centralize everything."

Now is a Time To Be Wary of Both Business and Government. Somehow we have to strike a balance between regulating everything or allowing business to continue with the excesses of the past. The free market has allowed corporations to be run for the benefit of executives in some cases and union employees in others. This has been at the expense of shareholders in some cases but may end up at the expense of tax payers in the future. As difficult as it may be to let some large corporations (banks and car companies) fail. It may be the least painful in the long run.