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America is viewed as the bastion of free-market capitalism. But to what extent is this really true? And what are the implications for the future? The Subprime Mortgage Crisis leading to the Great Financial Crisis of 2007–2008 caused the entire financial system to experience such turmoil that its very sustainability was in question as it was in jeopardy of collapse.
This crisis lead to the Emergency Economic Stabilization Act of 2008 that provided various bailouts involving capital injections, buying out toxic assets, free credit, and government equity stakes in financial institutions and large corporations.
“I’ve abandoned free market principles to save the free market system.” — George W. Bush, 2008
One particular problem is that most of the assets the government bought from private corporations were difficult or impossible to properly value. Thus, to hedge the overpaying for these toxic assets, the government would take an equity position that would rise and make up a possible overpayment for the toxic assets. Now if the government takes a stake in financial, manufacturing, or automobile corporations, how is that different from government outright owning the means…
