On Bailouts: Chinese and US

This evening, I learned the following:

• The government is temporarily guaranteeing money market funds so that they don't drop below par value.
  
• The government is considering buying distressed debt from financial institutions as a way of provident liquidity to the system and shoring up banks' balance sheet.
• The government has banned short selling of securities.

The government in question is, of course, the American.

But it sounds suspicously like another government I know.

In China, the government sets the rates of interest for deposits (effectively guaranteeing those deposits).
In China, the government, in effect, buys distressed debt from banks--I work in this industry.
In China, short selling is banned.

In China this week, the government announced plans to buy stakes in large commercial banks as a way of proping them up. In the US, the government took control of AIG.

In China, the central bank raised rates twice and lifted lending caps on loans to small and medium enterprises. In the US, the central bank (the Fed) provided emergency liquidity to the banking system.

The similarities are striking.

Here, some Chinese officials are almost giddy at America's crisis. After all, Hank Paulson and many before him have made it a habit to come to Beijing and ask the Chinese to reform their financial system (along the lines of what the US has).

I'm for limited bailouts. I agree with Freddie and Fannie--they are quasi-government entities. I disagree with AIG and Bear Stearns. They should have been allowed to fail like Lehman.

I agree with helping people with mortgages, but also ensuring that they don't continue to get into trouble since they know the government will step in (moral hazard).

I'm for free markets, but I'm also for accountability and responsibility for people who run those markets or participate in them. If that requires government intervention, so be it.

And that is all.