John Stossel has a piece today...

...on why he is a libertarian. I have to say, I was a little disappointed. It seemed tired to me.

I'm reading Too Big to Fail (again), and I'd like to know what Stossel would say about this passage:

[AIG] had "$1 trillion of exposures concentrated with 12 major financial institutions." You didn't have to be a Harvard MBA to instantly comprehend the significance of that figure: If AIG went under, it could take the entire financial system along with it.

Or this one from former Fed vice chairman Alan Blinder:

One day a little Dutch boy was walking home when he noticed a small leak in the dike that protected the people in the surrounding town. He started to stick his finger in the hole. But then he remembered the moral hazard lesson he had learned in school..."The companies that built this dike did a terrible job," the boy said. "They don't deserve a bailout, and doing so would just encourage more shoddy construction. Besides, the foolish people who live here should have never built their homes on a floodplain." So the boy continued on his way home. Before he arrived, the dike burst and everyone for miles around drowned--including the little Dutch boy.

Perhaps you've heard the Fed's alternative version of this story. In this kinder, gentler version, the little Dutch boy, somewhat desperate and worried about the horrors of the flood, stuck his finger in the dike and held it there until help arrived. It was painful and not guaranteed to work--and the little boy would rather have been doing other things. But he did it anyway. And all the people who lived behind the dike were saved from the error of their ways.

And that's the trouble with libertarianism. It works better in a text book or a classroom than it does in the real world.