This is a Cato special podcast. I'm Caleb Brown with a bailout approved and on its way to the

president's desk for a signature what scenarios are likely to play out as the bailout legislation

is implemented.

Arnold Kling, a former senior economist for Freddie Mac

and the Board of Governors at the Federal Reserve,

lays out a dark scenario for how this bailout might proceed and the legends that may be created even if the bailout is a total failure.

Well, it seems like the legend that's building is that this was a massive failure of a unregulated

capitalist system. No one's been able to pinpoint exactly which regulations were let go and how those caused the result but that doesn't matter.

There was this atmosphere of deregulation and the mere atmosphere of deregulation somehow caused excess and Washington had to step in and bail out.

We're going into an election, I think we'll be going into an election where the Republican Party is likely to be quite demoralized

after this and conceivably we will come out of the election with a Democratic president,

a massively Democratic House and Senate, and the

stage is set for almost any number of socialist type measures where they will say well if the

financial markets can't be trusted well help private health care certainly can't be trusted, so the election

may be defined as a mandate for the United States to adopt a European-style model of Democratic socialism.

I hope I'm not being too pessimistic here.

Maybe I'm overreacting to my team's latest loss as it were but that's my my current thinking that this is

going to have really major structural impacts on the U.S. economy.

We may not have a private sector as we once knew it.

We may, they may move in a direction of government partial ownership of banks,

government, severe government regulation of the financial sector and

through the financial sector everything else.

...