This is the Cato Daily Podcast for Wednesday, December 10, 2008.

I'm Caleb Brown.

The stability of financial markets has been made worse by morphing bailouts, the Treasury Department's latest floated

ideas and industries belling up to the government trough.

Cato Institute Senior Fellow Steve Hankey has some advice for the next president.

First, do no harm.

What advice do you have for President-elect

Obama and the 2009 Congress to mitigate the problems that have been created up to now.

Don't pull any new rabbits out of your hat and stop scaring the public and minimize the number of hearings that we're having on Capitol Hill and we don't

need any more Circus acts up there.

This is what's scaring the public because it's public confidence now that's completely eroded

because they don't trust any leaders and they are very skeptical of anything coming out of Washington.

So I think shut down Washington as much as possible and do as little as possible and let the market repair itself and spontaneously bounce back from this financial crisis that we've been in.

If they do that, I think by the end of 2009 or early in 2010

we'll be on a recovery path. If they keep intervening and keep debating bailouts

and all these other things, the whole process is just going to be stretched out for a much longer period of time.

The major lesson is that the crisis was created by massive government failure.

On the one hand you had the central bank pushing interest rates down to artificially low levels, 1% federal funds rate in July of 2003 that lasted for a year.

This created a credit bubble. the Congress then also at about the same time was pushing for more money

to be forced into affordable housing.

And the subprime and alternate A mortgages were virtually invented

at about the same time the Fed punched those rates down to 1% in July of 2003.

...