Walter E. Williams, a columnist and economics professor at George Mason University, opposes the government's proposed $700 billion bailout.

He would let market forces correct the financial crisis facing the nation.

Williams is a member of the board of directors of Media General Inc., parent company of the Richmond Times-Dispatch. He was in Richmond for a board meeting yesterday.

Williams talked about the financial crisis and the proposed bailout during an interview yesterday:

Q: You recently wrote in a column that Congress' move to bail out lenders and borrowers who made poor decisions will create incentives for more unwise decisions in the future. Do you still believe that?

A: We should first ask ourselves what is the situation that led to the current state of affairs? A lot has to do with current laws to extend homeownership, such as the Community Reinvestment Act [of 1977] that led to the high subprime rate problem.

Lenders were willing to engage in risky loans, extending guarantees by Fannie Mae and Freddie Mac, and we need to do something about that. That should be part of the solution. I don't think we should just give them a blank check.

Q: So you don't think we should give them $700 billion?

A: No, I don't. . . . If you see a building on fire, you don't call the arsonist who created the fire to help you put it out. Congress caused these problems and I don't think we should look to them to solve the problem.

Congress wrote many laws during the 1930s that caused all kinds of problems and once a law is on the books, it's very difficult to get rid of it.

Q: So you think Congress contributed to the Great Depression?

A: The stock market crash of 1929 would have been a severe problem for a year or two. The attempt to correct it caused a 10-year depression. We exported our depression to the rest of the world.

Q: How dire do you think the situation is?

A: In general, the fundamentals of our economy are, indeed, sound. We are the envy of the world. Europe would give its eye teeth to have an unemployment rate of 5.2 percent.

We have severe problems in one sector of our economy, the financial sector. We need to recognize that as such and not panic into accepting everything the politicians in Washington want us to do.

Q: Is the country heading toward a depression?

A: No, I do not think so, unless we let Congress bamboozle us into thinking we are heading into a depression. . . . I am bullish on America.

Q: What about the investment institutions, mortgage lenders and the like? Is there no culpability on their part?

A: Let's say I'm a lender and there are highly credit-risky people that I wouldn't ordinarily lend to. However, there is a government guarantee program such as Fannie Mae and Freddie Mac, so I can just sell the paper. People are pursuing their own interests given the incentives that they face.

Q: Should Fannie Mae and Freddie Mac be privatized?

A: Absolutely. But so far what we've done, as one commentator said, we have allowed the profits to be private and the losses to be social.

What are the areas that the average American complains about the most? Public schools, police services, the Department of Motor Vehicles. In other words, the areas controlled by government are the areas where most Americans are dissatisfied.

Q: There have been warnings of a cataclysmic meltdown -- of credit markets freezing up, of everything grinding to a halt. What are the chances of that?

A: I am not a soothsayer. But I don't believe that would happen. . . . We had a huge stock market crash in 1987 and nothing was done about it. The next 10 years were the longest period of sustained economic growth in our history.

Q: Could you put this situation in perspective?

A: If we think that what we are witnessing today is a major problem, wait until 2025 or 2030 when Social Security collapses. . . . This will be a drop in the bucket.

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.