Why are people on the right so quick to excuse the banks?
Reader comment on: Stimulus at Work
Submitted by benjamin (United States), Dec 23, 2009 20:28
This quote makes the banks sound like unwitting accomplices. The banks made the loans, often without checking for documentation or in many cases even taking hold of the note itself. These banks did not expect to make money off the loans themselves, but rather the transaction fees and repackaging of the loans as securities. Had the government regulated these practices, we would not be where we are today. The problem was not government interference in the market, but lack of government regulation of rapacious bankers. I would be curious to know when futureofcapitalism thinks government regulation is a good thing. The FAA? The FDA? Anti-trust laws? Weights and measures? It would seem that the ideological disposition of this site would say that the market would take care of all these areas that the government has inserted itself into. Who needs the FAA? If a plane crashes, people won't fly that airline and it will go out of business? Who needs the FDA? If food is making people sick, people will stop buying that brand. Is there ever an appropriate time for regulation, and how does one decide when that is - more specifically. Perhaps this site needs an alterego - futureofregulation.com. This site overwhelmingly criticizes government action - sometimes this is warranted. But is there anything the government should regulate? Is there anything the government should do other than guard our borders and pave the roads?
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The Future of Capitalism replies:
Well, the road-paving I would leave to private contractors (and perhaps even let them be hired by private operators of toll roads). And I am essentially for open borders, or at least dramatically increased immigration, so I'm not sure that guarding the borders even is a necessary government role. So it's funny that even the two government roles that you assume I favor, I don't. I try to answer some of these questions in thediscussion
with Nicole Gelinas of the Manhattan Institute, and what I said was that government should enforce laws against theft and fraud and provide a court system in which people can resolve contract disputes. I also say there that the Constitution, with its enumerated powers, gives a pretty good guide to what the federal government should do. A lot of the founding fathers thought standing armies were threats to liberty but I've come around to accepting those. The FDA I think it's pretty well recognized causes a lot of deaths by preventing patients from accessing possibly beneficial experimental drugs, and it certainly hasn't succeeded in keeping dangerous or ineffective drugs off the market. The agency was last seen trying to tell Cheerios what it could say on its cereal cartons. Anti-trust regulation doesn't make much sense to me; if a company is exploiting monopoly power to overcharge consumers for poor quality goods, new entrants will arise. The classic example is the decades-long federal anti-trust case against IBM -- while the government was haggling with IBM's lawyers over its supposed monopoly on the mainframe market, the guys at Microsoft, Apple, and Dell were out essentially making mainframes obsolete. I agree the banks are not blameless on the mortgages, but the government, by backing the mortgages through Fannie and Freddie and the FHA and encouraging home ownership through the home mortgage interest deduction, the exemption from capital gains tax on a lot of home price appreciation, and various HUD programs backed by both parties, was pushing consumers into home ownership just as much as the banks and the real estate brokers were.
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