Watch as Democrats try to blame financial mess on "deregulation"
Posted by: McQ on Monday, October 06, 2008
The Heritage Foundation's "Morning Bell" points me to something Sebastian Mallaby said today in the WaPo:
[B]laming deregulation for the financial mess is misguided. But it is dangerous, too, because one of the big challenges for the next president will be to defend markets against the inevitable backlash that follows this crisis. Even before finance went haywire, the Doha trade negotiations had collapsed; wage stagnation for middle-class Americans had raised legitimate questions about whom the market system served; and the food-price spike had driven many emerging economies to give up on global agricultural markets as a source of food security. Coming on top of all these challenges, the financial turmoil is bound to intensify skepticism about markets. Framing the mess as the product of deregulation will make the backlash nastier.
You had better believe that the intended "bad guy" in government is going to be "deregulation" and thereby the Republicans. And given the probable outcome of the election, free markets will have no champion in the Oval office. The external "bad guy" has already been established - Wall Street (while Freddie and Fanny keep a low profile).
The internal "bad guy" has yet to be identified. But even Democrats understand that they can't side-step the fact that some of the responsibility for this has got to be pinned on government (since it is government on which most of the responsibility lies.). It is just a matter of picking the right victim (no pun intended).
So imagine the scenario - a Democratic House, a Democratic Senate and a Democratic president. Any chance the real reason for this debacle will ever see the light of day?
Of course not. So in anticipation, Mr. Investigations, Democrat Rep. Henry Waxman, has scheduled a whole month of investigations concerning the "financial meltdown". Any guess as to where they might be headed with this?
Well, let's see - on October 16, 2008 the topic is "The Regulation of Hedge Funds". That's when George Soros will tell Congress how he recommends they regulate Wall Street. On October 22, the topic will be "The Breakdown of Credit Rating Agencies". Obviously they need much stricter regulation, wouldn't you say? And finally, on October 23 - wait for it - "The Role of Federal Regulators" is the topic.
But as the Heritage Foundation and any number of others have pointed out, the failure here wasn't deregulation at all. And the claim that Republicans have led the charge to deregulate over the past few years simply doesn't hold water either.
I certainly wish it did, but as with much this administration has done, they instead tried to out-Democrat the Democrats:
First of all, by every quantifiable measure, regulation has increased under President Bush:
* Money spent by federal regulatory agencies is up to $44.9 billion in 2007 from $27 billion in 2001, a 44% increase.
* Total people employed by federal regulatory agencies is up to 244,000 in 2007 from 172,000 in 2001, a 41% increase.
* Total number of pages in the Code of Federal Regulations is up more than 4,500 pages since Bush took office.
* Cost imposed on Americans is more than $28 billion in new regulations since Bush took office.
In total, the federal government imposes a nearly $1.1 trillion regulatory burden on the American people every year. Many of these regulations are justified. Providing transparency and creating information are value-added government functions. Regulation is not per se inconsistent with market principles. Some reinforce property rights and market mechanisms.
But creating a massive government duopoly in the residential real estate market does not reinforce market mechanisms. It perverts them, and it perverts them to such a degree that some estimate that Freddie Mac and Fannie Mae purchased more than a third of the $3 trillion in junk mortgages created during the housing bubble. They did so because heavy government regulation required them to push as much money into questionable mortgage buyers as possible.
Yes that's right, the reason for the meltdown wasn't lack of regulation, but instead regulations and policy that forced a particular behavior contrary to how, if left alone, normal lending institutions would have behaved.
That's not a deregulation problem. That's a policy problem. But, that's not where these investigation will be pointed. To admit that is to admit that Democrats had a huge hand in the debacle.
Let me lay out that very probable scenario again for you - Democratic House, Democratic Senate, Democratic president.
So with that in mind and carrying it to its logical conclusion, what will be the "government problem" they discover as the "investigate" this?
Deregulation, of course.
And the solution?
I'm sure you can't begin to imagine even in your worst nightmares, but I can promise, you won't like it.
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