Opinion
Deregulation essential to a prosperous economy
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Also by Jim Allard:
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- Cheaters graduate from college, go on to craft stimulus package (March 3, 2009)
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Suppose an erratic driver is caught weaving in and out of traffic. The driver has been heavily medicated for years. His medical records contain thousands of pages worth of prescriptions, many designed to stimulate the patient and cause him to take risks he would not otherwise take.
Suppose all the major newspapers report the incident and say it showed a failure of doctors to crack down on irresponsible behavior and that the doctors’ de-medication ideology had blinded them.
Suppose a new doctor vowed to fight the alleged de-medication ideology by prescribing yet more drugs, not only for this man, but for drivers in general who, he claimed, would prey on pedestrians and drive recklessly if left to their own devices.
Fiction, you say? Such insanity is now official policy.
Finance and banking are the most heavily regulated sectors of our economy. The federal government controls how much money is available, how much banks may lend and what accounting rules they may use. A single man (e.g., Alan Greenspan) is given the power to arbitrarily manipulate the entire money supply without regard to economic realities — such as setting interest rates below the rate of inflation!
Yet, almost every media voice from The New York Times to the Wall Street Journal is evading these facts and claiming that we are experiencing a crisis of de-regulation and free-market ideology. It’s hard to imagine a bigger lie.
There are over 100 federal agencies and commissions, including the IRS, FRB, FDIC, SEC, CFTC, NIH, DEA, BATF, EEOC, INS, OSHA, CAA, FAA, FEMA, FERC, FCC, FTC and NLRB (to mention a few). In the last 12 years there have been over 51,000 new regulations. The Federal Register last year contained 73,000 pages of regulations. The cost of administering and complying with these regulations is estimated at over a $1 trillion.
Is this de-regulation?
Even more perverse is the oft-repeated claim that irresponsible lending was the result of a free market. It was government that championed high-risk lending precisely because the market was unwilling to offer such loans.
Laws such as the Community Reinvestment Act (CRA) and government-created entities like Freddie Mac and Fannie Mae used government backing to encourage irresponsible lending. As reported by The New York Times in 1999, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people,” and “by expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.”
In reality many low-income people cannot afford homes, and banks are naturally reluctant to lend to them. Rather than accept this fact, government intervention created the appearance of low-risk and enticed banks into making unsound loans.
This is not capitalism.
Are these facts being acknowledged? On the contrary. Despite massive regulation of financial and housing markets and the systematic practice of intervention designed to conceal risk and make unsound lending more palatable, the “solution” we are offered is more of the same.
Treasury Secretary Henry Paulson is now trying to conceal the actual financial state of banks and borrowers. Even banks that did not need or want the government’s handouts were coerced into selling their shares. Why? Because doing so makes it impossible for the market to judge credit-worthy banks from failing banks. It furthers the goal of keeping banks lending and homebuyers borrowing regardless of their actual financial status. It allows keeping up appearances despite economic realities.
At every step, official government policy has been to deny basic facts and circumvent economic reality. And if faking realty in the banking industry is acceptable, why not in the automotive industry too? It now appears that General Motors will be bailed out as well.
None of these policies have anything to do with sound economics or capitalism. Capitalism functions by allowing people to identify the facts and act accordingly to the best of their ability. Some will succeed, and some will fail. Companies will be created, and others will dissolve. Jobs will be created, and others lost. This is reality.
Pretending banks have money they, in fact, do not; pretending borrowers can afford homes they, in fact, cannot; pretending GM is able to make a profit when it, in fact, cannot; and pretending our system is one of capitalism and de-regulation when it, in fact, is not, is a recipe for disaster.
In place of such vacuous mantras as “change we can believe in,” I suggest this alternative: “Nature, to be commanded, must be obeyed.” One can choose to accept the facts or evade them. But in any war between wishes and facts, it is the facts that will win.
Jim Allard (allard@wisc.edu) is a graduate student majoring in biological sciences.
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Hi
You DO see the pyramid scheme symbol on the back of the USA dollar bill, right? You DO see the servitude infestation in capitalism, right? And do you see the “pay up or lose your wellbeing” Chicago mob-like felony extortion widespread within capitalism? Do you see the “join or starve” felony extortion done to the 18 year olds… by this ugly competer’s church called capitalism? See how forcing competer’s religions onto 18 year olds… kills membership in the cooperator’s church (Christianity/socialism)?? Do you understand that AmWay (American Way) (New World Order) got “the exclusive” (legal tender) on the TYPE of survival coupons (money) accepted in supply depots (stores) and how that leverages the 18 years olds into the organization via that felony activity? (It puts AmWay-coupon-only slaving-requirements called price tags… on all the survival goods).
Do you understand how farmyard pyramids work… from your childhood?? Remember?? Upper 1/3 are “heads in the clouds” while the kids on the bottom ALWAYS GET HURT from the weight of the world’s knees in their backs? Still with me? Do you see anything illegal, immoral, or just plain sick… in any of this pyramid scheme’s activities?
Us American Christian socialists are still patiently awaiting the natural fall of the pyramid-o-servitude, or the busting of the free marketeers felony… by the USA Dept of Justice. Us Christians are VERY CLOSE to issuing a cease and desist order until the servitude and inequality goes away… which means it turns into a commune. Commune is a word we LOVE when used in the word “community”… but its one the caps HATE when used in the term “commune-ism”. Go fig. PROGRAMMED!!
Time to level the felony pyramid scheme called capitalism. Abolish economies and ownershipism worldwide, and hurry. Economies just cause rat-racing, and rat-racing causes felony pyramiding. BUST IT, America! Look to the USA military supply/survival system… (and the USA public library system) for socialism and morals done right. Equal, owner-less, money-less, bill-less, timecard-less, and concerned with growth of value-criteria OTHER THAN money-value. Quit doing monetary discrimination immediately, and make it illegal. There are MANY measurement criteria of “value”… not just dollars. Try morals, efficiency, discrimination-levels, repairability, etc etc. Economies are cancerous tumors, and to cheer for their growth… is just insane. Profiting causes inflation, so if caps LIKE inflation, and if they LIKE a terrible time in afterlife when they meet the planet’s ORIGINAL OWNER before caps tried to squat it all with ownershipism, then keep it up with the felony pyramiding. I dare you. While us Christians are finally bulldozing that pyramid scheme back to level, lets make servitude and “join or starve” (get a job or die) illegal in the USA, and lets level the architecture seen in USA courtrooms, too. Right now, USA courtrooms are church simulators or “fear chambers”, by special design. Sick.
Larry “Wingnut” Wendlandt MaStars - Mothers Against Stuff That Ain’t Right (anti-capitalism-ists) Bessemer MI USA
Jimbo, maybe we just need people to enforce the laws that already exist.
Well duh… Alan Greenspan has been gone for some time now.
Stick to biology, you obviously know nothing about the economy/banking.
Perhaps if the Democrats had allowed Bush and McCain to regulate FREDDIE MAC and SALLIE MAE there Democrat executives wouldn’t have been able to make so many bad loads? Perhaps the house of cards would still be standing?
At least it will be harder for the Democrats to escape responsibility for their actions and lack of action now that they hold the Presidency as well as the Congress.
I have to give the Democrats a lot of credit for successfully blaming the Republicans for everything, even though a great case can be made that the Democrats are actually responsible for the Panic of 2008.
Is it just a big coinky-dink that the Panic occured at the perfect time to help the Democrats take the Presidency?
Coinky-dink? Like the Osama Bin Laden tape 4 days before the 2004 Presidential election? Are you saying Bush used terrorists to get re-elected?
It’s easy to say that other people know nothing about something when you, 8:30 AM, are anonymous. Enlighten us as to how banks and economic systems work or don’t get involved.
Nail. Head. You’ve hit it.
I enjoyed reading your article. These are the points that I wish John McCain would have stressed more in his economic platform. When will conservatives wake up and realize they have the facts on their side if they would only stop playing defense on economic issues?
@3:44pm I dunno if thats possible in reality considering a man who used to champion deregulation, Alan Greenspanhas publicly stated that his economic opinions and policy were fundamentally flawed. Deregulation has occured, on a massive scale, just because there are agencies doesn’t mean they do their job, look at the FDA (please if you think Im being an insane conspiracy theorist about the FDA’s inadequacies and blatant disregard of public health, I beg of you to research the topic for yourself. I recommend Marcia Angell’s book, she was the former editor of the New England Journal of medicine). Yes it was in a democratic presidency that his deregulation happened but it is still conservative economic policies, and once again government control is necessary to fix it. Pretending like this is a result of overregulation and not massive deregulation just means you have your head up your ass. Hopefully the government cant start protecting people like it does corporations, but sriously stick to the bio and get off the libertarian bent, the free market is fine as long as your cool with screwing over innocent people, if you’re not it wont ever work the way it does on paper.
What an idiot!
The “Osama Bin Laden tape” effect is not even close to the greatest financial panic in over 100 years.
Soros and his buddies just over-achieved in their effort to tank the economy to help the Dems.
Haha! The article is titled “Deregulation essential to a prosperous economy” but when you read it, there’s no evidence or support for this claim. Not a shred! Haha! Instead, he gives us scintillating factoids about how our federal government passes a lot of regulations (Imagine! Are these all related to the economic issue?) and an unsourced claim regarding the adumbrated costs.
Worth the read for the entertainment value alone.
So,
@ 6:43,
WTF? lol. There are so many things that don’t make sense/contradict itself in that rant that I don’t know where I can begin. Sheesh, and i’m not even a “just plain sick” laissez faire capitalist.
But anyway, I really do agree with 3:44. If we had a party that actually was for small government I wouldn’t cringe every time I thought of politics. Right now we have a democratic party, and another democratic party except that it is affiliated with religion and Bush (huge deficit spending).
So yay for the economy.
Now, Jim has a lot of facts in his column. If these are right, then damn, what the hell is wrong with our media/society??
Umm…$750 BILLION dollars of taxpayer money to go to people who can’t responsibly run their own businesses? I know the solution! Let’s give them our money and then deregulate our the economy more, so that some hot-shot asshole can knock on the flap of a cardboard box in New York City, and ask a homeless man if he’d like an adjustable rate mortgage. As someone astutely said above, we need to ENFORCE the laws that we have in place, so irresponsible, greed-ridden, predatory lenders can go to jail.
As an econ major, I can say without hesitating… you don’t know what you’re talking about.
Yes, forcing Fannie, Freddie, etc. give loans to high risk people helped in creating this crisis, but what had a bigger hand in it was the guys at AIG and other insurance and investment firms offering more or less insurance policies on people’s mortgages and investments for the sake of making even more money. But a slight problem arose when Lehman Brothers, Fannie, and Freddie went under… AIG and co had to pay all those securities at once. And they didn’t have anywhere close to enough money for it.
I can say without bias that both parties, too much regulation on mortgages, and the lack of regulation on investment and insurance caused this dire economic situation.
2:30 pm: Alan Greenspan has not headed the Federal Reserve for TWO (2) years now.
2:30 pm And it was Ronald Reagan who first appointed Greenspan, then re-appointed by George HW Bush, …
George W. Bush frequently bragged about the government’s role in increasing homeownership rates and in decreasing government regulation of the housing market. In 2004, for example, Bush told a group of carpenters in Phoenix that “the housing industry is booming, which means more people own their home. And that’s positive.”
During an October 2004 speech to the National Association of Home Builders, Bush talked about his administration’s record on encouraging homeownership — including a proposal to allow first-time buyers to make no down payment. Adding that “we must remove the regulatory barriers on our home builders.”
Not until the walls were crumbling down around him, did Bush change his message. You know… flip-flop.
wait, what is our money backed by? hypotheticality? there is no gold standard, and the government doesn’t even own the money ultimately. it leases it. go capitalism!
Regulation is needed to ensure a free market. Once you’ve achieved the goal of ensuring a free market environment, regulation can become very damaging. Dead weight loss is inevitable in over regulated environments. The US economy is a mixed bag. Unions see to it that labor markets are over regulated by forcing employers to pay artificially high compensation to employees (see auto industry) and at the same time, the SEC has completely failed in providing transparency in derivatives markets through its regulations.
Democrats and Republicans dropped the ball. It will be interesting to see if anyone can figure out how to pick it up. I don’t have a tremendous amount of faith in either party, but considering Democrats encouraged a lot of the irresponsible credit lending that perpetuated this current economic crisis I wouldn’t favor their odds.