It’s widely accepted that it’s the government’s responsibility to devise a rescue plan (and given the size of the problem this seems true). So there have been many, many interviews with politicians who, naturally, encourage the view that someone other than government (ie. themselves) is to blame. Both Obama and McCain are pointing fingers at Wall Street greed and calling for more government regulation including, as a sop to the vengeful masses, capping executive salaries. Almost no one asks what government’s role has been in causing the crisis.
One notable exception to this trend has been the Financial Post where Terence Corcoran, Peter Foster and William Watson have been pointing out a few inconvenient truths.
For example, here’s a list of relevant questions and answers from William Watson:
* Who inflated the housing bubble with 1% money in a strong economy? (The Greenspan Fed.)Here’s Peter Foster on the calls for more government regulation:
* Who encouraged all sorts of low-income, high-risk borrowers to acquire mortgages and homes they were doomed to lose? (Government agencies of all stripes.)
* Who created the stock-option mania in big investment companies by capping tax deductions for executive salaries? (Congress, in the early 1990s.)
* Who prolonged the current crisis with continuing destructive ambiguity, still unresolved, about which institutions would be bailed out and which wouldn't be? (Today's regulators and policy-makers.)
There is almost universal "consensus" (a shudder-worthy concept) that the recent turmoil in U.S. financial markets must be due to insufficient regulation, or at least regulation of the "wrong" kind. So now we must have more and better regulation.And here and here Mr. Foster points to lessons from the Great Depression:
It seems beyond the conceptual abilities of most people that current problems might have been based on too much rather than too little regulation.
They have a blind spot to the role of government programs and policies in promoting the housing bubble, and of facilitating institutions, especially Fannie Mae and Freddy Mac, that were widely perceived as being government backed (and ultimately were).
Wall Street’s recent difficulties have inevitably brought the usual anti-capitalist suspects from their lairs to claim Cassandra status, while in fact merely displaying their deeply embedded prejudices and historical amnesia. Take the CBC. .... Its doleful Washington correspondent, Michael Colton, declared that recent events were an embarrassment for "free enterprise." He then channeled a puzzled public’s lament: "Why can’t American business stand on its own feet?" One might well ask the same question of the CBC.
...what made the Great Depression great was not its depth but its length, and what made it so long was lousy legislation based on misunderstandings of markets and demonization of capitalists. Similar legislation is now being proposed again.And on interference with executive compensation:
FDR’s attempts to "correct" markets and counter capitalist greed led to such policy fallacies as believing that more unionization would force up wages and thus kick-start the economy. These and similar interventionist measures proved disastrous and prolonged the slump.
Lord Skidelsky implies that the Great Depression was a failure of laissez-faire capitalism, but as Milton Friedman pointed out, it should be more accurately laid at the door of government monetary manipulation, while the Depression’s depth and length were due to the uncertainty created by interventionist policies.
Attempts to control salaries have had perverse impacts before. There was uproar over executive incomes during the recession of the early 1990s. This led to restrictions that resulted in the flourishing of stock options, which were poorly accounted for, and in turn were blamed for the excesses of the dot-com boom and collapse of Enron and WorldCom.More here and here from Terence Corcoron.
And there's an instructive thread here, of all places, at Climate Audit.
And finally, Mark Steyn’s observation:
... whenever anything goes wrong in the economy, the fault is always blamed on capitalism, red in tooth and claw. And in this case, both candidates tend to blame greed, untrammeled greed. Well, greed is writ in the human heart and is embedded in our DNA, and has been since the beginning of time. So clearly, greed itself is not the factor...