INSTAVISION: John Allison: The Government Caused The Financial Crisis. And a much-more-of-the-same approach won’t fix it. Plus, the most-regulated sector — finance — vs. the least-regulated sector — technology. Which has done better? And why capitalism is the only moral system for economic organization.
Friday, August 26, 2011
Why I Support Capitalism
Just watch the interview here at the link. It's 11 minutes long, but there's not much in it with which I can disagree. Here is the description provided by Instapundit himself:
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14 comments:
Explain to me where the government created and marketed the idea of derivatives and CDOs - which Buffet shied away from as "weapons of mass destruction." There's no truer capitalist than Buffet. Explain where the government told Moodys and Co to give AAA rankings to toxic assets. Where did the government encourage financial institutions to leverage themselves 200%? Explain where the govt is responsible for AIG's negligence. Explain where the govt told GoldmanSachs to sell people crappy securities while betting against the same thing.
This was all about a reckless and nearly unregulated financial sector - one which Alan Greenspan later apologized for admitting, "I was completely wrong. I never though businessmen would be so foolish with theirs and other people's money."
You can pick on Fannie and Freddie and the CRA all you want ... but a bunch of defaults and foreclosures of poor people can't wreck a global financial system. It takes massive securities fraud for that to happen.
This is flat out historical revisionism that can be marketed to naive and uneducated conservatives.
No one said the banks were blameless. The point remains, though, that finance is a *heavily* regulated industry.
And you can ignore the CRA if you want to, but it was a biggie.
No one's revising history here, but *you* are cherrypicking.
No - the post puts the blame for the 2008 Crash on the government, and that is hogwash.
There is no non-partisan observer who would support that. And there are plenty of conservative economists like Mankiw, Feldstein, and Wheeler, as well as many old school Republicans like Bartlett, Frum, and Gergen who agree.
Finance is not heavily regulated. The SEC had one guy for the entire department of investigating CDOs and derivatives. One guy taking on multiple companies with hundreds making the shady trades. You have a lot of reading to do if you think that industry is heavily regulated.
I know you hate when I recommend you learn something, D. But check out The Trillion Dollar Meltdown or Freefall or watch IOUSA or Inside Job before you make claims about regulations in finance.
CRA could not crash a system. Not even close. And here's a stat for you, D, since you're a numbers guy. 80% of CRA sub-prime loans did not default. 80%, my friend. Meanwhile more than 50% of subprime loans by underregulated freelancers went belly-up.
This was a Wild West Free Market F**K Up - and that is indisputable.
Unless you ignore the facts and numbers.
You don't think finance is heavily regulated? The air is thinner in the Denver area than I remember.
I go to Instapundit, a blog written by a libertarian law professor, and I type "Securities and Exchange Commission" into his search engine, and I read the results. NY Post, NY Times, Wall Street Journal, Washington Post, CBS News--the links in his posts are from mainstream outlets, and they're reporting about SEC screw-up after screw-up. Remember the SEC porn scandal, by the people who *should* have been watching Bernie Madoff?
No one wants to let the banks and money houses off the hook for their misdeeds. Why do *you* want to let the government off the hook for its role?
Your faith in our bureaucracy would be quaint were it no so darned dangerous.
As I suspected. No answer for the facts - just bromides. But's I guess I must love it, because I keep coming back. :-)
Hey, speaking of politics: If you're interested check out my latest blog entry for some links. I'm writing news commentary for an online service. I'd love to hear your thoughts.
SEC screwups? Of course, there are losers in every field. But screwing up regulation? They've been gutted. They've hardly got any people.
And the point is that the finance industry caused the Crash. The SEC was just too weak to stop it.
But they certainly didn't cause it. No way. No how.
Facts! You cherry-pick a couple things and think that makes an intelligent or coherent argument? Pfffffft. You've been listening to former Enron advisor Paul Krugman too long.
Now I'll go check your links :)
If you're going to accuse a man of cherry-picking, then it would be reasonable to simply point out the "selective date" and refute it with the counter-argument.
But, as is your habit, you simply respond with the "you're wrong" defense, and then excuse yourself by saying you're not going to waste your time bothering to debate the point. Thus, your concession generally means you have no idea how to refute the point, and you lack the knowledge to actually prove the charge of cherry-picking.
Thanks, for checking out the links. I appreciate the readership.
I'm not going to debate why the earth is round. Anyone who claims that finance isn't more regulated than the technology sector is living in a partisan fantasy world.
By the way--were those derivatives and such illegal?
Flat earth, really? That's absurd. The argument is about an under-regulated finance industry, and there is plenty of real world, factual evidence to discuss. So, the comparison is ridiculous.
No, the derivatives weren't illegal, but it is indisputable that they caused the crash. And, the rating/selling of assets was questionable, not to mention unethical.
So, the under-regulation of the finance industry led to the sort of risks that derailed a financial system.
Here's a nice story about under-regulated banks in Colorado:
http://www.denverpost.com/business/ci_18773942
Check it out - you might learn something if you're interested in the facts and truth.
http://www.washingtonpost.com/business/economy/sec-moves-toward-charging-fannie-mae-freddie-mac-executives/2011/03/17/AB535zm_story.html
"SEC moves to charge Fannie, Freddie execs"
You only get charged when you do something illegal. The banks and money houses weren't doing anything illegal--how would a beefed-up SEC have stopped them? On the other hand, even President Bush tried to stop Fannie and Freddie and was slapped down by Barney Frank and his fellow Democrats. Hmmmmm.
I don't understand how you think your arguments work together. You first argue that finance had over-regulation that caused the failures, then you argue that that the regulation wasn't applied due to incompetence and that this incompetence shouldn't be ignored, and then you argue that what caused the problems wasn't even illegal and therefore regulation was a non-issue? How do those arguments work together toward something cohesive and meaningful?
The biggest problem I see with your argument is that of the comparison to the technology sector. The technology sector is relatively unregulated and it didn't fall apart, the financial sector is somewhat regulated and it fell apart, therefore regulation causes failure. The truth is the prosperous technology industry is one in which growth can be artificially slowed but guaranteed through under-competition and under-regulation. We have two main desktop CPU manufactures, we have 2 main graphics card manufacturers, we have 4 national cellular companies about to go down to 3, we have 1 desktop operating systems with ~83.3% of the market share, we have increasing rebranding of products instead of actual competition, the list just goes on and on.
The European Union has gone after an increasing number of these companies for antitrust behavior and then you have examples like Samsung which is in the paper yearly for it's unrelenting anti-competitive behavior and price-fixing. Yes, an industry with very few competitors and artificially slow but easily made increases in performance has continued to grow and prosper, but that doesn't mean it's some shining example of proper capitalism and something that ultimately is good for people.
This is a good question, asked well.
My point is that finance *is* heavily regulated, in that there's a lot of law there. Having a lot of law, though, makes it even more likely that the law will be inefficiently enforced. And there's certainly no guarantee that the law is "good" law.
As for the illegal/legal argument, the law as it exists didn't make the activities illegal. More SEC people to enforce the law wouldn't have made a difference; in that I was countering a point Mazenko had made.
An argument can be made that *more* law could or should have been created making derivatives, et. al, illegal. It remains to be seen whether that would be "good" law or if there would be found a legal way around that law.
I'll be honest, Anonymous--I threw this post out as read meat for the lefties who read this blog. The commentary in the video was clearly much more in depth than the paragraph-quote I provided :-)
As for monopolies and other non-competitive behavior--I don't support that, and neither did Adam Smith. I'm certainly not going to say that everything business does (and Samsung's issues are "business"-, not "technology"-related) is right or proper or "good", but the flip-side of that, that government could do a better job, is almost certainly false. I always challenge people to find *one* good program or agency at the state or federal level that is generally considered to be well-run, efficient, and cost-effective. Most, and I include myself here, cannot name one. But look at the flopping done for Apple and Jobs this past week, on the occasion of Jobs' retirement. Everything Apple does isn't perfect--I think they're a bit totalitarian, myself--but I can *choose* not to buy their products, and I cannot argue with their bottom line or their impact in the world of technology.
Again, I appreciate your comment.
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