Monday, March 31, 2008

Emperor Seeks Emergency Powers, Jedi Not Worried

Hello, this is your local Market Stability Regulator calling. Your papers please?

Once again, the government has done everything in its power to cause the current financial crisis, yet it simultaneously is using the crisis as an attempt to justify ever more regulations. As always, the initial regulations as well as the entire structure of the central banking system is not brought into question as the culprit. Naturally, it is unscrupulous and even "uneducated" [fill in specific businessmen here] mortgage lenders that are now to blame. Just as the oil companies were allegedly colluding to raise the price of gasoline, now we are to believe that the mortage bankers apparently found that lending money to people who have no ability to repay was really the evil, greedy thing to do.

Are we supposed to believe that in an unregulated environment where the government does not stand as the lender of last resort and/or literally underwrite these mortgages through Fannie Mae and Freddie Mac that mortgage bankers would have felt comfortable lending money to people with spotty credit and no ability to repay? Are we to believe that under a 100% reserve gold standard, the banking system could somehow manufacture credit in such a way that money is practically given away and that a sector of the economy like housing could become a house of cards? Are we to believe that private lenders, their insurers and re-insurers, as well as their shareholders and depositors would allow this to happen in an unregulated environment where everybody stands to lose everything without a government bailout? Would you feel sorry for a bank and its shareholders that did allow this to happen to itself? Are we now to believe that a "super agency" (a bunch of bureacrats from Washington who incidentally are fantastic at managing their finances) which literally has the power to inspect any institution deemed to be a "threat to the stability of the banking system" will be better suited to manage a bank's risk than the coordinated efforts of all the firms and individuals in a free unregulated marketplace whose sole concern is to make money?

What may be most frightening is that this is being proposed by the Republicans who are supposedly against government intrusion in the economy. The main criticism of the plan is coming from Democrats who don't think the proposal goes far enough! What truly needs an overhaul is the Leviathan federal government which is destroying our economy.

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