Thursday, April 24, 2008
Government at Work - on regulations
I keep wondering why we don't learn the lesson of having government manage the marketplace. I think it was Ronald Reagan who said something to the effect that if there were smart people in government, private industry would quickly hire them away.
I wholeheartedly agree...
I wholeheartedly agree...
In the Wall Street Journal, Allan H. Meltzer summarizes his opinion of government regulation:
"Mr. Frank and Senate Banking Committee Chairman Christopher Dodd are planning more schemes to move the risk to the taxpayers from those who made bad decisions, such as buying mortgages that are now in default. As a result, ordinary citizens will ask themselves: Why should I pay my mortgage if my neighbors can get theirs reduced? These proposals have stark long-term consequences. The financial system cannot survive if the bankers make the profits and the taxpayers take the losses.
The government has a responsibility to prevent systemic crises and financial collapse. Long ago that job was given to the Federal Reserve. It serves as lender of last resort to the market. Today, the Fed should not rescue individual firms, but it must keep the payments system from failing. To carry out that responsibility, the Fed has auctioned reserves and exchanged marketable Treasury bills for illiquid mortgages, and it has succeeded so far. Now, it must stop responding to calls for lower interest rates.
If the government underwrites all the risks, call it socialism. If it underwrites only the failures, call it foolishness."
