“Creating a systemic risk regulator would be a continuation of that regulatory confusion. Just as bad, a systemic risk regulator would work against Washington’s credibility in ending too-big-to-fail. Investors would be lulled into false confidence that the government is looking out for them just as it looks out for insured bank depositors. But a systemic regulator would be no more effective than the former USSR’s central planners were in seeing and knowing all. Just as markets seeking profits are better planners than central bureaucrats, markets protecting themselves from a credible threat of failure would be more effective regulators than a central office that stifles that threat.”
From After the Fall: Saving Capitalism from Wall Street- and Washington by Nicloe Gelinas
My first article published at American Thinker-
The iron law of bubbles
excerpts:
But this same infatuation with talent can be attached to more than money; it can be attached to power. With capitalism struggling to recover from yet another smackdown bubble we seem inclined to somehow believe that academics in political power will yield better results. The same uncertainty that plagues the financial markets also plagues the political environment. The biggest difference is that a financial bubble will be brought down much more quickly. Bad political solutions become institutionalized and linger for decades. In many ways the current financial mess was born from political solutions imposed in response to our previous bubbles.
Our political discourse is largely about the balance between the need to smartly regulate a very efficient but imperfect market, and the desire to merely replace financial power with political power. It often means the balance between individual rights and the interests of the collective. While the economic self-interest of capitalism is suspect after the bubble is burst, we often suffer more from the political self-interest that seeks to correct it. Our most oppressive laws are often the ones designed to protect us from our own stupidity.
