Will writes from Washington, D.C. (well, Arlington, Virginia). You can reach him at willblogcorrespondence at gmail dot com.

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15 Responses

  1. Avatar tom van dyke says:

    “I kind of wonder if a deluge of uncomfortable stories about corporate bailouts and political insiders could eventually sap some of this generation’s entrepreneurial vitality.”

    Yes, Will, we have not come to terms with capitalism-as-free enterprise and entrepreneurship vs. capitalism-as-finance. The former creates wealth; the latter is largely parasitic, making money on money. We need finance [and arbitrage, commodities trading, etc.] to preserve liquidity and fungibility, as grease on the wheels of commerce—it’s a necessary evil. But how much evil is necessary?

    Perhaps it’s for the best that gigs in the finance industry are a bit of a “closed shop.” Many of our best and brightest seem to want to get into Wall St. because, hey, that’s where the money is. But mebbe at least a few will be forced to become entrepreneurs, creating wealth instead of merely managing it.Report

  2. Avatar D. C. Sessions says:

    But mebbe at least a few will be forced to become entrepreneurs, creating wealth instead of merely managing it.

    Or worse yet, skimming it.Report

  3. You can’t legislate morality?Report

  4. Avatar Mike Schilling says:

    First, attempts to describe the roots of the financial crisis solely through the lens of government intervention sound pretty silly.

    Except when it’s described entirely as a result of the CRA, in which case it’s less silly than evil.Report

  5. Avatar E.D. Kain says:

    Good post, Will. I’ve wrestled with a lot of these questions. We often talk of regulatory capture, but I think deregulatory capture is just as likely in a lot of instances. I share your last sentiment.Report

  6. Avatar DensityDuck says:

    You know–I’m just going to go on a tangent, here, and I’m not blaming the blogger specifically, but…

    It’s not “free reign”. Okay? It’s “free rein“. The aphorism refers to riding a horse and dropping the reins, and thus the horse is completely uncontrolled and will do whatever it wants, completely at random, often something bad. The aphorism implies undirected action, not unrestricted action.Report

  7. Avatar North says:

    Perhaps a mitigating solution would be to make the financial laws/regulations subject to very little interpretation? Obviously that wouldn’t prevent all regulatory capture but it’d make it a little less egrigarious I’d think. In some cases I guess that’d mean withdrawing regulation from endlessly complex instruments? Maybe aim the regulation at the fundamentals of the company? I’m only a finance minor so I’m mostly guessing here.Report

  8. Avatar Francis says:

    This case is a perfect example of why the libertarian dream — that government shrinks and elections matter less — is pure fantasy.

    The rich and powerful will always participate in government. In most countries through most of recorded history, the rich and powerful were, by definition, the government (see, eg, monarchies). In this country we’ve been lucky enough to extend the effective mandate down to the middle class. (As Ezra pointed out just recently, the poor don’t vote. If they started to do so, they could wield enormous political power.)

    Now libertarians come along and propose that the State have less power. Really? Try to persuade Wall Street bankers right now that the State should play a smaller role in the financial industry. That’s exactly what they want, which is why they are so active in politics.

    The basic problem with the libertarian approach to politics is that the decision not to regulate is just as much of a political decision as the decision to regulate (and by how much). And it is the rich and powerful who tend to benefit most when the State decides not to regulate. So the game may be utterly corrupted by money and by the character of the people involved in it, but if the ordinary person wants to have some chance of not getting completely screwed by the system he has no choice but to play.Report

  9. Libertarian detractors are missing the point that the original meaning of the word “regulate” is to “keep regular”. Libertarians generally advocate a pro-market approach – let the markets rip, stand back, consumers and producers coordinate, wealth is produced.

    Of course some people will try to cheat any structure we produce, and these people must be punished and negative effects of their actions mitigated in a way that interferes with the rest of the market and even with unrelated markets to as minimal a degree as is possible.

    What are the best kinds of solutions for this? There are a whole range of suggestions, but libertarians tend to prefer targeted, light and lethal, Plain Jane, consistent solutions, like, for example, allowing financial companies that take on too much risk and collapse to go through the bankruptcy and liquidation procedures that have developed organically over centuries in the Anglo-American world and beyond and have tended to be conducive to long and medium-term stability. What are bailouts? The least desirable solution given the aforementioned “libertarian” set of values.

    So, AGAIN, libertarians are not proposing that the Bernie Madoffs of the world be left alone to rob retirees, because, that’s like the free market. Libertarians seem to propose an alternative, organic regulation, refined and processed in the laboratory of historical experiment.Report

  10. Avatar Ann says:

    It seems your “brother” knows a bit more about the real world than you do, revolver. I suggest doing some fieldwork.Report