Originally Posted by
bragi
I think we're on nearly (not quite) opposite ends of the spectrum. You see government meddling in the market as the problem. I see an almost complete lack of government regulation over the last eight years as the problem. I don't have a problem with people making the right decisions, making a lot of money and enjoying the fruits of their success, as long as they come by that success honestly, and without hurting others. The role of government is, in addition to printing money and providing for national defense, to keep people honest, especially those people whose actions affect society at large. If you own a factory that produces a lot of waste, you don't have the right to make a profit and expect society at large to pay for the cost of cleaning up your mess. Similarly, if you have a bank, you should expect to submit to regulations that prevent you from going ape**** and getting into the kind of trouble that drives millions of people into unemployment or ridiculous debt. The only institution that has the clout to counterbalance the power of large corporations, which may or may not feel any sense of responsibility, is the state.
If a man robs a convenience store with a gun, I completely expect him to pay his debt to society. If an unscrupulous investment banker knowingly makes a series of decisions that drives thousands of innocent (though foolish) people into bankruptcy and/or unemployment, he/she deserves a punishment at least as severe as that which awaits the robber.
I think the fact that you picked the last eight years to make your argument about regulation of financial markets is telling. Please tell me what regulations were gutted in that time that exacerbated the economic downturn. It's not all about party politics and you discredit your arguments when you try to make it so. If I've misread your reason for picking that period of time, please correct me.
There's a difference between government meddling, especially political meddling, and well-reasoned, effective regulation that provides transparency and the rule of law. The latter is an essential ingredient markets in which people can have confidence that they're getting a fair shake. We have that, for the most part, in our financial markets and have had for a long time. On the other hand, social engineering through things like the CRA, are bad for markets. That kind of intervention always has consequences other than those intended and those consequences are almost never positive ones (unless you're the politician who reaps the campaign fund or personal financial largesse). Aspects of Sarbanes Oxley are another example of over/mis-regulation of markets and corporations that distort markets and cost corporations huge sums to comply with but provide limited value to investors and others. Though I think that Act was well-intentioned, it was also the type of knee-jerk that's all too common from our politicians.
Were the derivatives markets too unregulated, complicated, and opaque? Probably. (Those, by the way, got their start in a big way in the 90s.) But the people who created those instruments didn't knowingly make decisions so that they could wrongly gain at the expense of others (with, I'm sure, some small number of exceptions). In fact, without the housing bubble (that was due in at least part to government meddling) those instruments would probably still have been viable through this current downturn. They sailed through the 2000-2001 recession without any problems.
Corporations don't feel at all, but they do act on their responsibilities. Those responsibilities are to their shareholders/owners. There is a role for government in providing disincentives to act in ways that harm others. No disagreement there (though I imagine in the practical crafting and application of that law we'd disagree plenty).