Tuesday, September 16, 2008

To Regulate or Not - That is the Question

Obama continues his pitch trying to get people to believe that the overall lack of regulation in general, and the Bush Administration in particular, led to the financial crisis we are now in – no regulation of mortgage lenders, these banks that are now all going bust. In reality, just the opposite is true.

If you go back to the Clinton years, a good case could be made for the fact that OVER regulation is the root cause of our current problems. It was during the Clinton Administration that regulations were put in place to force lenders to make home loans to those who would not previously qualify under the guise of "making home ownership available to all". This has been a mantra of the Democratic Party for many years.

As Megan McArdle put it so well when she said, "This was not some criminal activity that the Bush administration should have been investigating more thoroughly; it was a thorough, massive, systemic mispricing of the risk attendant on lending to people with bad credit." She gives a great analysis of this whole issue in her posting yesterday focusing on how Obama is seeking to blame the current crisis on the Bush Administration.

That posting was so well read that many people posted their own comments on "What Bush Should Have Done". She then followed up with today's blog posting where she provides additional in depth analysis of the cause and effect. As she says in summary, "Democrats seem unable, or unwilling to grasp, that to the extent that this is a regulatory problem, the seeds were laid under Clinton, not Bush. There simply haven't been any significant financial regulatory changes over the last eight years that we can point to as the culprit; nor does "stronger enforcement" work as the solution to a crisis when the companies in trouble seem to have been in full compliance with the law."