Wanted: a real debate over financial regulations — VOICES for REASON

Throughout Washington, the most powerful politicians (including Barack Obama) and bureaucrats (including Ben Bernanke) are sparring over the apportionment of new government powers–in particular, how much additional power should the Fed have–to prevent future financial crises. (See stories here, here, and here for more background.)

But notice that this “debate” essentially features only one position on the financial crisis: that it was caused by insufficient government control of the economy, especially by the Fed–and therefore that the solution is more controls. But what about the position that the government, in particular the Fed, was the essential cause of the crisis? Without the Fed lending out money at below the rate of inflation, without government-guaranteed mortgages, without government bailout guarantees, the housing bubble never would have gotten off the ground.

Barack Obama, Ben Bernanke, et al. want to pretend that such a position doesn’t exist. But it does–in fact, it is the position by many who predicted the crisis while Obama and Bernanke were denying it. Take the example of Peter Schiff, the analyst who went on TV repeatedly in 2006 and 2007 explaining how Fed policy had caused a devastating housing/credit bubble that was a fundamental threat to our economy; see for yourself on the popular YouTube video “Peter Schiff Was Right.”

But the current debate over solutions to the financial crisis has no room for Peter Schiff or anyone else who can argue that the government was the fundamental cause. If it did, Americans would soon realize that the power of the Fed and other regulatory agencies is not the solution to the present financial crisis, that power is its basic cause.

The financial protection we need is not protection by the regulators but protection from the regulators. We need the government to stick to its Constitutional role of prosecuting force and fraud, and otherwise leaving market participants to succeed or fail in a market without handouts or bailouts.

Source: Wikimedia Commons