Posted by Rojas @ 2:14 pm on January 27th 2010


The essence of government is the prevention of force and fraud. When a portion of the financial industry engages in fraud, it becomes incumbent upon government to act. This is beyond dispute.

It can also be reasonably argued that an industry which relies on government bailouts takes upon itself certain regulatory burdens that make subsequent bailouts unnecessary. I think it is more rational to argue that we ought to permit the banks in question to fail and avoid the bailouts altogether, but there is a reasonable case to be made to the contrary.

Consider, alternatively, this statement:

We need to make banking not just boring but as profitable as any other sector in the economy: no more and no less.

Here we have a case for financial regulation based upon the belief that it is a reasonable exercise of governmental force to micromanage private profit–not to tax it, mind you, but to deliberately set conditions whereby the amount of profit earned by a non-criminal enterprise will be kept within boundaries, to prevent the management class in that particular industry from becoming too full of themselves.

I cannot think, offhand, of a more essentially totalitarian statement that I’ve seen in print recently…a statement which simultaneously affirms the omnipotence of government regulations to achieve precise results, and which affirms the desirability of doing so in order to engineer private virtue among a class which is deemed to have lost its way.

Perhaps you have already guessed the author.

1 Comment »

  1. What bugs me about this line of thinking is that it’s capitalism itself that gets the blame; that there is something inherent to the pursuit of profit that leads to this, rather than it being a product of its environment and all that that entails. It runs parallel to the health care status quo critique, which is correct in that the system is dysfunctional and indeed seems peculiarly geared towards screwing people, but which for some reason blames this on the half of the system that is kinda-sorta market based, while viewing government regulation, which presently accounts for the whole other half, as some kind of pristine divine hammer able to smash all those negative impulses and not, in fact, also driven by them.

    Which makes me think of this Reason post today, which is a bit off-topic I guess but which matches my own take on health care reform (in that, as I’ve said, I think I’d rather socialized medicine or totally unregulated medicine as opposed to the incremental hodge-podge Frankenstein we always seem to wind up with for “compromise” sake (granted, the Reason post is about federalism, but it’s the same gist):

    I’m obviously wary of socializing medical payment, even at the state or local level. But given the opportunity to see single payer compete against a genuinely deregulated market, I’m pretty sure I’d bite. And I suspect a lot of single payer supporters would too. But that sort of political competition isn’t in the cards. Instead we’re stuck with a broken, compromised system in which neither side gets what they want: On one hand, the government controls nearly half of all medical spending, but failures get blamed on the free market. On the other hand, those who want to sweep away the current system and socialize medical insurance get stuck with messy legislative compromises larded with handouts for special interests. You could make the Beltway centrist’s case that this is a good thing—that political systems shouldn’t cater to extremes. But in this instance, we’ve got a system that’s catering to almost no one. And in the meantime, we’re stifling innovation and experimentation on both ends of the political spectrum.

    Comment by Brad — 1/27/2010 @ 2:32 pm

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