Ron Paul: The Moral Hazard of Regulation

[Skull Pilot]

FACT CHECK: BUSH ADMINISTRATION'S TRACK RECORD OF DEREGULATION - Zibb.com

what you fail to see is that the list on that web site is comprised mostly of things like, objections to proposals and not actual deregulation signed into law by GW.

And how about this?

http://www.heritage.org/Research/Economy/wm2109.cfm



and this

Spitzer and Sarbox Were Deregulation? - WSJ.com

One had to look far and wide in the spring of 2002 to find anyone who thought the Sarbanes-Oxley law was an experiment in cowboy capitalism. For example, on its front page of April 25, 2002, the New York Times reported: "House and Senate negotiators agreed . . . on a broad overhaul of corporate fraud, accounting and securities laws aimed at curbing the rampant abuses that have shaken Wall Street . . . Some lawmakers called it the most sweeping securities legislation since the 1930s." The Times added that "business and accounting industry lobbyists had tried in recent days to soften the measure, but they got nowhere."

sounds like GW signed this bit of regulation


The combination of Mr. Bush's enactment of Sarbanes-Oxley and Mr. Spitzer's Wall Street prosecutions contributed to America's significant market-share loss of initial public offerings -- and the U.S. is yet to return to pre-Bush levels. While government reduced the profit-making potential in Wall Street's traditional bread-and-butter business, it was simultaneously encouraging investment in the housing sector. Neither activity constituted deregulation.

so back to your "source"

December 4, 2007: In response to a question about whether the Administration was too slow to recognize the subprime problem, President Bush said: "We've been working on this since August." [Remarks By President Bush, 12/4/07]

how the hell can this statement be cited as an example of deregulation? The "source " you cite is full of this bull and contains no actual evidence of any deregulation signed into law under GW.

 

[editec]

The Moral Hazard of Regulation

Since the bailout bill passed, I have been frequently disturbed to hear “experts” wrongly blaming the free market for our recent economic problems and calling for more regulation. In fact, further regulation can only make things worse.

It surely could make it worse.

Bad regulations can certainly be worse than no regulations

It is important to understand that regulators are not omniscient.

And it is likewise important to understand that often one does not have to be omniscient to write laws and regulations, too.

If omniscience were required to write laws we'd have NO LAWS at all.

It is not feasible for them to anticipate every possible thing that could go wrong with whatever industry or activity they are regulating.

That is true. But the mortgage problem we just experienced could easily have been anticipated. In fact it had been, and laws were written in the 1930s that would have prevented the banks from GAMBLING WITH YOUR MONEY.

We undid those laws. Hence we had the Savings and Loan disaster, and now we have the mortgage disaster, too.

They are making their best guesses when formulating rules. It is often difficult for those being regulated to understand the many complex rules they are expected to follow.

Yes, that's why they get the big bucks...to understand their industry and laws and regulations.

Very wealthy corporations hire attorneys who may discover a myriad of loopholes to exploit and render the spirit of the regulations null and void. For this reason, heavy regulation favors big business against those small businesses who cannot afford high-priced attorneys.

This above is true. No doubt about that. It's not the whole truth, but it is true.

The other problem is the trust that people blindly put in regulations, and the moral hazard this creates.

Blindly?

Too many people trust government regulators so completely that they abdicate their own common sense to these government bureaucrats.
They trust that if something violates no law, it must be safe. How many scams have “It’s perfectly legal” as a hypnotic selling point, luring in the gullible?

Oh posh. Now you're just pandering to your audience and not really saying anything.

Many people did not understand the financial house of cards that are derivatives, but since they were legal and promised a great return, people invested. It is much the same in any area rife with government involvement.

Okay, now he's completely off the beam.

Dereivitives were completely UNREGULATED.

People couldn't put their trust in regualtions because there were none on that activity.

Read that again.

there were NO REGULATIONS ON DEREIVITVES

Ron?

You sir, are dismissed.

Come back when you really understand what multiple things happened in this meltdown.

You clearly do NOT know what you are talking about.

You can fool some of these people, but when you tell us that the derivatives problem came from overregualtion?

You moved from being wrong to LYING to you audience.

People, if you believe this pied piper you are fools.

There were NO REGULATIONS on the DERIVITIVES INDUSTRY.

And that problem far more than the mortgage crises is what caused the fiscal meltdown.

 

[Ravi]

Dereivitives were completely UNREGULATED.

Thank you for reminding us of that simple fact.

 

[Paulie]

Sure, people that can't afford loans shouldn't apply for them. But I'm not sure what you're advocating here, making laws against stupid people? Seems to me it would be more fair, and more constitutionally sound, to make laws against selling loans the same day you made them.

You ignored 95% of what I posted, and instead talked about consumers.

Why does no one want to discuss the monetary policy of the Fed?

Until some of you educate yourselves on the Fed, its history, and our economy's history based on Fed policies, you don't have much of an argument here.

If you are only armed with your opinion about regulation, then you are a weak participant in this discussion.

 

[Ravi]

You ignored 95% of what I posted, and instead talked about consumers.

Why does no one want to discuss the monetary policy of the Fed?

Until some of you educate yourselves on the Fed, its history, and our economy's history based on Fed policies, you don't have much of an argument here.

If you are only armed with your opinion about regulation, then you are a weak participant in this discussion.

Okay, the Fed. Monkeying with the interest rate might be a bad idea. But then again, if credit is cheap, I can easily use it to borrow money to grow my business. Which I've done for the last eight years. Now that it isn't so cheap it may be harder for me, then again, I have better clients that seem to have no problem paying on time.

 

[dilloduck]

Okay, the Fed. But then again, if credit is cheap, I can easily use it to borrow money to grow my business. Which I've done for the last eight years. Now that it isn't so cheap it may be harder for me, then again, I have better clients that seem to have no problem paying on time.

Monkeying with the interest rate might be a bad idea.

It's not only a bad idea---it's racist.

 

[Paulie]

Okay, the Fed. Monkeying with the interest rate might be a bad idea. But then again, if credit is cheap, I can easily use it to borrow money to grow my business. Which I've done for the last eight years. Now that it isn't so cheap it may be harder for me, then again, I have better clients that seem to have no problem paying on time.

You're only looking at the bright side of it for YOU, though.

What about what's best for the country?

Is it best for the country, to have an institution like the Fed artificially adjusting rates, causing business cycles every 5-10 years?

How many recessions are you willing to endure?

It's not just about YOUR wallet, Rav. For every wallet getting fatter, there are many more becoming empty. It needs to stop.

Why shouldn't the market be able to set rates based on supply and demand of money? Supply and demand is the basic tenet of economics. Why shouldn't it apply to interest rates as well?

 

[Ravi]

You're only looking at the bright side of it for YOU, though.

What about what's best for the country?

Is it best for the country, to have an institution like the Fed artificially adjusting rates, causing business cycles every 5-10 years?

How many recessions are you willing to endure?

It's not just about YOUR wallet, Rav. For every wallet getting fatter, there are many more becoming empty. It needs to stop.

Why shouldn't the market be able to set rates based on supply and demand of money? Supply and demand is the basic tenet of economics. Why shouldn't it apply to interest rates as well?

Multiply me by everyone else in the country that benefits from cheap credit and it is good for the country. As far as I can tell, the thing that is most responsible for this crisis is the way bad mortgages were broken up and resold. If NINAs were not allowed, or if NINA loan makers were required to hold the loans and assume the risk...none of this would have happened.

 

[Paulie]

Multiply me by everyone else in the country that benefits from cheap credit and it is good for the country. As far as I can tell, the thing that is most responsible for this crisis is the way bad mortgages were broken up and resold. If NINAs were not allowed, or if NINA loan makers were required to hold the loans and assume the risk...none of this would have happened.

If rates were not set at 1% early in the decade, there would have been no housing boom.

The cheap credit created early in the decade is what made all of this possible. We don't need interest rates that low to have a prospering economy.

When you make credit that cheap, you create an environment of irresponsible investing, because there's just too much money.

If you focus only on banks offering risky loans, then you allow the credit manipulation to continue, and the boom and busts as well.

We just once again lowered rates to almost 1%, and there is a HELL of a lot of money sitting in bank reserves just WAITING to be spread around the market.

What do you think is going to happen in another 5 or so years? The same shit, Rav. It's an endless cycle. As a country, we need to figure out how to go back to prospering without cheap credit. If we can't do that, then we are already doomed as a nation.

The answer isn't to regulate our decisions. It's to educate ourselves, and never make the same mistakes again. We've been making the same mistakes for DECADES, because we aren't putting a stop to the real problem.

 

[Bern80]

There are reasons the US is so wealthy. Natural resources for one. You can't really do all that well without them and the US has them in abundance. Another reason is population. 300 m people are going to produce some really whiz-bang individuals and so there have been.

The reason for the economic crisis and the recession is that capitalism was allowed to run completely unchecked. Bad idea.

Make sure you know what you're talking about before you say it, bud. Unchecked capitalism? Regulation, let see there's gotta one or two here, a yeah THE FUCKING FDA for starters. You could just as easily make the argument that OVER regulation is part of our problem.

 

[Bern80]

Multiply me by everyone else in the country that benefits from cheap credit and it is good for the country. As far as I can tell, the thing that is most responsible for this crisis is the way bad mortgages were broken up and resold. If NINAs were not allowed, or if NINA loan makers were required to hold the loans and assume the risk...none of this would have happened.

It is good for the country to make risky loans now? make up your mind Rav.

 

[Ravi]

It is good for the country to make risky loans now? make up your mind Rav.

umm...no, and that's not what I said. Try to follow along.

 

[Bern80]

umm...no, and that's not what I said. Try to follow along.

I understand it isn't what you think you're saying, but cheap credit is essentially risky credit. Think about it. What does cheap credit really look like? It would have things like low interest rates, small or no down payments, it would be more accessible to higher risk people. All of those things are risks.

 

[Ravi]

I understand it isn't what you think you're saying, but cheap credit is essentially risky credit. Think about it. What does cheap credit really look like? It would have things like low interest rates, small or no down payments, it would be more accessible to higher risk people. All of those things are risks.

That's not what I'm talking about, but I guess I can see your point. Cheap credit lately has been 5% on my credit line...and believe me, I don't get it for free and I'm not high risk.

 

[Paulie]

Cheap credit offers risky opportunity to people who otherwise would never be able to afford the debt. People who can barely afford debt PERIOD, are now being given an opportunity to indebt themselves up to their eyeballs, creating an environment where banks are filling their balance sheets with too much risk.

If the market determined the interest rates, we would see a lot more responsible lending and borrowing.

Like I said before, if we have to artificially set rates that low just to get people to spend money they don't have, we're already fucked economically. We're basically just kicking the collapse farther down the road.

 

[Ravi]

Cheap credit offers risky opportunity to people who otherwise would never be able to afford the debt. People who can barely afford debt PERIOD, are now being given an opportunity to indebt themselves up to their eyeballs, creating an environment where banks are filling their balance sheets with too much risk.

If the market determined the interest rates, we would see a lot more responsible lending and borrowing.

Like I said before, if we have to artificially set rates that low just to get people to spend money they don't have, we're already fucked economically. We're basically just kicking the collapse farther down the road.

Or we have to not allow banks to make stupidly risky loans with out owning the risk.

Sigh

 

[Truthmatters]

the market is nohting but people , where you have people involved you will have chiselers who dont care about the long term market but just screw who they can to make a quick profit at everyones expense.

The market is not magical and it needs laws and police just like all human endevors.

I am still waiting for someone to show me an example of this magic behavior of the market anywhere in history.

 

[Paulie]

Or we have to not allow banks to make stupidly risky loans with out owning the risk.

Sigh

Without owning the risk?? If I recall, you advocated the bailout.

Rav, the point of setting rates that low is to spur as much lending as possible. When you restrict banks from making certain loans, that pretty much defeats the purpose of lowering the rates. They go hand in hand.

And since we can probably all agree that this type of housing mess won't happen again, at least in our lifetimes, what do we do about the fact that the Fed can still create new money at will?

I mean, there won't be another housing bubble, but when the next bubble happens because of the excess money, do we argue for more regulation in whatever sector is affected and continue to ignore the Fed's policies?

Sooner or later Rav, you have to face the music on this. Cheap credit is a perpetual economic downfall. Everytime we enter an economic mess, the answer is lower rates, print money, and spur borrowing and spending. This of course leads to more boom and busts.

How long are you willing to endure the same game being played by the same men, merely wearing a different uniform each time?

 

[Paulie]

the market is nohting but people , where you have people involved you will have chiselers who dont care about the long term market but just screw who they can to make a quick profit at everyones expense.

The market is not magical and it needs laws and police just like all human endevors.

I am still waiting for someone to show me an example of this magic behavior of the market anywhere in history.

Most markets do fine without much, or any, regulation. You don't see it reported, and the only time it ever gets heat is when something like the housing mess happens.

Look around you. Everywhere you go, everywhere you shop, is virtually a free market. The auto industry has all KINDS of shady deals being offered by dealers and their banks. No one makes a fuss about it though, because it hasn't caused a "crisis". But, nonetheless, people are being screwed every single day.

All you need to do is not be a fucking moron. All the regulation in the world won't solve people's idiocy. I'd rather people get smarter about their money, than feel secure in knowing they don't have to be, because the government will step in and make sure they don't make any bad decisions.

And this market is not "free". Get that through your fucking head. You can not possibly have a free market, if we are forced to borrow at pre-determined interest rates, with only one legal tender currency that is created and extinguished without representation of the people.

 

[Truthmatters]

Wow just wow, you have NO idea what you are talking about.

All of the states have auto dealers licenses.

You also contradict yourself by saying "Everywhere you go, everywhere you shop, is virtually a free market" then you say "And this market is not "free". Get that through your fucking head".


What I asked for was an historical example of a time when an unfettered market worked in the favor of a democracy.

You are lost.