Greed, not regulation!

Newsweek ran an interesting article today, in which Barrett Sheridan interviewed Yaron Brook head of Ayn Rand Institute. Being a staunch capitalists, Mr. Brook claims that the fundamental cause of the current financial meltdown was due to excess regulation of the financial market. One wonders if he was living on planet Earth for the past, oh I don't know, ten years or so?

If anything that the current collapse of gargantuan banks tells us is that the lack of regulation propelled these greedy bankers flaunt conventional wisdom and promoted sub-prime mortgage in the first place. Like the typical capitalist that he is, Mr. Brook claims regulation such as the Community Reinvestment Act was the hotbed for such financial derivatives mortgage securitization.

True, the CRA was enacted to ensure banks do not discriminate when lending to people with low incomes. But that does not give banks the authority to dole out mortgages with questionable practices to these low income borrowers at all.

What Mr. Brook doesn't understand is that the current financial collapse was, is due to the deregulation that capitalists like him lobbied the government - with the tacit support of another Rand follower, Alan Greenspan - to reduce the CRA to a meaningless piece of paper that's more worthy of a role as a toilet paper. Greenspan started deregulating the economy in the late 1990s, which Bush pushed to an overdrive in the last eight years. This gave bankers, well at least the greedy ones, the incentive to give out highly dubious mortgage loans to people who could not afford it, then securitizing these mortgages for profits god knows they can make if people start repaying their mortgage.

As it is, they couldn't, which meant that greedy bankers couldn't get their dirty hands on the interest on the securitized mortgages, which means they had to line up at Congress to get money. Funny how these capitalists cry out for government intervention when things go bad.

Point I'm trying to make here, is that the Mr. Brook's premise that regulation was the cause was illogical. If anything it is the greed of these bankers that rode down these financial institution in the first place.