Government Caused this Crisis, Not Deregulation

by Sal on March 27, 2009

in Economy,Politics

One of the great sophistries of the current economic crisis, expounded by the President himself, is that it was caused by “deregulation.”  It sounds good in a stump speech, and some point to the modification of the Glass-Stegall Act in 1999, which allowed investment banks to compete against traditional banks, as the culprit of this mess.  The problem with this theory is that a direct correlation cannot be shown.  In reality, the financial mess was caused by activity from the government, and two quasi-government entities, Fannie Mae and Freddy Mac.  Peter Wallison of the American Enterprise Institute, who also served as the General Council of the Treasury department as well as an advisor for the Reagan administration, has created a video that outlines the cause of the crisis as relating specifically to government policy, and not  “deregulation.”  It is a good overview of how we got where we are today, and what we need to do to fix this mess.

H/T: Redstate

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Glass-Steagall: A Red Herring for the Financial Crisis | Axis of Right
January 21, 2010 at 8:51 am

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Ryan March 27, 2009 at 5:44 pm

Whereas I do agree with everything in this video clip and the post itself, one thing struck me as I was watching it: while thorough, paced and quite informative, if we have people like this fellow selling our ideas we’re doomed.

Conservatism’s been around for a long time and in the absense of a Great Communicator, we’ve suffered. Add to that the periodic Republican in-fighting between RINOs who want everyone to like them and ideologues who would rather lose every election on principle by jumping on every sword which comes their way. No messenger and in-fighting are not the way to majority status again. Neither is keeping the rich-old-white-man stereotype of the Republican Party alive. This guy was not from the Party, but his solutions are quite conservative and make perfect sense — the only people in position to take that political ground are Republicans.

Regular people sell ideas very well nowadays in our media culture. Joe the Plumber and Sarah Palin are two recent examples of real people with real experience talking about real problems and solutions.

Again, the video was solid in my opinion, but the messenger was a symptom of part of the image problem the Right has.


Sal March 27, 2009 at 6:37 pm

Have to disagree with you, Ryan. There’s plenty of room in the Conservative movement for both charismatic leaders and for scholarly thought. Wallison is an example of the latter, and is an important part of Conservatism. Wallison will never be a leader of the movement or its spokesman, but he does have something valuable to contribute, and it is worth having these types of media created to go more in-depth on a topic than a Palin would (Joe the Plumber is a great symbol and a great problem-identifier, but I would hardly consider him a spokesman for Conservatism).

There is not only room for both approaches, but it is necessary to have both for us to flourish as a movement. The image problem the right has is due to the fact that there have been too many Peter Williamsons and not enough Sarah Palins.


Mike March 27, 2009 at 10:41 pm

I see a disagreement here, but I don’t see a disagreement here. Of course people like Williamson, Steve Forbes and the like have a place on the right. They are the ones who can explain what we believe as applied to more complex issues. However, if they become the faces of what we believe, then we are doomed.

And by the way, the ability to discuss a topic without putting an audience to sleep and scholarly thought are not mutually exclusive.


Mike March 27, 2009 at 10:52 pm

The substantive point of this post is one I’ve often made to my liberal friends (believe it or not, I actually have liberal friends). The typical response is the assertion that additional regulation was necessary in terms of stricter lending standards. I accept the view that smart regulation is better than half-assed regulation, but my liberal friends usually miss the point that limited regulation is better than either. This mess we’re in confirms that.


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