A New York Times editorial today, They Have Very Short Memories, restates a very popular liberal belief that has influenced much of the left’s thinking about our economic situation.
They write (boldfacing added):
Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness.
To me, ‘too little’ is simply wrong.
It would be more fair to say ‘ineffective regulation’ where ‘ineffective’ means that the regulations were not well designed or did not work as intended or did not cover the specific circumstances that developed on the ground. Some might argue that some / many regulations on the books actually contributed to or served as catalysts for the dysfunction that emerged. For example, anti-discriminatory lending regulations seemed to offer a major boost to subprime lending.
Or it might be fair to say ‘poorly executed regulated’ as in that the regulations on the books were not properly or well interpreted and implemented on the ground in real time by the regulators. For example, as when Fannie and Freddie became major enablers of the surge in subprime lending.
Or even more likely, it was some of each.
But an actual shortage of regulations, I don’t think that construct offers us much insight and is, in fact, deleterious to effective interpretation and response.
And this bad idea is just one of several bad ideas contained in this short editorial.