Saturday, October 18, 2008
Last night, my wife wanted to watch 20/20 on ABC because she enjoys the fact that John Stossel is somewhat of a contrarian, not afraid to take shots at anyone including himself. What we got last night was a broadside of Libertarian views on the ineffectiveness of government and the suggestion that the problems we face are more often caused by over-regulation than under-regulation of the free choice of our population. The term that he used was "self-ordering". Then, I got a surprise when he started to talk about New Orleans in the aftermath of Katrina.
Stossel interviewed a number of people with great attention being paid to Mayor Nagin and the bureaucracy that keeps people from doing simple things... form after form, arcane regulations to be followed to the letter. He contrasted that with the volunteer operations that have done much more than all of the expensive public works. His major examples came from Habitat for Humanity, and Malik Rahim. In fact, Rahim got a lot more camera time than Brad Pitt (Make it Right Campaign) and that says a lot. It is unfortunate that the segment did not mentions Rahim's current candidacy.
I don't agree with Stossel's purely Libertarian view that over-regulation by government is what caused the mess. Actually, in his view, Fannie Mae and Fredie Mac should never have existed in the first place. It makes just as much sense to blame the Harvard MBA programs for teaching all of those financial whiz kids that risk is only a mathematical calculation. The problems were not that government over-regulated, but that they did not regulate the right things. The basic idea that you could commodify financial obligations (mortgages) left no room for the type of failure that happened as real estate prices dropped.
The more scary proposition for me is that banks have hugely more debt obligation in terms of credit cards. When people are using credit card debt to last from pay check to pay check, and their costs are continuing to rise, we have another bubble ready to burst and that is one which will make the real estate fiasco look like a parlor game.