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Regulation is the Problem, Not the Lack of It

Aaron Task over at Yahoo’s tech Ticker makes a point I’ve made here at BitsBlog several times:

Before this discussion goes any further, Jeff Matthews of Ram Partners, wants you (and presumably policymakers) to remember this: “The epicenter of the financial crisis that almost brought the world to its knees was the regulated portion of the U.S. financial system — in particular Fannie Mae and Freddie Mac, two of the most regulated entities ever created.”

Furthermore, “every publicly traded bank that has gone out of business had financial statements signed by their CFOs and CEOs,” the veteran money manager notes. Such assurances were prescribed by Sarbanes Oxley [1], the legislation that emerged in the aftermath of the corporate scandals at Enron, WorldCom and others earlier this decade.

The vid on that page goes further, saying that every bubble in history has been responded to by government, who attempted regulation to prevent it happening again. Such attempts are almost invariably failures, and the rare successes are only such by happenstance more than by planning.

So, needless to say, what is Obama and company planning? True to form… another failure:

On Monday, Tim Geithner and Larry Summers penned an op-ed piece in the Washington Post entitled A New Financial Foundation [2]. On Wednesday, President Obama is expected to put his full weight behind this vision of a new regulatory framework for Wall Street.

Amazing that a self-proclaimed student of history could be so daft on such matters. Unless, perchance, fixing the problem isn’t the agenda at all?