The Claremont Institute carefully analyzes many subjects, now turns its sights on the financial crises or meltdown, as sometimes called. The article here, "Is Deregulation to Blame?", focuses on the history of CDSs (credit default swaps), and the so-called lack of regulation (actually overregulation in the eyes of the author), and other systemic failures as the cause of the collapse of the financial markets and institutions. I found this article particularly interesting having just read two recent books on the housing meltdown causes, "Architects of Ruin", by Peter Scheitzer, and "The Housing Boom and Bust", by Thomas Sowell. The former focuses on the politicization of the housing market and its players as the root cause, and the latter Sowell book more on the underlying economic fundamentals as the primary cause. Both books make fascinating reading and their basic premises are underscored by the Claremont Institute piece linked to above. Bottom line of all three sources: Overregulation and over meddling by politicians in the dynamics of the free market economy, caused major distortions which led directly to the collapse of the housing market and the financial institutions involved in this market. We are now witnessing the repeat of the regulatory mistakes made going back to the New Deal as the current administration sets about layering on more regulations the net effect of which will be to create more moral hazards and lead to another bust, sooner or later. All three sources here argue for less regulation and more competition, especially in the area of free market rating agencies where excessive risks can and should be identified for investors. The duopoly of Moody's and S&P's rating companies failed miserably in identifying risky behavior on the part of large banks and insurance companies largely because they were selectively endorsed by the SEC thus freezing out competitors. This issue was not covered in the two books but supports their call for more competition and less regulation, certainly no more which we are about to get.
Additionally this blog pinpoints those responsible for the huge explosion in the mortgages promoted by the policies of the Clinton administration. Specifically it was Andrew Cuomo when he became the head of HUD during the second four years of the failed Clinton administration who opened the floodgates for the bad paper that eventually sank the financial system. Cuomo, whose father was a flaming liberal governor of NY, has social engineering in the blood. What a joke.
