…you read this letter to the editor by economist Steve Horwitz–republished on the Cafe Hayek blog–and continue to argue that the financial and housing market meltdowns were due to deregulation.
Here’s a snippet:
Congress has passed four new sets of regulations for every one deregulatory act, and between 2001 and 2008, there were nine new sets of regulation and not one bit of deregulation. Those recent regulations included the Basel capital requirements, which created powerful incentives for banks to sell off the mortgages they originated and buy them back as mortgage backed securities, which they otherwise would not have done…Why, if this was really capitalism, would [banks] make loans to people they thought could not pay them back. If corporations are greedy profit-seekers, why would they risk customers not being able to pay unless they believed that those mortgages could be sold off to government-sponsored enterprises like Fannie and Freddie who would, as they did, get bailed out by the government?
