Not Enough Regulation or Too Much?

I tend to believe that the problems on Wall Street are much more due to overregulation than underregulation. When Washington gets involved problems tend not to improve, but to get worse. They put band-aids on problems which may make things look better temporarily, but eventually result in bigger troubles.

Sen. Jim DeMint agrees:

Sen. Jim DeMint, R-SC, an avowed free marketer, said the problems go back to the creation of public-private hybrids like Fannie Mae and Freddie Mac. He said the market is not under-regulated, but over-regulated.

"Many of the problems we're having today, particularly the problems with AIG., the failures on Wall Street, the mortgage industry, actually go back not to greed in the private market but political greed," Demint said.

"The problems that were created when this Congress and this government set up Fannie Mae and Freddie Mac as government-sponsored enter prices with the implied and now very explicit backing of the American people provided so much cheap credit to the market, securities that were bought and sold by many companies. AIG is in trouble because of these bad mortgages that originated with Fannie Mae and Freddie Mac. My point is that the problems we're having are caused by the wrong kind of government intervention. this is not a failure of free enterprise. This is a failure of government solutions and the lack of government oversight into enterprises like Fannie Mae and Freddie Mac that were started."

Unfortunately, both Obama and McCain will be scrambling to come up with new regulatory schemes that will not correct the problem. They will simply shift the problem somewhere else.