In a brief post earlier today, I wrote that it was heartening that both McCain and, to a lesser extent, Obama, are talking about cutting federal spending. Various commenters suggested that I was being naive in thinking that either candidate will cut spending if elected.
The commenters miss my point, so let me clarify. I'm not heartened because I have any expectations of either McCain or Obama. Rather, I'm heartened because they are both opportunistic politicians, and they wouldn't be talking about cutting spending unless they thought that this is what the public wants.
At least since Bill Clinton rolled the Republicans in the great budget standoff of 1995, and especially since the Republicans almost lost Congress in 1998, both parties have tried to outbid each other for the public's votes, fiscal responsibility be damned. I'm hoping that the political winds are shifting.
And by the way, while I don't have much faith in McCain, he does get credit from me for being one of the few Senate Republicans to vote against the largest expansion of government in recent history, Bush's Medicare drug program.
Related Posts (on one page):
- Heartening, Part II:
- Heartening:
There is no evidence the public will tolerate cuts in specific beloved programs.
Actually, what "various commenters suggested" was that you were flat out wrong about no other politicians since Reagan calling for cutting spending.
In fact, that point was so clearly stated that this red herring post is simply baffling.
Lehrer asked them what impact the bailout would have on their plans. McCain said first thing that we'd have to do is reign in spending.
One thing to keep in mind: McCain's personality is very Churchillian (weak party ties, reputation for recklessness, impatience with the academic, strong love for country, borderline innumeracy), and Churchill actually, and unexpectedly, cut defense spending mercilessly as Chancellor in the 20's.
I could see McCain taking the knife to hundreds of billions of glorified welfare in the Pentagon budget over the course of his term(s). That's (one of) the big places the money is.
Choice 2 is Republicans who claim to favor spending cuts, then increase spending and finance it by borrowing
Those are the only two choices.
"Those are the only two choices."
If that were true, Congress would not be in session as we type. Rove was wrong.
except that i said no presidential candidate, not no politician. commenters wrote that republican candidates made noise about 'controlling spending' or some such, which is different than 'cutting spending'.
Cornellian:
Choice 1 is Democrats who increase spending then finance it with taxes
Choice 2 is Republicans who claim to favor spending cuts, then increase spending and finance it by borrowing
Choice 1 is Republicans, who are against government, and therefore do an extraordinarily bad job of governing, by deregulating industries and cutting funds for oversight, leading to trillion-dollar disasters, and lie our way into ridiculous trillion-dollar foreign entanglements that kill our best young people and wreck our international prestige, and by denying scientific reality on evolution, disease control, environmental protection, and other issues.
Choice 2 is Democrats, who do believe in governing, and often do a pretty good job of it, which is why Democrats control most of the nation's governorships and most of the nation's state legislatures, as well as the national legislature.
Actually democrats say they are going to finance more spending with taxes and then increasing spending way beyond what the increased tax revenues would supposedly bring in.
You said I don't consider the democrats blocking of republican attempts to provide oversight and reform of Fannie Mae and Freddie Mac before the economic meltdown to be an example of good governance. Apparently you do.
VIDEO: Barney Frank (D) Denying Problems With / Blocking Oversight of Fannie-Freddie in 2003
Remarkable that Democrats were able to block legislation with party line votes in 2001, 2003 and 2005, considering they only won back control of Congress in 2006.
"... foreign entanglements that kill our best young people ..."
assuming you are speaking of our military, don't worry, John Kerry told us the young people stuck in places like Iraq are the ones who didn't study, work hard and apply themselves.
You do know that in our system of governance, minority party can block legislation in the Senate, don't you?
I would love to have a senator elected who objected to every unanimous consent call on principal.
"Party line vote" does not equal "filibuster."
Generally, the Senate gentlemanly requires sixty votes to pass legislation if any senator puts a hold on the bill; only the threat of filibuster is needed.
The allegation was that party line votes by Democrats blocked reform, even though Republicans controlled both Houses of Congress. If someone wants to allege a particular bill was filibustered or subject to a hold by an individual Senator, let's hear some specifics.
That's an area I'd expect him to do better than Obama. He'd have more political capital for it, and it's one of his longstanding pet projects.
I also think the Churchill comparison's a good one. McCain's no match for Churchill's wit, but their character is similar. And that cuts both ways. Churchill was of the "often wrong but never in doubt" school, and we're damn lucky one of the times he got it right was when it counted most. I could envision McCain rising to a critical occasion with greatness, but I could also see him going off half-cocked to our eternal regret. Both candidates have distinct areas of potential greatness, so part of my preference for Obama is an expectation that he'd be steadier and more conservative in important risk regards.
From Robert Scheer, no apologist for military spending: "John McCain, who previously distinguished himself as a deficit hawk and was almost in a class by himself in taking on the rapacious defense contractors, has thrown in the towel with his inane support for staying in Iraq till "victory," even if it should take a century."
(my emphasis)
It's my recollection that the Republican leadership were quite eager to be rolled, and sent Dole in to kick start things when Clinton proved to lack enough torque to accomplish it himself.
IOW, it wasn't something Clinton did to them, save in the sense of giving them some deniability.
The democrats own this financial meltdown. Democrats were in the middle of the management debacles at fannie and freddie. They blocked all attempts at reform and oversight of fannie and freddie.
If this is an example of what the democrats produce by "believing" in governing we could use a lot less of democrats "beliefs"
How the Democrats Created the Financial Crisis
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue.
Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.
Rein In Fannie, Freddie? Not Dodd
Chris Dodd (democrat) at the center of causing this disaster, is using the disaster to get more money taken from hardworking taxpayers, siphoned off to his politically connected cronies.
From Crony Capitalism to Crony Community Organizing: "Profit” Loophole in Bailout Bill Doesn’t Require Net Profits.
A quick search on Senate bill S.190 introduced in 2005 shows that it was introduced to the Senate and sent to the Senate Committee on Banking, Housing and Urban Affairs and no further action was taken after that. I haven't found any record of any vote ever being taken on the bill. Can anyone can point to actual documentary evidence of a Democrat either threatening a filibuster or of a vote being held in Committee? See http://www.govtrack.us/congress/bill.xpd?bill=s109-190 for instance.
If not, I'm not going to treat unsubstantiated statements made by official McCain adviser Kevin "Dow 36,000" Hassett as authoritative. Sorry.
This meltdown is a clear vindication of small government conservative and libertarian support of limited government.
It is a clear illustration of just how hazardous large, expansive government is.
As a characterization of what happened prior to Bush taking office in 2001, this is wildly incorrect. Look at the numbers. We went from a deficit of 3.1% of GDP in 1995 to a surplus of 0.9% of GDP in 2000 (if you count SS, it was a shift from a 2.2% deficit to a 2.4% surplus). '98 through '01 was the only sustained period of budget balance since at least 1968.
Fiscal responsibility is generally understood to mean keeping the budget roughly balanced, rather than keeping spending low, but even if you're referring specifically to spending, you're wrong. Spending went from 20.7% of GDP in 1995 to 18.4% of GDP in 2000. That 18.4% figure is the lowest it's ever been since at least 1968. The story is the same specifically for discretionary spending (7.4% of GDP in '95 to 6.3% of GDP in '00, the lowest it's been since at least 1968).
Given the revenues flowing into the government coffers in Clinton's second term, Clinton and the Republican Congress at the time could have easily spent quite a bit more without getting much flak for leaving the budget especially out of balance. Instead, they shrank the national debt from 49% of GDP to 35% of GDP. This was a big factor in making sure the costs of paying interest to finance the national debt were significantly lower during much of Bush's presidency than they were for Clinton.
Maybe you were rooting for Gingrich in '95 and were disappointed that spending didn't shrink even more relative to the economy. Regardless, that doesn't change the fact that Clinton's second term is one of the greatest periods of fiscal responsibility in post WWII U.S. history.
When you look at the overall picture it is clear that political action by the democrats allowed the fannie and freddie debacle to develop.
Big government caused the fannie and freddie disaster.
The fannie and freddie debacle clearly shows the deadly hazards of big government and the safety and wisdom of limited government.
The Fannie Mae Gang
This meltdown is a clear vindication of small government conservative and libertarian support of limited government.
It is a clear illustration of just how hazardous large, expansive government is.
This post is a triumph of ideology over clear thinking. All of Wall Street and half of Washington gloried in the growth of unregulated sectors of the financial industry, while the real estate market went crazy is clear defiance of those fusty old principles of conservative banking. In the past decade or so, we've had more than one bailout of a hedge fund or arbitrage trader who was "too big to fail" with only a Cassandra here and there pointing out that a big and sophisticated house of cards is still a house of cards.
Government policy caused or contributed to many of the bad things you mention.
Your post seems to agree with I said, where is the difference in opinion?
Your analysis seems like the dead-end Marxist analysis that I see so often- well, yes, Communism has failed everytime it's been practiced, because it hasn't been done the right way yet.
Fannie and Freddie are red herrings. While the implicit government guarantees were not good (and the executive compensation was awful) were you aware that Fannie, ferinstance, has much higher performing mortgages on the its books than the various private entities involved in this mess?
This is a complete failure because of a lack of government regulation. The banking industry is different than others because of the nature of systemic risk- because it relies on investor confidence, it is liable to come down like a house of cards when things start turning out poorly. Hence, for instance, the great success of FDIC. For the mortgage industrties, there was a catastrophic failure of due diligence at all levels. To quote:
Well, because the investors and creditors did not do their due diligence and check that the banks that were the ultimate holders of derivative securities had done their due diligence and checked that the financiers who had created the derivatives had done their due diligence and checked that the purchasers of the securities had done their due diligence and checked that securitizers had done their due diligence and checked that the lenders had done their due diligence and checked that the home buyers had done their due diligence and checked that they could afford their mortgages if house prices stopped going up.
Catastrophic failures of risk management at seven different points along the chain--any one of which would have kept us out of this current mess.
That is a failure of regulation. But please, keep peddling the free market uber alles.
The government entities fannie and freddie are at the center of this disaster. Government action and policy toward home ownership caused this disaster.
You can't hand wave this fact away with your laughably incorrect statement Fannie and Freddie are red herrings.
This disaster was the result of government driven action period. fullstop. end of story.
There has been plenty of regulation.
Furthermore there is a reasonable argument to be made that some regulation (mark to market) made this crisis worse.
A few thoughts before I re-enter the fray..
Feel free to keep peddling the myth that this disaster was caused by absence of regulation.
Even though a trivial knowledge of facts on the ground shows that government action, not lack of regulation caused the meltdown.
You don't even know what you don't know. Fannie and Freddie are responsible for our entire crisis right now? Really? If that was the issue, this would be a small potatoes-type of deal, easily containable.
It is not. Look to the CDS market. Look, heck, anywhere. Look at economists from the left and the right (note- economists, NOT politicians) and you might begin to understand. I recommend a steady course in Mankiw, Delong, and Cowen for starters. Heck, I recommend a 101-level macro econ course.
You are simply not being responsive. Money laundering = terrorism (via the Patriot act) and requires increased investigation (and, occasionally, disclosure) of certain types of transactions. Sarbanes-Oxley (I assume that's what you were talking about) was passed in response to, yes, the Enron scandals and doesn't touch on the type of conduct involved here.
In short, if a city government privatizes police, and has a catastrophic failure, it is no response to claim that they tightened regulations over zoning.
Nice try. Please sell your ideological crazy to people who know less.
Why don't you tell us what Regulations would have helped us and how this is not the fault of various regulations pushing Alt-A loans.
Any attempt to go into the regulations needed would take some time. For a start we needed to oversight to decrease opacity, risk, and leverage in the CDS market.
As an example of how we have failed at basic regulationn of the banking industry (WSJ, 2007)
Regulators appointed by President Bush often have been more sympathetic to industry concerns about red tape than their Clinton administration predecessors. When James Gilleran, a former California banker and bank supervisor, took over the OTS in December 2001, he became known for his deregulatory zeal. At one press event in 2003, several bank regulators held gardening shears to represent their commitment to cut red tape for the industry. Mr. Gilleran brought a chain saw.
He also early on announced plans to slash expenses to resolve the agency's deficit; 20% of its work force eventually left. When he left in 2005, Mr. Gilleran declared that the OTS had "exercised increased diligence in its review of abusive consumer practices" while reducing thrifts' regulatory burden. But his successor, Mr. Reich, a former community banker, has reversed many of Mr. Gilleran's cuts. Citing "understaffing," he hired 80 examiners last year and plans to add 40 more this year. A spokeswoman for Mr. Gilleran, now chief executive of the Federal Home Loan Bank of Seattle, said he wasn't available to comment.
A few other quick points.
WRT to the Fannie misdirection (from Calculated Risk):
Fannie and Freddie... were nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren't the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box.... [T]he immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of "innovation." If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.
I don't have time to source the alt-a for you, but it is yet another false point. That is to say, the underlying problem is not alt-a loans, but the incentives and lack of oversight (upstream/downstream) in all loans.
When it all gets boiled down, posts like the one, supra, from TJIT anger me. People who believe, generally, in less government (like me) are always underdone by the ideologues who try to advance their theories in the face of reality. As I mentioned above, it is like arguing with a Marxist- they're theories are always correct, they were just never done *correctly*. So it is with TJIT- no matter what the issue, the problem was never government oversight, but, rather, too much government intervention. And crazy stances like that make it harder for the rest of us to advance good-faith arguments for less government intervention and regulation in areas where we truly do need less.
When all you have is a hammer, every problem looks like a nail.
If you put wheels under the goalpost it would be a lot easier for you to move them around.
You are starting to sound like the commie defenders you rightfully slagged in an earlier posts.
You are arguing that if we had the right people writing the regulations everything would be ok.
Like the commies the regulators never seem to get it right and they always want another bite of the apple, promising they will get it right this time.
You don't want to get the fact that if the government had not created fannie and freddie the problem would not have gotten as big as it was.
Blame Fannie Mae and Congress For the Credit Mess
You are misrepresenting my position. I have said
1. The government policy that created fannie and freddie were the root cause of the problem and the reason it got so big.
2. That the political connections of the GSE's to congressional politicians (primarily democrats) allowed these entities to avoid additional regulation and oversight.
These institutions needed to be reined in and the fact that their political connections kept them from being reined in is what made this such a huge problem.
Read some of the links I provided and you might understand this point.
Mortgages were only the fuse, the real problem are derivatives based on them and derivatives based on those derivatives. There is zero regulation of these instruments. Phil Gramm slipped a law into an omnibus bill that specifically forbade regulating these derivatives.
Please. I received enough humor from the SNL debate skit last night. If you keep pouring it on like this, I might need to get new stitches.
For you to consider, since you continue to spout talking points instead of basic knowledge (and FYI, I never argued that having F&F be GSE was a good thing):
1. Why do F&F have a much higher percentage of performing loans than the private mortgage lenders?
2. Why, since they were formed so long ago, did they happen to fail at the tail end of *this* administration?
3. Since the originators of the loans quickly packaged them up to become CDOs, and since no due diligence was done at any level (see me, supra), what does this have to do with the GSE component?
You are conflating two separate issues- whether we should have GSEs (no, either the backing should be explicit or not at all) and whether the lack of regulation led to the overall crisis. In short, it is an attempt to wrongly explout a current problem in order to push your private agenda . . .
Kind of like how the House Republicans wanted to repeal the capital gains tax to 'solve' this problem. WTF? The problem is with securities that have no value, so they wouldn't be sold. Instead, that proposal would have encouraged people that had performing securities to sell; ARGHHHH!
"The government entities fannie and freddie are at the center of this disaster."
TJIT@11:54am
"Feel free to keep peddling the myth that this disaster was caused by absence of regulation."
TJIT@2:30pm
"That the political connections of the GSE's to congressional politicians (primarily democrats) allowed these entities to avoid additional regulation and oversight. "
To sum up- your position is that Fannie and Freddie are largely responsible for this disaster (IMO, wrong), and that the lack of regulation contributing to the disaster is a myth (IMO, wrong), and that Fannie and Freddie failed because they were able to avoid regulation and oversight (I'd agree with that!).
Do you see a problem here? Feel free to continue dancing.
Asking questions instead of providing answer indicates you don't have a leg to stand on.
I will answer one of your questions for you..
A.) Because the politicians (particularly democrats) blocked numerous attempts to increase oversight and regulation of the GSEs.
B.) Because the housing bubble finally burst showing how rotten the GSEs had gotten.
Don't forget government actions (low fed interest rates, mortgage tax deduction, land use regulations, pathetically poor financial education in the schools) helped to inflate the housing bubble.
You studious ability to ignore the overall picture by pointing at minutiae is entertaining.
Big expansion of government (spending) on life-threatening, unnecessary war: NOT BAD
Yeah, I'm missing out here. Let me spell out your basic problem:
1. Everyone, from Makiw on the right to DeLong on the Left, from the formerly unrepentant Greenspan to main street icon Buffet, knows that lack of government regulation is at the core of the problem.
2. Nevertheless there are those, like you, who want to argue for any other point possible in order to advocate continued deregulation. Sometimes the incoherence is so baffling that we get a string of posts like yours (blaming F&F for everything because they were, uh, too unregulated, therefore we need no GSEs and less regulation!!!!). You are wrong. Simply wrong. Having better financial education in the schools would have solved the problem? Really???
Again- if you have a complete failure of due diligence up and down the line, you will have a problem. If you have incomplete risk analysis because you don't look at the underlying risk of an item and believe tranching it will magically reduce the risk, you will have a problem. If the market (yes, the market) incentivizes all players to continue with this house of cards and expose the entire economy to systemic risk because there is no oversight of CDS, YOU WILL HAVE A PROBLEM.
Maybe the wall street types needed a little more 'financial education.' Maybe you need a little more economics education. Just sayin'.
Your tenacious persistence in ignoring all of the links I provided indicates you are not exactly arguing in good faith here.
Particuraly since all you have provided is lots of IMOs and arm waving.
Let me summarize what I have consistently said.
1. Government policy (not lack of regulation) was the primary driver that caused this disaster.
A. Without political action (primarily by democrats) that defended freddie and fannie from oversight this problem would never have gotten this big.
B. Government policy and regulation helped to inflate the housing bubble.
C. The housing bubble is the root cause of the current financial problems.
From a link (one of many) that you conveniently chose to ignore
You do provide lots of teachable moments.
You said:
Could you provide an example of what regulations would have prevented this problem?
Again you provide lots of arm waving and assertions. What you don't provide is one thin scintilla of supporting evidence or a suggested policy.
I'm sorry. Are you so embarrassed by the fact I posted out your own internal contradictions that this is what you're resorting to? I've started with some real basics- the need for oversight and regulation in the CDS market (increase transparency, for starters). We don't have that because of Phil Gramm. Next, increased enforcement of the regulations that we do have (see my post on Banking, supra). I would also look into assets/liability requirements, but that may not be such a large problem now that all the investment banks have been N.A.'d.
This is called reality. Seeing the problem (lack of regulation) and identifying the solution. This is different than the ideological blinders some seem to be wearing- recite a problem, and use it to advance your pet cause.
Here's the rub- I like capitalism. I like our way of life. I want government intervention to be, um, safe, legal, and RARE. But I'm not going to let ideological know-nothings destroy our capitalist western way of life to advance their crackpot pet theories.
Is this a new version of "heads I win, tails you lose"? No matter what happens, it's more proof that government is bad. People who think like you will be the end of our way of life.
You said Interestingly enough one of the primary drivers of derivative development is government regulation.
regulation and/or accounting rules are the most fertile breeding ground for derivatives
You, loki, and others who blindly see increased regulation as the solution to every problem would be well served to take a refresher course in the law of unintended consequences.
Again, you have no idea what you are talking about. Please, take econ 101. The CDS market, and CDOs in particular, did not arise out of government regulation (nice of you to post an ideologically blinded article about the wrong financial instruments during the wrong crisis, BTW). Here's how it works-
A real genius came wup with the idea of packaging these mortgages together as investment vehicles (not a bad idea yet). Then the idea came to bundle them together. Still not (necessarily) a bad idea. Then the idea was to divide these bundles into tranches of various risk, with the payment based upon the repayment (i.e. the first to not receive payment was the riskiest, accorded the lowest score by the ratings agencies etc., and so on until, for example, the top two tranches, 'guaranteed' payment, rcvd AAA ratings). Now it gets bad, because no one was doing due diligence anywhere down the chain- the highest tranch of crud is still crud. But these instruments (CDOs) were incredibly popular and profitable, incentivizing everyone up and down the chain to continue generating more and more and more mortgages to feed this profitable new CDO beast.
I could keep going on. But unless you're willing to pay me, I don't have time to do basic financial education for you.
your arm waving provides a refreshing breeze 1. Some regulations would have helped prevent the problem (better oversight of the GSE's)
2. Some regulations made the problem worse (land use regulations which artificially drive up home prices)
3. Some policies probably make the problem worse by providing federal incentives to buy houses (tax deduction for mortgage interest). This distorts purchasing decisions and acts to help inflate housing prices.
This is a relatively complex issue with many causes.
Folks like you instantaneously attribute all of the problem and all of the solution to regulation of financial institution's.
You do this and complain about the behavior of the financial sector while ignoring all of the government action / policies / regulations that contributed to the problem.
Not a very promising foundation upon which to build a comprehensive solution to the problem.
Thanks for the information in your 3:46 PM post.
Look, despite our name calling, we may not disagree with on too much. This is a complicated situation, and there are many factors involved. As someone who is prefer less government involvement, there are specific areas in which government intervention was not helpful (for example, for the GSEs, the backing should have been made explicit, since the implicit backing was already priced in, or they should have been privatized). Nevertheless, where we disagree is on a fundamental issue- I believe the crux of the matter is a failure of government regulation; while other issues did not help, the lack of oversight and regulation over banking in general and the CDS market in particular (demanding more transparency, for example) was the but-for and proximate cause of this crisis.
This is a specific problem that can only be solved through government regulation. In short, in the peculiar instance of the financial industries, where there is an implicit government backing because of the systemic risk to the economy, there is a need regulation to ensure that these monumental mistakes do not get paid by the taxpayers.
Here is an article that discusses the general environment and some of the potential regulatory responses to it.
I think it is fair to say that it is a complex issue that had many causes and the potential solutions are not as clear cut or easy to establish as a person might hope.
Hindsight regulation
The Fed's problem has never been caring about unemployment. That's a canard. What they need to focus on is:
a) Inflation
b) Prevention of speculative bubbles (e.g., not continuing to ensure cheap money during a speculative bubble).
B is interesting. The last speculative bubble (late 90s) was, arguably, not a *bad* thing. This speculative bubble is much, much worse for both economic reasons and political reasons (the need to bail people out of decreasing 401ks and rescue telecom companies from too much fiber optic cable is much less than the mortgage mess we're in now).
Past that I think what we would end up agreeing on if we argued enough is that what got us here is a mix of BAD regulation AND deregulation. You can't ignore the GSEs role in engendering the rise of housing prices that lead to this bust. The derivatives are based on housing prices and if they never fell the house of cards would still be expanding. "We" should have never had the government getting involved in trying to create an ownership society and as much as Bush fought Fannie and Freddie he was also complicit in pushing that meme. Getting people into homes with loans they can only afford when home prices were rising was a bad idea and government regulation was directly involved with that.
Another thing about securitizing was that the GSE debt is mixed in with the other mortgage debt and that is part of the magic alchemy that allowed the AAA ratings in addition to the tranche system loki13 mentioned. It was also bad regulation that allowed banks to drop their reserve requirements to basically zero and allowed them to leverage up 30+ times their capital base so that when prices came down, as they inevitably would, they were suddenly all insolvent. The regulation/de-regulation argument is a bit of a red herring too because the line blurs between bad regulation and de-regulation.
If we want to talk about good regulation we should probably be talking about regulation that prevents the companies being regulated from writing the regulation via lobbying. Until that is stopped we won't ever escape bad regulation or de-regulation as it suits them. The most important point should be to get regulation that benefits the citizens and not business at the expense of its citizens. We should also be able to do this in a way that doesn't ruin businesses and all that they provide.
The main thing I don't like to hear is blaming our current problem on greed or individuals. It was the state run system one way or another that created the structures that allowed the problem. People in EVERY system will follow their incentives and it’s the state and therefore the politicians in charge that are the ones to blame. That they were/are bought off by private industry doesn't excuse them. By trying to say the problem was just de-regulation you are effectively giving them a pass on bearing any responsibility for the crisis.
Which government policy or regulation required banks to lend money to people who couldn't pay it back?
There's some truth to that, but blaming sub-prime derivatives abuses on regulation is like blaming adultery on marriage, or truancy on school.
I don't think there is any one regulation that mandated that bit of stupidity.
There were a lot of perverse incentives in the system. On the government side things like CRA probably led to relaxation of lending standards.
On the private side lots of commissions and the now blown up assumption that securitzation of enough bad loans would turn them into good assets.
The reason I am so bitchy about regulations is that unintended consequences of regulations often cause problems, which lead to more regulations, which lead to more unintended consequences, etc, etc.
I think one example of this and the root cause of a lot of problems in business was the populist nonsense that led to a regulation on the amount of hard compensation CEOs good receive.
The CEOs walked right around that regulation with stock options. One of the downsides of stock options is it focuses the CEO on quarterly results and not long term strategic value creation.
Which can cause some monumentally stupid short term decisions just to keep the stock from cratering in one particular quarter and thereby damaging the CEO compensation.
"I could envision McCain rising to a critical occasion with greatness, but I could also see him going off half-cocked to our eternal regret. Both candidates have distinct areas of potential greatness, so part of my preference for Obama is an expectation that he'd be steadier and more conservative in important risk regards."
Two things:
(1) There was a hint in the Gibson/Palin interview of what they could have in mind. Gibson was (rightly) grilling her for specifics on the ticket's spending control plans, when Palin came back by saying that veteran's bennies would not be cut. Gibson heard her saying all military spending would be off the table, so hit her with the 18% non-military discretionary number, implying she wasn't serious. But though Gibson heard all military, that's not what she said.
(2) If you look at what actually happened in Churchill's famous "reckless" episodes such as the defense of Antwerp and the Dardanelles, it was the sclerotic McClennanish conservatism of those surrounding him which was to blame, not his bold willingness to take risks or to stand on principle. Then, as now, we have too many Tories with us overly impressed with our power and resources and too willing to be conservative of an advantage we no longer possess and only came to once gain via the courage, principle, and boldness now out of fashion.