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Sun, Feb 22nd 2009, 19:58

Patrick Edwin Moran, Wake Forest University, Platinum Contributor (201)

No link to the original article?

Mon, Feb 23rd 2009, 00:57

Patrick Edwin Moran, Wake Forest University, Platinum Contributor (201)

http://online.wsj.com/article/SB123509667125829243.html
This link may work.

Mon, Feb 23rd 2009, 04:27

Patrick Edwin Moran, Wake Forest University, Platinum Contributor (201)

Former Senator Gramm, USB vice chairman, presents this article adapted from his recent submission to the American Enterprise Institute (itself a leading architect of Bush’s public policy). In it he speaks for those who constitute his natural constituency, using leading arguments that urge readers to draw dubious consequences that he would not dare to state openly. Words like "politization" insinuate that politicians have implemented unwise policy moves to favor their political futures by appealing to the hopes of the common wage earners. "Politization" caused a real estate bubble, and unnamed figures in "rating agencies" ignored hazards. "When the bubble burst, the financial system lost the indispensable ingredients of confidence and trust." He seems surprised that dangers of "securitized mortgages, even subprime and undocumented Alt-A mortgages" were ignored. He denies that regulation was inadequate. Here he indulges in a dangerously slipshod use of language. Regulatory statutes may have been adequate, but regulatory activity was clearly inadequate, pointing to systemic flaws in the governance. Gramm avers, "If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back." In so saying, Gramm cynically blames the primary victims for the disaster that dominoed into the world financial system.

His main point is buried in the middle of his article: "The principle alternative to the politization of mortgage lending and bad monetary policy as causes of the financial crisis is deregulation." This assertion creates a false dichotomy. The "polarization" of mortgage lending may simply refer to government attempts to make mortgages easier for lower income groups to acquire. It remains to be seen whether such attempts were well thought out. Gramm simply insinuates that the entire regulatory process could be caused to go into hibernation by "politization." The remaining factors, "bad monetary policy" and "deregulation" would be bad by definition on the one hand, and viewed as treacherous processes by many students of economy on the other. Regulations, per se, are not good or bad. They must be evaluated. But all societies have found regulations essential for their well functioning.

Mon, Feb 23rd 2009, 08:43

Eimear O'Casey, Atlantic Community, Platinum Contributor (156)

Thanks for pointing out the bad link. It should be working now!