Monday Morning Links

Monday, October 20th, 2008
  • I am shockedshocked–that a guy who wrote a book called In Defense of Government would misdiagnose the financial meltdown as a deregulation problem, then blame libertarians for all of society’s woes. It’s odd. We libertarians can’t get either party to take our ideas seriously. But there are plenty of people on both sides of the ideological spectrum ready to blame us for the consequences of bad ideas we never endorsed.
  • TSA agent found with $200,000 of loot he stole from your suitcase, and was selling on eBay.
  • Thousands of DUI cases in Miami may have to be overturned after a lab technician was caught purging the machines of questionable results.
  • What would Milton Friedman say?
  • The dangers of legislating by anecdote. Too many bad ideas become law this way.
  • Alan Bean has excerpts from the actual affidavits of the recanting witnesses in the Troy Davis case.
  • This kid is pretty damned cute.
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    23 Responses to “Monday Morning Links”

    1. #1 |  freedomfan | 

      The ironic thing about Weisberg’s piece is that he is doing exactly the thing he claims ideologues typically do: He ignores the tide of overwhelming facts in order to maintain his unsupportable premise. He never shows (or even claims, really) that there wasn’t a lot of regulation in financial services, he just says that there wasn’t enough of the right kind of regulation. That’s exactly the approach he criticizes among libertarians and Marxists. He is a pro-government ideologue who, when faced with failure in a system that is subject to all sorts of government authority, claims that it wasn’t the right kind of government authority and that the regulation wasn’t wise enough or sufficiently immune to politics. Well here’s a news flash: the market may not always be wise, but there is just zero reason to believe the government is going to be wiser, and it is certainly never going to be immune from politics. Saying that political influence undermines effective government is the same as saying there will not be effective government.

      And, BTW, these pro-government folks really need to give up on the straw man that the libertarian claim is that “markets are always right” and the free market would never allow financial problems to occur. Though people may oversimplify at times, that is not the libertarian claim. The libertarian claim is that the government, despite (irrelevantly) good intentions, is not going to be able to do a better job than the free market. And, in attempting to do so, it introduces distortions that tend to exacerbate the problems. In this case, by encouraging risky loans it helped destabilized the mortgage sector of the financial markets. Maybe the private market would have gotten itself into trouble by making bad loans without government help, but it’s really difficult to argue that government policy here didn’t encourage risky behavior by insulating people from the consequences of that behavior.

      BTW, I tend to agree that the derivatives and CDS market has grown without the disclosure that stabilizes such markets, for many reasons. But, as a side note, government intrusion and regulation of part of a market encourages a mind-set that the whole market is regulated in some way. That mere fact, even when false, encourages other risky behavior because people assume that there is a safety net that there isn’t. That is part (though not all) of the reason the derivatives market has grown so recklessly; people assume that the government is keeping everything safe and that provides false confidence and reduces the incentive for disclosure and third party ratings of those segments of the market.

      Regardless of where derivatives land and how they are handled in the future, the overall point remains. Weisberg’s jibe about libertarians being “intellectually immature” falls sort of flat when he patently engages in the same behavior he accuses libertarians of himself.

    2. #2 |  paul | 

      A lot of what i’ve read on the financial meltdown has charecterized the problem as either a lack of regulation, or a lack of effective regulation – i.e the regulators, and sometimes even the boards of banks themselves, not understanding the whizzy super products being traded by the ever so clever money men in the trading rooms. Whilst you’re probably technically correct, that’s not the perception that’s sticking, so my guess is the history books will put the financial mess down to de-regulation. And libertarians will know how the socialists have been feeling all these years.

    3. #3 |  Josh | 

      Weisberg says “inquest is central to improvement.”

      Wasn’t it Barney Frank who said something about not having the time to weigh the pros and cons of the bailout??

      So far, it’s been the libertarian side digging into the details of what the root cause of this is, and the Weisberg/Frank side reflexively attacking the free market.

    4. #4 |  Michael Pack | 

      So the BAC machines don’t work and they have to hide the results? This seems to happen so often that flipping a coin would be a better option.I’m still amazed they are used.As for deregulation,they always blame the free market.It does correct it’s self but it can be messy.Everyone wants to be protected from their mistakes.

    5. #5 |  Marty | 

      ‘The TSA reached a mind-boggling new low in customer service this week when it was revealed that one agent had single-handedly absconded with over $200,000 worth of travelers’ belongings, primarily cameras and laptops, and proceeded to unload his booty on eBay.’

      How many, “Honey, I thought you packed the camera…” arguments do you think this guy caused?

      I love it that the problem’s with ‘one agent’… This has been going on since the TSA was established.

    6. #6 |  einTier | 

      Yes, theft from luggage has probably been going on since people started checking luggage. Unfortunately, it really went off the charts when the TSA forbade us from locking our luggage. This is perhaps the stupidest decision they’ve made in a long line of bad decisions.

      Today, I only check what I have to, and it’s never anything that can be broken or I would mind losing.

    7. #7 |  Paolo | 

      Government always wins with spin. If there is failure, the answer is more government. If there is success, it’s because of government and more is needed. Katrina/NOLA, Financial “Crisis”, 9/11, public schools, SocSec, war on drugs, etc.

      BTW, Free Markets are the most efficient allocator of resources over the long run (and usually over the short run, too). The allocations of a free market MAY NOT be what a morally elite might want: such as supplying free cheese for redheads. “Right” and “Wrong” are not concepts that I prescribe to a Free Market; however government policies are mostly “wrong” in that their results are usually in conflict with their stated goals…due mostly to ineptness. Mr. Paulson, you may step forward now as an example.

    8. #8 |  Mattocracy | 

      I’ll just go ahead and call Weisberg a piece of shit. It may be a knee jerk and emotional reaction without any substance to counter his argument, but nonetheless, he’s a piece of shit. I am now going to preach to the choir.

      When there is nothing remotely Libertarian about our economy, as Radley alluded to, blaming our ideas for the recession is like blaming peace advocates for the violence in the world. WTF.

      “But to summarize, the libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong.”

      Bullshit. The evidence is overwhelming that deregulation had nothing to do with this. It was brought on by the cooperative actions of corporations and the government to meddle with the financial system. There is nothing remotely free market about government and corporations working hand in hand to manipulate the market.

      He doesn’t even explain why the “libertarian apologetics” are wrong. Just states they are and leaves it at that. I guess you can’t lose an argument if you don’t fucking make one.

      “One line of argument casts as villain the Community Reinvestment Act, which prevents banks from “redlining” minority neighborhoods as not creditworthy. Another theory blames Fannie Mae and Freddie Mac for causing the trouble by subsidizing and securitizing mortgages with an implicit government guarantee.”

      Yeah, you could say that. No one was “redlined.” If they didn’t have the means to pay a fucking mortgage, sorry, that’s a good reason not to issue one. Doing it anyway has just given a lot of these “redlined” minorities a bankruptcy and a foreclosed house that will fuck their credit forever. Libertarians never would have allowed the poor to have been mislead and used so mortgage company execs could get their payouts with the help of politicians re-writing the regulations. But hey, the politically connected made their money, and the politicians got their lobbyist money. Nothing Libertarian about that whatsoever.

      “Blame Greenspan for making the case that the exploding trade in derivatives was a benign way of hedging against risk. Blame Gramm for making sure derivatives weren’t covered by the Commodity Futures Modernization Act, a bill he shepherded through Congress in 2000. Blame Cox for championing Bush’s policy of “voluntary” regulation of investment banks at the SEC.”

      How about if we blame assholes like you who championed the policies that undermined the mortgage backed derivates that lead compromised the transparency necessary for investors to know what the hell they were investing in. Derivatives aren’t the problem, its the government practices that forced the derivatives market to overvalue the mortgage backed securities the gov’t helped to produce. NOTHING LIBERTARIAN OR FREE MARKET ABOUT THAT!

      He is right that ignoring the facts is what ideologues do. And he aught to know all about that.

    9. #9 |  Steve Verdon | 

      Regarding liar Weisberg.

      He is a fool in that not only is the market not a “free” market–i.e. it is regulated and monitored–but government has been tyring to make sure we don’t have such panics for almost 80 years and so far I’ve lived through 2 (or is it 3) major bubbles/stock market collapses. Excellent track record jackass.

      And my beef with government in this latest crisis isn’t as simplistic and moron Weisberg makes it out to be. It isn’t that there was too much deregulation or even too little, but that government usually fooks things up.

      Our government relies on discretionary policy–i.e. policy that is shaped to fit whatever problem is currently on the horizon. Further, since we have a democracy (although this isn’t a critical part of the criticism I’m making since the same problem holds in a government with a “benevolent dictator”) it can be manipulated by those who are seeking unearned economic returns–i.e. rents. As such, even if the government manages to hit on the right policy, an heroic assumption, later on the government will likely find it desirable to deviate from that policy.

      Thus, claims to do things like not manipulate the inflation rate to try an influence the unemployment rate (i.e. taking advantage of the Phillips curve unemployment-inflation trade-off) break down. People figure out what the government is doing or will do, and hence don’t believe current announcements to reduce inflation.

      Same thing here. The people investing in Wall Street know that during a bubble things look good. People are giddy, unemployment is falling, incomes are rising, GDP is growing, inflation might be a minor issue at best, and income tax revenues are going up. Everything a politician likes. Why prick the bubble early on? Toss on the bailouts that basically reinforce bad decision making and you are laying the seeds for the next crisis. For example, Fannie Mae and Freddie Mac they go back to….the Great Depression (at least Fannie Mae although it had a different name back then).

      My problem isn’t a simpe one of “too much deregulation/free markets are utopia”. It is that the idea that we can get just the right amount of regulation on markets to make a utopia is a fools dream. There are people on all sides that want to manipulate the regulations for their own agendas. Those agendas can be profits, greater market share, re-election, etc.

      Discretionary policy has been shown to be lacking both theoretically (Kydland and Prescott’s Nobel prize was based on this theoretical work) as well as empirically. We have had failures at preventing serious market meltdowns both here and abroad. Government has enacted unsustainable policies (e.g. Medicare). Government, as a general rule, can’t run a surplus during boom times an a deficit during down turns. Instead it runs deficits pretty much all the time. Every country has health care systems that are unsustainable and one of the big reasons is government interference (Gammon’s Law). It isn’t the type of government interference in the latter case, just that the government is involved.

      France’s health care system: unsustainable
      Canada’s health care system: unsustainable
      U.S.A.’s health care system: unsustainable
      England’s health care system: unsustainable

      I have yet to find a health care system that is sustainable that has large scale government involvement.

      Paraphrasing Ronald Reagan, “Government isn’t the solution, government is the problem.”

    10. #10 |  Terrorific | 

      I like how the TSA screener’s purchased items were all ac adapters, OSX install disks, and other necessary accessories. What a great guy not to leave his customers without power!

    11. #11 |  j.d. | 

      anyone watch Maher last Friday? On his “new rules” he had a little something about fathers buying thier children S.W.A.T. team halloween costumes (its’ up on youtube btw). Hilarious, but spot on.

    12. #12 |  Dave Krueger | 

      I remember when “60 Minutes” did a story about baggage handlers stealing stuff. Of course, those crooks weren’t the highly motivated honorable and professional law enforcement officers that comprise today’s TSA. I’m sure it’s just “a few bad apples”.

      Muahahahahahahahahaha!

    13. #13 |  Mojotron | 

      here’s a piece from Barron’s mentioning specifically what actions (including but not limited to rolling back regulations) led to the recent crisis. I don’t think that it’ll sway anyone who thinks that regulations are intrinsically bad and it doesn’t really name names, but it does a good job of showing how different pieces came together to make the problem bigger and more prolonged than it should have been.

      //bigpicture.typepad.com/comments/files/a_memo.pdf

    14. #14 |  Ken Bean | 

      I’m afraid there WILL BE NO FURTHER REAL ELECTIONS…if Obama gets elected. These guys are communists.
      Ken

    15. #15 |  Cynical In CA | 

      Wow, that Weisberg piece sure brought out the scribe in some people.

      Shorter Weisberg: “First comes food, then comes morality.” The guy’s got to eat, you see.

      Laws named after kids in Cali:

      “Megan’s Law” is a beauty that publicizes child abductions on freeway LED boards, so of course, traffic has to slow to even more of a crawl so people can read it as they idle by. Don’t know to this day if a child has been rescued as a direct result of this method.

      “Lanni Law” named after a kid who was killed crossing a street after exiting his school bus. Criminalizes (felony, I believe) school bus drivers who fail to report other drivers who blow through the school bus’ flashing red lights, among other things.

    16. #16 |  Jerry S | 

      Thousands of DUI cases in Miami may have to be overturned after a lab technician was caught purging the machines of questionable results.
      ****************
      Anyone actually think this only occurs in Florida? I think not.

    17. #17 |  Against Stupidity | 

      Unfortunately Ken, if they get their way in the next few years, you may probably be right. A good election process depends on accurate information available to the voters. As long as the majority of the electorate receives its daily news from the current corporate media complex, they will not be properly informed and elections will have an aberrant outcome.

      I’m not saying the information isn’t out there. Its just that the majority of voters aren’t willing to find a less tainted source of information.

      They are worse than communists. They are Marxist Progressives and they are more deceitful than any communist.

    18. #18 |  Francis | 

      Govt interference in the “free market” of the financial industry starts with statutes authorizing the formation of entities with limited liability (aka corporations). The next step is generous bankruptcy laws that make the rake-back of distributions from bankrupt corporate entities to their employees almost impossible.

      So starting off, we’ve created an environment where a rational financial entity will seek to privatize its gains and socialize its losses.

      Next, there’s a reason why boatloads of banks failed in the Depression and S&Ls were seized in the 80s — bad loans. In the Depression, the lenders to banks (aka depositors) got wiped out. As a result of banking regulations, low-information lenders (depositors, still) no longer are required to do massive due diligence on their banking institutions. The regulation providing insurance for small deposits has a downside — encouraging risky behavior — but a huge upside — providing a base level of confidence among millions of depositors. Now, since your average regulator isn’t a complete moron, as a condition of receiving FDIC insurance, the bank must in turn allow the regulator to inspect its portfolio of assets (third-party loans) to ensure that the depositors have a reasonable chance of being paid back. This is commercial banking regulation in a nutshell.

      Insurance is, generally, a highly-regulated business. After all, the insurer needs to pay large numbers of claims concurrently only when things go really bad. Since the same people who buy insurance tend to be voters, they elect people who pass laws that require insurers to be able to live up to their obligations, including when things go really bad. Otherwise, the insurer gets to privatize the gain and socialize the loss. State regulation provides the alternative to the continuing due diligence that each policy holder would otherwise need to do on its insurer.

      The credit default swap market is a classic example of the failure of unregulated insurance. Insurers are grossly undercapitalized. No one knows who the insurer is on various claims, so no one knows whether claims can get paid if an institution is driven into default. Paralysis has ensued.

      Put another way, the last 10 years of regulation of investment banks and the various products they have sold are a perfect example of libertarianism. The failure of the government to provide adequate oversight allowed for institutions to capture gains and externalize, onto the taxpayer, the losses.

    19. #19 |  Cynical In CA | 

      “The credit default swap market is a classic example of the failure of unregulated insurance.”

      Wrong.

      It is an example of systemic fraud.

    20. #20 |  MacK | 

      OK so now TSA means _To Steal All_… of your shit.

      First of all what about all the people keeping each other in line crap we had heard about? This guy took things that did not quite fit into his lunch pail that he started work with, and no one noticed?

      Even worse to me is if he can take, he can give.
      He can take your shirt, and he can give you a .45 caliber for the next inspector to find.
      He can take your money, and give you a clock with wires leading to some soap.
      He can take your child’s B-day present, and give you a clock with wires leading to a blasting cap inside 3 pounds of C4.
      When it goes off mid flight over Peoria you can bet they would figure out who that bag belonged to.

    21. #21 |  Marty | 

      lighten up, Francis. just by saying, ‘Put another way, the last 10 years of regulation of investment banks and the various products they have sold are a perfect example of libertarianism,’ you’re telling me that you’ve placed blame and then built your ‘facts’ to support your thesis. Do your research first and base your findings on your research, instead. I’m willing to bet the word ‘libertarianism’ isn’t part of your answer.

    22. #22 |  Please Don't Flame Me; I Really Want To Know | 

      I am a bit confused; can someone explain to me why the credit crisis was the result of regulation?

      My layman’s understanding is that the first mistake in a long series of mistakes that caused this financial crisis was that banks were lending to people without making sure they had adequate income. People say the government’s efforts to force banks to lend to low income families caused this first step towards disaster, but from what I’ve read, once one bank offered a certain high-risk mortgage, many other competing banks would soon offer similar deals out of their own volition. Why? Because the mortages were selling like hotcakes to the larger banks and financial firms and making the bank a lot of money without any of the risks involved in keeping a crappy mortgage on the books! The government wasn’t forcing them to offer these ridiculous mortages; they were offering them because bigger banks were buying the mortages off as fast as they could issue them.

      Or am I wrong? What am I missing here?

    23. #23 |  KBCraig | 

      Not surprisingly, the TSA thief wasn’t caught by TSA, nor any other government agency. He was caught by one of his victims scouring through eBay for their stolen camera.

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