Why should we regulate industry that violate the standards we stand for?

Question

For example if we regulated the banking industry, they couldn't tell people they can afford these huge mortgages when the really couldn't.

Answer 1

The U.S. tried unregulated capitalism in the late 1800's.  We got monopolies, robber barons, sweat shops, child labor, and a huge disparity between the working man and a few ultra-rich capitalists (Morgan, Stanford, Rockefeller).  We regulate many things now, but there are many smart people out there who can find a way around good regulations.  The best example today of unfettered capitalism is China:  lead paint on toys, air quality in Beijing, poor earthquake building codes in Sichuan.  Free markets are great, but as with anything, total freedom in the marketplace isn't a good thing

Answer 2

Uh, that's exactly how we got in this mess.  Something called the "fair practices in lending act" which required banks to approve loans to people that couldn't afford them.  Banks wouldn't have put themselves out of business by making bad loans.  They had government help.

Whats worse is government regulations also permitted the banks to bundle these bad loans and sell them as mortgaged backed securities.

The government meddles messes things up, then can always count on citizens to clamour for more meddling to fix it.  No wonder we're in trouble.

Answer 3

NO nononononononononono

Because we aren't smart enough.  That is what Bush is trying to do - put all banks and financial markets under the untransparent unelected fed.  But the more we mess with otherwise self correcting markets, the more trouble is caused.  That is how we got first the dot com bubble then the housing bubble now the commodoties bubble, to begin with.

What we need to do is UNDO some of the problems we put into place.

I saw something today.  Wait a sec...

"Congressman Paul’s latest Texas Straight Talk:

One problem with politicians is that when problems they create come to a head, they typically feel this irresistible urge to DO something, rather than to UN-do something, or to simply back off to avoid exacerbating the situation. Too often, that which they end up doing has very little connection to the cause of the crisis, but plays well in the press and superficially makes everyone feel better. Bills that are rushed through Congress under duress are never studied enough, providing too tempting an opportunity to quietly slip in unrelated provisions that erode freedoms in ways that would never pass as a stand-alone bill. We famously saw this with the PATRIOT Act, but Washington learned nothing from that.

The current housing crisis and the corresponding big government fix are another prime example. First of all, the so-called solution will actually make the problem worse. The problem stems from easy credit and a rush to flood the housing and mortgage markets with money. Relaxed or non-existent lending standards led many into mortgages and houses they could not afford. As more foreclosures hit, the lending institutions will continue collapsing like dominoes under the weight of all the bad paper they underwrote. Some are reacting and reintroducing lending standards. Thus the number of buyers in the market for homes is beginning to shrink back to its natural size, and hyper-inflated prices are falling back down to earth. In these ways, the market is trying to correct itself in the wake of the mistakes government intervention encouraged them to make through easy credit. However, this correction is causing pain, especially to Wall Street investors and those who bought homes at the top of the market bubble, never expecting it to crash, always assuming they would easily be able to refinance.

Some mistakenly identify the falling home prices as the disease instead of merely a symptom – which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.

Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is – do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.

With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President’s signature, our government has unfortunately chosen the latter"

And there is this:http://www.youtube.com/watch?v=XaxdUPNYj...

What we need to regulate is the fed.  Or abolish it.

Answer 4

Regulation costs a lot of money - somebody has to enforce those regulations.

And it's just a different evil - government people just LOVE to make new rules and regulations, so they're constantly expanding their role.  Sooner or later, it grinds the industry to a halt.

And people that want to break the law can still do it - they just create a new product that isn't regulated yet and away they go, so regulation doesn't provide the protection you seek.