Rob McAleavy argues:

It is time to seriously look at solid and functional regulation. We hear so often that "free markets" will cure all, and that regulation only hampers these markets. Time and again, these "free markets" fail us — Savings & Loan, Energy (Enron), Mortgages, Credit Cards(?), health care - essentially due to greed, corruption, ignorance and the demonizing and complete absence of intelligent and forceful regulation. "Free Markets" are never free — they simply favor some over others. It is time to polish the word "regulation" and put it in its rightful place, hand-in-hand and side-by-side with Free Markets to balance them.

This is certainly a crucial question right now. There are many, many people on the left and the right and the center and all over who think the message is clear: we need more regulation of financial markets to prevent these crazy shenanigans.

I'm going to sit out that debate for right now. We'll be having it a lot here, I think, over the coming weeks and months.

But I will say . . .

 

. . . that I don't think Fannie and Freddie apply. They are very peculiar institutions. They are not "Free Market" companies by any definition. They were created by act of Congress to serve a public goal of promoting more house ownership. They were given sweetheart, lovely deals by the implied support of the U.S. government.

Many have called for serious reform over the years to make Fannie and Freddie more like regular companies. More responsive to the Free Market. But, Congress refused to act. Why? Partly because Fannie and Freddie have been really powerful lobbyists. Congress has — knowingly, many would argue — allowed this highly odd, extremely risky venture to continue.

Leaving aside all the other things you mention — Enron, Mortgages, etc — in the case of Fannie and Freddie, I hear a lot of smart people saying the problem, in this case, was too much government. Not too little.