We're going to need regulators who can anticipate what the next Wall Street business model is going to look like, and how the next crisis will be different than the current one. We're going to need squads of low-paid regulators who can stay ahead of the highly paid bankers, auditors and analysts who pace this industry (and who themselves failed to anticipate this turmoil).Tony Blankley, speaking Friday on KCRW's Left, Right & Center, is similarly concerned:
Here we are, eighty years after the beginning of the Great Depression and still debating the causes and effects. And to think that you've discerned in a week and a half that it was certain regulations that caused [the current situation] shows a tremendous confidence in your analytical skills.And Megan McCardle of The Atlantic, who has been excellent as usual of late, writes:
What can I say that Bush, or Clinton, or anyone else, should have done, knowing what they did at the time? I can demand that they be omniscient, but since I'm not willing to hold myself to that standard, that hardly seems fair.
If, in retrospect, if we don't know what caused a particular financial crisis, why should we expect governments to implement regulation that will effectively diffuse future calamities? And if, as Alvin Toffler posited, American business moves at 100 mph while the law moves at 1 mph, how do we build an effective regulatory apparatus that does not, through its unintended consequences, pull the reins too tight or in the wrong direction? This is not a call for anarchy on Wall Street, but rather an honest attempt to answer those questions.
It bears saying, too, that financial bubbles happen only in healthy economies and serve a valuable function therein (see Wright/Gross video above). North Korea has never had a housing bubble; Cuba has yet to experience a dot-com collapse. The degree to which these booms and busts happen may be to some extent mitigated, but their role is undeniable.
Further worrisome is the human tendency toward panic in the wake of perceived catastrophe: the internment of Japanese-Americans after the attacks on Pearl Harbor; widespread and uncritical public support for an invasion of Iraq after the 9/11 attacks; and the current push for more governmental involvement in the US financial system, are but three examples of this. As such, David Cay Johnston, in this open letter to journalists, reasonably suggests that we would all do well to take a deep breath and ask ourselves if what we're seeing right now should be properly called a crisis:
As of now we are, as a group, behaving just as we did the last two times the administration sought to rush through a hastily thought-out, ill-conceived plan. Why in the world are we being so gullible and naive? Whatever happened to the core value of journalism - check it out?Perhaps, behind all of the panic and pandemonium, there is good reason to be sanguine about the antaean resilience of the American economy. Or maybe not, but, at a minimum, we would do well to put aside our panic and recognize the enormous implications of the current debate.