The Reregulation Mantra?

The current interventions prevent market participants from adjusting to new conditions. Banks might be willing to sell their shaky loans to investors at a steep discount, but why do that if the government might bail them out? Why not wait to see if you can get a better price? With the politicians constantly changing the details of the bailout, selling at a discount today might get you accused of fiduciary malpractice later.

Uncertainty over what further new regulations may be imposed only stifles the market’s search for solutions.

Markets are never perfect. They are made up of people making their best judgments, and people’s judgments are never perfect. Yes, under some circumstances market activity such as speculation and short-selling could harm innocent bystanders. But those who say government is the best protector are wrong because the knowledge problem is an insurmountable obstacle.

There is only one genuine protection for the public: the discipline of profit and loss.