Slate Proves Amusing

I posted about the end of libertarianism earlier on Slate, and the replies were funny. One mentioned fact checking, without stating any facts that I'd misstated. Another was mad because I didn't use the author's name, which everyone knew since they'd just read the article. Another went on about pragmatism, without knowing a thing about it. Here's a definition:A way of approaching situations or solving problems that emphasizes practical applications and consequences. I suggested that this was as opposed to an ideologue, who, presumably, doesn't look at the facts, but holds to a theory no matter what the facts are.

My general point remains true. The author gave no analysis to back up any of his claims. None. For one thing, Hayek has nothing to do with Rand, or Mises, say. Also, Gramm is not a libertarian. I've been told that Cox and Grenspan are. Since I consider their performances at the Fed and SEC to be dreadful, I'm not happy to hear that. But that shows how wide this movement is, since we allow incompetence. Suffice it to say that Hayek speaks for me, but they don't. Then there's this remarkable sentence:

"There are rebuttals to these claims and rejoinders to the rebuttals. "

So, what are they?

And this:

"Had the advocates of prudent regulation been more effective, there's an excellent chance that the subprime debacle would not have turned into a runaway financial inferno."

I actually agree with this, but there are many disagreements on those rules. You can read Paulson's plan from earlier this year. It's full of rules.

By the way, these quotes are from the article the author quotes:

"Born wanted to shine a light into the dark. She had offered no specific oversight plan, but after months of making noise about the dangers that this enormous market posed to the financial system, she now wanted to open a formal discussion about whether to regulate them -- and if so, how. "

"Derivatives did not trigger what has erupted into the biggest economic crisis since the Great Depression. But their proliferation, and the uncertainty about their real values, accelerated the recent collapses of the nation's venerable investment houses and magnified the panic that has since crippled the global financial system. "

"By appearing to provide a safety net, derivatives had the unintended effect of encouraging more risk-taking. Investors loaded up on the mortgage-based investments, then bought "credit-default swaps" to protect themselves against losses rather than putting aside large cash reserves. If the mortgages went belly up, the investors had a cushion; the sellers of the swaps, who collected substantial fees for sharing in the investors' risk, were betting that the mortgages would stay healthy. "

"The crisis has prompted second thoughts. Goldschmid, the former SEC commissioner and the agency's general counsel under Levitt, looks back at the long history of missed opportunities and sighs: "In hindsight, there's no question that we would have been better off if we had been regulating derivatives -- and had a clearinghouse for it."

Levitt, too, thinks about might-have-beens. "In fairness, while Summers and Rubin and I certainly gave in to this, we were not in the same camp as the Fed," he said. "The Fed was really adamantly opposed to any form of regulation whatsoever. I guess if I had to do it over again, I certainly would have pushed for some way to give greater transparency to products which turned out to be injurious to our markets."

There you have it.

1) No plan.
2) Didn't cause the crisis.
3) People thought they were insuring themselves against loss.
4) It would have helped to have some regulation on them and a clearinghouse. Again, not much specificity.

Now, from my point of view, and I'm going to have to make this more explicit because I've been assuming it all along, point three is the most important fact explaining this mess.

Finally, I have no problem with minimal and effective regulation. But that's the big issue. How do we do this?

My main point was that the author knows nothing about libertarianism. It's like conservatism and liberalism, encompassing many different views and ideas. So, to pronounce a whole movement refuted, is simply preposterous, especially when you offer no evidence.

To say the following:

"After LTCM's collapse, it became abundantly clear to anyone paying attention to this unfortunately esoteric issue that unregulated credit market derivatives posed risks to the global financial system, and that supervision and limits of some kind were advisable. This was a very scary problem and a very boring one, a hazardous combination.'

Where's the evidence that the issue wasn't debated? If Bob Rubin, and others, who are not libertarians didn't get it, then maybe something else was at work. If the author wants to argue about regulation, fine. But what is he proposing? They need to be regulated. How? By Whom?

My blog has many discussions on regulations, credit default swaps, etc. I hope and endeavor to be specific and fair. That's all I ask in others, as well.

On this blog, I have tried to argue that implicit and explicit government guarantees have contributed to this crisis. The author of the post seems to think that this is wrong. It might be, but he has given no argument in support of that position.