Lately, FrumForum has been the only bastion of fairly reasonable conservative thought. Take, for example, this post in which Peruvian free-market thinker Hernando de Soto Polar lists what he thinks is necessary for effective derivatives regulation. His list is something I wholeheartedly agree with, especially the reminder that the financial system only helps create wealth, it should never be seen as a wealth generator in and of itself. It also, coincidentally, jibes fairly well with the legislation in Congress. No wonder financial reform is seen as an electoral winner.
David Frum correctly points out that given the bill’s rational, and indeed market-based reforms, Republicans who oppose it are doing so against their own beliefs. Moreover, they are doing it contrary to their own political aspirations. Running against this bill and effectively stating that Wall Street should be able to screw over everybody it wants in order to make a buck, instead of providing the capital needed for Main Street business owners to start and expand their businesses, isn’t going to be a vote-winner come November.
Today’s Senate hearings with Goldman Sachs provides even more evidence. No deference is being given to the “financial wizards” at all: these senators are out for blood. As well they should be. From what I understand of the SEC complaint against Goldman Sachs, they created investment vehicles that were essentially designed to go bust, then sold them to investors while they themselves shorted them. As absurd as this seems, Goldman Sachs is claiming that they broke no laws because they were selling to “sophisticated investors”, who should have known better.
Unlike some people, I have no problem with shorting the market or trying to make a buck off of assets that are declining in value. Just like in craps, where you can bet “don’t pass” despite it being seen by most people as unlucky, betting “to lose” it is still a perfectly valid strategy. However, there is a big difference between betting on the dice to fail, and the casino loading the dice against you without letting you know (but you should have better inspected those dice beforehand yourselves!)
As is typical, I do disagree with Frum’s stand on the consumer credit protection agency: I think that when it comes to certain credit, such as payday loans, consumers need less of it, not more. But his overall point is valid: Republicans who are fighting financial reform are going to end up hurting themselves, as well as the economy, in the long run.