Nobel Prize winning economist Milton Friedman exhortedthe virtues of a free market economy with as little intervention as possiblefrom the government, which he argued was more the cause of problems, than anentity that competently solved them.
Last week, the president traveled to New York -specifically to urge financial reform and simultaneously warn that if morestringent regulations are not put in place, there's the likely potential ofanother Great Depression.
Among those measures on his wish list are greaterprotections for consumers, limits on executive compensation, more transparencyfor complex financial instruments and the amount of risks that banks would beallowed to assume.
That fiery rhetoric is sure to appeal to those on MainStreet and paint Wall Street as the culprit for a nationwide contagion offoreclosures and unemployment that ran into double digits.
And make no mistake, Wall Street does deserve a lot ofthe blame.
contributed in no small part to the 2008 crisis and forthat few would argue that a higher degree of oversight was/is needed.
Unfortunately, some of the real causes of the crises wereeither deliberately, or conveniently, overlooked in the president's push forfinancial reform.
Chief among those MIA in the Obama rhetoric are TheCommunity Reinvestment Act, which for lack of a more subtle description, held afederally approved gun to the heads of lenders and forced them to make loans topeople who were light years from being able to pay anything back. That measurealone, courtesy of the Carter Administration, is estimated to have cost thecountry $1 trillion.
Nor are there any current plans to rein in Fannie Mae orFreddie Mac, both of whom were singled out (primarily by the GOP I may add) fortheir swelling and uncontrolled loan portfolios only to be assured by augustDemocrats like Rep. Barney Frank of Massachusetts, Sen. Charles Schumer of NewYork, and Sen. Chris Dodd of Connecticut that there was no cause for alarm.
On a personal note and admittedly tinged with more than abit of partisanship, I'm a bit wary of what more smothering regulation will doto New York City, where roughly one in 12 employed in the Big Apple are somehowconnected to the financial services sector.
According to reports, that generates 40 percent of thecity's business and personal tax revenue. What is to prevent those financialfirms from moving if smothered by over-regulation and going elsewhere - likeout of the country perhaps in a worst-case scenario.
Reform, I'm told has to be implemented in the best spiritof the country, not fueled by partisan hysteria.
Sadly, Dr. Friedman is no longer withus, but his prescient theory ofgovernment's effect on the free market has not ebbed over time.
