Greg Ip is worried about financial deregulation. He opened his Wednesday piece with this statement:
Deep into an economic boom with asset prices near records is when you’d expect the US financial system’s guardians to tamp down risk-taking. Instead, federal regulators and legislators are doing the opposite—watering down, narrowing or declining to enforce rules passed after the financial crisis.
That’s his misunderstanding. Government shouldn’t be interfering in any way with the business decisions of private enterprises operating in a free market economy. Beyond that, while declining to enforce is a bad move for any reason other than enforcement resource allocation, there’s no bad time to reduce the burden of regulation when regulatory bodies have gotten out of control, as the CFPB (among others) has done, and when regulations themselves have gone beyond what is truly necessary, as 80,000 pages in the Federal Register indicates.
They will stimulate lending and risk-taking at a time when the industry is lowering its own standards amid a near-record economic expansion.
Again, this isn’t Government’s job. A free market, unfettered by excessive Government diktats, will do a fine job of “regulating” businesses whose risk-taking goes too far. And the free market will do it in real time, not the weeks or months required to write a regulation or to complete an enforcement action within an existing regulation.