risks posed by crisis

The Automatic Earth:

Capitalism might or might not work only if and when you could keep corporations out of the government. If you can’t, disaster is assured for everyone but the corporations.

Sure, not bailing out the broke banks would have been a start. It would, however, not have solved the problem, not even close.

The libertarian class claims that the issue is not capitalism or the free market. (After all, these are their deities.) For them the trouble all starts -and ends- with government and its rules and regulations.

But that’s precisely where the issue gets all mixed up. For one, the bail-outs are not the beginning of the sorrowful saga.

Allowing investment banks and securities firms access to taxpayer deposits, ref: the 1999 Glass-Steagall repeal (Gramm-Leach-Bliley Act), and liberating the derivatives trade, ref: the 2000 Commodity Futures Modernization Act, are the two pieces of law that directly led to a situation in which banks were allowed both to 1) become as big as they are now (too big to fail) and 2) to leverage their bets as much as they have (which wiped out their capital).

And you don’t really have to be all that smart to realize that both acts are de-regulatory, and made the markets more, not less, free.

Now look around you and tell me what you see 10 years later.

In other words, the free market system has failed America miserably. Well, at least in this instance, and that by itself should raise very grave doubts about that system.