Monday, December 15, 2008

The Difference Between Business Failure and Government Failure

John Carney nails it:

It used to be said that the reason market solutions were superior to government solutions was that the market had a Darwinian test. When market solutions proved ineffective, the proponents went out of business. When government solutions prove ineffective, the government never goes out of business. It doubles down... perhaps more regulations are exactly what we don't need right now. There have been reports, for instance, that the various SEC inspections of Madoff's business-at which the firm got a clean bill of health, somehow-were actually used to market investing with him by the various feeder funds that pumped billions into the Ponzi scheme. What if more regulation is actually counterproductive.?...Wall Street hates those arugments because it wants investors to be confident enough to entrust their money to its financial advisors. So you can expect brokerages, hedge funds and banks to call for more regulation-but never enough to be effective, since that would shut down business. Many in the securities business want investors who feel safer than they are. Maybe this time we should end this confidence game.

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