The Unregulated Bailing Out the Regulated

Conn Carroll / March 25, 2009

Great observation by Michael Barone on Treasury Secretary Timothy Geithner’s latest bank bailout plan:

Democrats like Barack Obama and Barney Frank, at least on the campaign trail or in sound bites, have portrayed the financial crisis as the product of deregulation. The solution, they say, is more regulation.
…
My American Enterprise colleague Peter Wallison has argued powerfully that this is a bad idea. Neither the Federal Reserve or other regulators identified the systemic risk which caused this crisis. Neither did most financial institutions or investors. Systemic risk is hard to identify for the very reason that it is systemic: It results from just about everyone doing what turns out to be the wrong thing.
…
Which takes me back to the Geithner paradox. He has singled out unregulated institutions as the only ones to bail out regulated institutions. (more…)