Thursday, May 07, 2009

Saxdrop stands before the Judge

Well , not really.

I generally have a hard time disagreeing with Richard Posner. His reasoning is almost always so damn rational, measured, and air tight, and we already tend to come from a similar set of priors, that even if I could poke a hole, I'd have to twist around backwards to do so.

But I found this line from his op-ed in today's WSJ curious:
"Competition between banks was discouraged by limits on the issuance of bank charters and by (in some states) not permitting banks to establish branch offices."
This line comes directly after he blames aggressive deregulation in the 70s as one of two culprits in the financial mess. Does that sound like deregulation to you? Creating barriers to entry is, many times the sole purpose of regulation. This may seem like nitpicking on some small part of his overall theme, but the central premise of his new book is that this phantom deregulation mixed with a licentious Fed combined to create a failure of capitalism, which brought this mess upon us.

He also goes to claim that the actual deregulatory measure which allowed banks to first start paying interest on checking/savings accounts led to unsustainable liabilities. That just makes no sense at all. Of course all this will get much more attention that it probably merits because it has the "Come to Jesus" characteristic that Alan Greenspan saying in a hearing "the free market doesn't work the way I thought" did.

Judge Posner, you used to be so cool...

1 comment:

Rob said...

Funny you should mention it, I am just now coming around to finding Posner totally super-cool!***

I actually do want to engage on the merits of your deregulation questions but I guess it's gotta still wait. Deadlines.

***Only partially true. I always found him a pretty interesting thinker. But I certainly agree with the conclusions of his new book a lot more than I've agreed with some of his old ones.