Lynne Kiesling
In Monday's Washington Post, Sebastian Mallaby argues that blaming deregulation for this financial crisis is both false and dangerous:
So the first cause of the crisis lies with the Fed, not with deregulation. If too much money was lent and borrowed, it was because Chinese savings made capital cheap and the Fed was not aggressive enough in hiking interest rates to counteract that. Moreover, the Fed's track record of cutting interest rates to clear up previous bubbles had created a seductive one-way bet. Financial engineers built huge mountains of debt partly because they expected to profit in good times -- and then be rescued by the Fed when they got into trouble.
Of course, the financiers did create those piles of debt, and they certainly deserve some blame for today's crisis. But was the financiers' miscalculation caused by deregulation? Not really.
Please do go read the whole thing; it's got a level of nuance in its logic that makes it very persuasive, and is a salutary corrective to the false anti-deregulation invective that has been swirling around for the past couple of weeks.
As his primary source Mallaby also cites my old friend and former professor Charlie Calomiris here and here.
The persuasiveness of Mallaby's article turns on how one defines regulation and re-regulation. Fannie & Freddie's mission could have been accomplished with direct subsidies, but that was subverted to these less direct and less transparent entities for some reason, perhaps in order to satisfy marketplace or "free market" ideologies.