Stupid Libertarian Tricks

I thought of a few alternative titles for this post, like, for example: How Alan Greenspan, George Bush, and the Right-Wing Kleptocracy Conspired to Bring About the Sub-prime Crisis. Or how about: How the Invisible Hand got its Fingers Stuck in the Cookie Jar. Or we might have just gone with the headline of Paul Krugman's NYT column: Blindly Into the Bubble.

It's a now familiar tale: ideology and greed combine to produce stupid policies. A few get very rich, less than honestly, and many get a good deal poorer. Krugman lays out how Alan Greenspan, Ayn Randian zealot of unfettered capitalism, ignored clear and persistent warnings to enable a vast swindle. Naturally, George Bush and his appointees played key supporting roles.

When announcing Japan’s surrender in 1945, Emperor Hirohito famously explained his decision as follows: “The war situation has developed not necessarily to Japan’s advantage.”

There was a definite Hirohito feel to the explanation Ben Bernanke, the Federal Reserve chairman, gave this week for the Fed’s locking-the-barn-door-after-the-horse-is-gone decision to modestly strengthen regulation of the mortgage industry: “Market discipline has in some cases broken down, and the incentives to follow prudent lending procedures have, at times, eroded.”

That’s quite an understatement. In fact, the explosion of “innovative” home lending that took place in the middle years of this decade was an unmitigated disaster.

But maybe Mr. Bernanke was afraid to be blunt about just how badly things went wrong. After all, straight talk would have amounted to a direct rebuke of his predecessor, Alan Greenspan, who ignored pleas to lock the barn door while the horse was still inside — that is, to regulate lending while it was booming, rather than after it had already collapsed.

Krugman unearths a harbinger of disaster foretold:

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

Because everybody knows that that reputation for honest dealing is worth more than a couple of shady billions in your pocket today, right?

Bush appointees did their part:

Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw.

Now that things have gone a bit South, even for some of the crooks, stout libertarian stalwart Greenspan knows the cure: a taxpayer funded bailout.

The trouble is not just bad decisions and human corruption. The real trouble is the worship of a false ideology:

Given the role of conservative ideology in the mortgage disaster, it’s puzzling that Democrats haven’t been more aggressive about making the disaster an issue for the 2008 election. They should be: It’s hard to imagine a more graphic demonstration of what’s wrong with their opponents’ economic beliefs.

I also sort of liked the footer of the column:

David Brooks is off today.

David Brooks, of course, is off every day, especially those days on which he writes a column. I guess he didn't today - and that can only be to the good.