HARM

Roubini Attacks Bailout, But Misses Boat on Regulation

Mish,

Like many people, you seem to be confusing old-school "regulation" (trust-busting, policing fraud, coercion and market manipulation, setting reasonable limits to business practices, "level playing field" stuff) with corporate socialism, which is NO REGULATION on the way up, but massive BAILOUTS (for the rich) on the way down, as Roubini and others have correctly pointed out.

The current business model in the U.S. is not so much "regulated capitalism", or even Soviet-style socialism, it's naked corporate socialism, mixed in with kleptocracy. Some have argued it's really closer to national socialism (a.k.a. fascism), and many of those arguments are compelling.

Examples of real "regulation": Trust-busting, outlawing fraud, coercion, insider trading, bribery, pump-and-dump. Preventing companies from dumping toxic waste in waterways (tradegy of the commons), prohibiting slave/child labor, requiring employers to carry worker's comp/injury insurance, whistleblower protection laws, requiring full documentation of borrowers, setting reserve requirements for banks, FDIC insurance for ordinary depositors.

Examples of corporate socialism and kleptocracy: Bailouts for the rich and well connected, losses for everyone else. Fed Funds rate set below the prevailing rate of inflation, cash-for-trash programs ("free" money for banksters). Extreme laisseze-faire approach to asset/credit bubbles on the way up, tacit --or even explicit-- approval of large-scale fraud, deliberate non-enforcement of existing regulations, no limits to margin trading, taxpayer underwriting of losses, generous tax credits/deductions for speculators, quasi-"private" entities (GSEs) that use their monopoly powers to squeeze out the truly private market players.

Let's not throw the baby out with the bath water just yet.