Apparently the financial crisis was a big enough disaster to convince even some of the firmest deregulation advocates that they were wrong.
Federal judge Richard Posner said his one-time support for deregulating the financial industry was based on a “basic misunderstanding,” in an interview with Eliot Spitzer on Current TV. His about-face is all the more noteworthy because Posner was appointed by Ronald Reagan, the president known to advocate for leaving businesses alone.
“I was an advocate of the deregulation movement and I made -- along with a lot of other smart people -- a fundamental mistake, which is that deregulation works fine in industries which do not pervade the economy,” he said in the appearance on Spitzer’s “Viewpoint.” “The financial industry undergirded the entire economy and if it is made riskier by deregulation and collapses in widespread bankruptcies as what happened in 2008, the entire economy freezes because it runs on credit.”
Posner’s comments come at a time when regulators are struggling to implement some of the provisions of the Dodd-Frank financial reform law, which attempts to place curbs on Wall Street. One example: After failing to put rules in place to rein in money market funds -- which some critics blame in part for the financial collapse -- the SEC and other regulators are scrambling to find another way to deal with them, according to The New York Times.
Posner isn’t the first to spit out the deregulation Kool-Aid that was so popular in the lead up to the financial crisis. Even ex-Federal Reserve chairman Alan Greenspan, who critics deride for believing too much in the ability of markets to right themselves, admitted in October 2008 that he was in “a state of shocked disbelief” at the disaster created by unchecked free markets, according to the NYT.
Then Bruce Bartlett, one of Reagan’s economic advisers, said last year that the notion that deregulation leads to job creation is “just nonsense. It's just made up.”
Check out some quotes from a famed regulation hater below:
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