Talking about financial reform, Jonathan Chait over at TNR lamented the lack of knowledge within liberal circles on how to move forward. As he says,
We have some regulatory proposals that we think will help, but almost nobody thinks will fully insulate us from the risk of another shock, and could possibly prove useless. The confidence level is fairly low. Now, I still think these proposals are far better than nothing. They’re also the best chance we have to get the answer right. We could wait a few years until the debate has matured, but the truth is that only is the shadow of an economic crisis and a backlash over the bailouts does the political space exist to impose a reform that actually takes a bite out of Wall Street.
So at this point, the best bet is to pass the toughest, most anti-Wall Street reform possible while the window of opportunity remains open. Then, if it proves too tough, or if somebody comes up with a better way to regulate the system, you can bargain away the too-tough parts of the law for something better.
The belief that any regulation could prevent the next crisis is foolish. Like clockwork, there has been an economic downturn every ten years for the last 400 years, at least. Even though he is not willing to come right out and say it, Chait does seem to admit the futility of tough regulation. As he says, these reforms “could possibly prove useless.” And yet, despite this, he calls for the “the toughest, most anti-Wall Street reform possible.”
This has always been one of the things I’ve wondered about outwardly partisan hacks like Chait. Why, given the fallibility of the regulation, is it still pushed forward? And more generally, why is some regulation better than none? Chait is being quite disingenuous here, but I think his views aren’t far from those of the mainstream, which really scares me.