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‘Regulations on steroids.’

Some appropriate reflections by Jerry Bowyer:

Before we all run out to buy shotguns and propane tanks, perhaps we can try a collective upgrade to Paulson 3.0. The fact is that this issue has been mis-framed by most of the press (and the administration) and therefore it has been misunderstood by the people. Freedom didn’t lead us to this crisis¬†— central planning did. We weren’t under-regulated; we were over-regulated. There has not been a single piece of deregulatory legislation passed in the last eight years. But there was a major piece of re-regulatory legislation passed under Bush¬†— Sarbanes Oxley. By upping the penalties on financial executives largely from civil to criminal sanctions it put the whole multi-thousand page regulation manual on steroids. No more fines; next time handcuffs. No wonder, nobody wanted to hold politically tainted paper. Owning a mortgage backed security in this environment is like owning a pointy hat and a black cat in colonial Massachusetts.

These securities which the government invented (through Fannie Mae), and foisted upon the banking community (through the Community Reinvestment Act), now has regulatory kooties. Own and you’ll get sued. Sell it and you’ll get sued. Keep it and the regulators will force you to write it down to panic level prices, and then you’ll get sued. Try to foreclose and state and local government will refuse to enforce the contract. Try to get private equity investment to keep your balance sheet alive and you find the door barred by 80-year-out-of-date regulations like the Bank Holding Company Act.

Government did this to us. This plan isn’t a bail-out; it’s more like reparations.