Tuesday, May 12, 2009
We can expect the Obama Administration to increase regulation of the financial sector because they believe that deregulation played a role in the financial crisis. They are not alone. Judge Richard Posner's new book, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression, also blames deregulation of finance as a cause of the recession. (He says we are in a depression.) But, Posner and Obama disagree on regulation's effectiveness in other areas. The new head of the Antitrust Division of the Justice Department has indicated that the division will be more aggressive in enforcing antitrust laws than the Bush Administration was. (See article here.) In the case of financial markets, it may make sense to examine regulations and tighten some up. (Posner suggests we should wait until the economic crisis is over to do so, though.) It seems clear that the new administration favors more regulation and government intervention in the economy regardless of the crisis. Again, we have a case where "a crisis is a terrible thing to waste.