Brooks column today is sort of a classic from him: on the surface, it's open-minded, and ambivalent, but ultimately, underneath it all, he manages to advance a deeply conservative argument. His basic point is: yes, everyone's calling for more regulation in the wake of the financial debacle, but it's unclear if it was a lack of regulation caused things to go haywire in the first place. (There's a point there, the ultimate cause might very well just be capitalism. Another newspaper columnist, Karl Marx noted that insane booms, busts and periodic crises were typical of this particular economic system.)

More revealingly, Brooks, also argues that good regulation is really hard and we'll probably screw it up. So why bother?

(I have to say I admire this style of argumentation immensely. My dream is to someday get to write a column for large audiences where I can smuggle my lefty worldview in under the wrapping of cheerful humor and charitable engagement with my ideological foes.)

This is a good window into conservative thinking on this and many topics: if a task is difficult, government isn't up to it. But while it's true that establishing a effective and and dynamic regulatory regime is difficult so was winning World War II and building the interstate highway system. Somehow we managed.

Revealingly, he puts his finger on one of the major obstacles to effective governance here:

We're going to need squads of low-paid regulators who can stay ahead of the highly paid bankers, auditors and analysts who pace this industry (and who themselves failed to anticipate this turmoil).

Will regulators always be paid less than their high-flying counterparts on Wall Street? Sure! But I'm sure we can close the gap. Hell, if paying a team of regulators obscene amount of money (I'm talking seven figure salaries) forestalled this crisis it would still be a winning investment.

Comments (29)

1. Well, like a lot of the Right...

   is in a bit of a panic.

   The current economic/financial situation has run headlong into the current POLITICAL situation and John McCain, the Republican nominee, is now on TV and radio (even right-wing radio) sounding like...

   a New Dealer.

   Calling for more regulations and throwing out the old "class warfare" rhetoric of "greed on Wall Street".

   So...who's LEFT to fly high the banner for "free markets", "de-regulation", and "stop blaming the fat cats, you pinko scum!"?

   Nobody.

   Posted by Maskdelta at 09/19/2008 @ 10:23am

2. Jeez, Chris we've had regulations of various sorts for 60 years now, although we do go through periods of regulatory and non-regulatory fever from time to time. The fact is both philosphies have their uses and misuses and neither have the ability to smooth business trends on a permanent basis. There's no such thing.

   Posted by CHIP THORNTON at 09/19/2008 @ 10:24am

3. Sure, regulation will fail, the way it failed for decades as the US enjoyed its greatest growth.

   Then the US deregulated, shipping manufacturing abroad, and became "a service economy."

   Are y'all feeling well serviced?

   Brooks's owners have robbed us blind. Literally blind, as they own most of the main sources of info & ensure that glib bullshitters like Brooks are well compensated for concealing truths & promoting deceptions.

   Posted by sloper at 09/19/2008 @ 10:32am

4. The fact is both philosphies have their uses and misuses and neither have the ability to smooth business trends on a permanent basis. There's no such thing.

   Posted by CHIP THORNTON at 09/19/2008 @ 10:24am

   Chip, Have you ever used linear motors? They are inherently unstable (without proper feedback control) which makes them quite ideal for launching projectiles. I would liken our economic problems today to a linear motor. We haven't had any feedback control since W stepped foot into the White House. Therein lies the problem. Deregulation of Wallstreet = calamity. Herbert Hoover Administration = George W Bush Administration.

   Posted by Wolfgang1 at 09/19/2008 @ 11:13am

5. Posted by sloper at 09/19/2008 @ 10:32am

   What you and Obama and perhaps McCain fail to realise is that this crisis is much bigger than the US financial system alone. That is why central banks in Europe and Asia are taking the same sort of action that the Fed is. In an integrated global economy if the US financial system runs out of liquidity it will affect all those other economies in much the same way as it would have the strongUS wider economy.

   It should be noted that while the president is C-I-C of the military he is not C-I-C of the financial markets and neither Bush, McCain nor Obama (as president) can or could much about it.

   The markets could have solved this liquidity problem over time but the Fed had to move quickly to ensure the US financial system did not collapse and bring down with it the world financial system. So the US government through the Fed and other countries through their central banks are attempting to inject enough liquidity to keep the system functioning.

   It may surprise some to know that financial market smoothing, by central banks around the world including your Fed, through injecting liquidity into the market as considered necessary, has been occurring for many years. That, far from being a socialist plot, is a free market mechanism vital to the market stability. The only difference now is that the capital needed is much larger. So far 9 US banks have turned belly up. In the Great Depression it was 700.

   A significant part of the now worthless debt came about in trying to help poorer people and those who couldn't afford an adequate deposit to buy their own homes. That was a noble motivation but the lenders under estimated the risk so it was hardly the greedy on Wall Street lining their own pockets as McCain and Obama characterised it.

   Posted by lrjones4 at 09/19/2008 @ 11:23am

6. Saying business becomes more competitive with less regulation is like saying professional sports would become more competitive without game rules and referees. It's sad that this stupidity continues to pass for conventional wisdom in this country - in the face of overwhelming evidence.

   David Brooks's skepticism is a fine quality, but like all Conservative skepticism, it is applied haphazardly at best, selectively at worst. Sure, we have to be skeptical about government's ability to regulate business. But we have to be at least equally skeptical about business's ability to regulate ITSELF.

   In fact, I would claim that recent history, like that of the 1920s, suggests that business is extremely POOR at regulating itself, especially when the smell of money in the air is strong.

   I have no problem with free-market mechanisms such as economic incentives - and you'll notice that Christopher Hayes, who calls for greater compensation for regulators, has no problem with them either. But I do have a problem with people who say that the game of economics needs no rules and no referees. That idea was bad in the 1920s, and it's just as bad now.

   Posted by JakobFabian at 09/19/2008 @ 11:32am

7. "A significant part of the now worthless debt came about in trying to help poorer people and those who couldn't afford an adequate deposit to buy their own homes. That was a noble motivation but the lenders under estimated the risk so it was hardly the greedy on Wall Street lining their own pockets as McCain and Obama characterised it."

   Thank you, "LRJones," for your view from the moon, according to which the people we earthlings call "predatory lenders" merely wanted to help the poor. That is why they invented adjustable-interest loans - so that the poor would not lose their ability to keep up with their payments and perhaps suffer foreclosure - God forbid!

   Black is white! Up is down! Ignorance is strength! War is peace! Freedom is slavery! And predatory lenders just want to help the poor!

   Posted by JakobFabian at 09/19/2008 @ 11:41am

8. Just received a newsletter from my local heating oil distributor stating that they are now going to give credit to more people thus spreading the drastically increased price over the calendar year. An answer to all our problems. Herbert Hoover's speaking points from so many years ago are still being repeated by the right. He said, "Should we let the 25% who can't make it, dictate the kind of government we have?" That has always been the repub argument. Heard one the other night, "Fifty million people don't have health care, what about the hundreds of millions who do?" This can be called "who do" economics. It's sick indeed & will be perpetuated by the connivers who always find a way around regulation.

   Posted by Sorelish at 09/19/2008 @ 11:45am

9. As an employee of a casino company, I am insulted by references to what is happening on Wall Street as "casino culture". Nothing could be further from the truth. Our industry is so regulated by the government that our slots are all electronically monitored to ensure they are paying every penny of taxes and that they are fair. Far more tamperproof than any electronic voting machines I might add. Unlike Wall Street, we operate with complete transparency and we don't let you play on our credit. Players know the odds going in and cheaters are caught quickly. Gambling is gambling, whether in the stock market or the slots parlor, but your best assurance against robbery is a strong cop on the beat.

   Posted by Steffes at 09/19/2008 @ 11:55am

10. Posted by lrjones4 at 09/19/2008 @ 11:23am

    When times were good under Reagan, we were told by the Right (and still are) that it was to his credit.

    When times were bad under Carter, we were told by the Right (and still are) that it was to be blamed on Carter.

    When times were good under Clinton, we were told "he got lucky" or "Newt Gingrich saved us".

    and now when times are bad under Bush-43, we're told "he is not C-I-C of the financial markets and neither Bush, McCain nor Obama (as president) can or could much about it."

    Anybody see a pattern here?!??!??

    Posted by Maskdelta at 09/19/2008 @ 11:57am

11. "That was a noble motivation but the lenders under estimated the risk so it was hardly the greedy on Wall Street lining their own pockets as McCain and Obama characterised it"

    competition (with liberty) for dumbest quote of the century!

    Posted by darladoon at 09/19/2008 @ 12:02pm

12. Gambling is gambling, whether in the stock market or the slots parlor, but your best assurance against robbery is a strong cop on the beat.

    Posted by Steffes at 09/19/2008 @ 11:55am

    Nothing bad has been said against gambling. People who go to casinos know, or should know, that the odds of them walking out with more money is less. Gambling is supposed to be a sort of entertainment, not a living per say.

    But, banks, the insurance industry, and wall street have literally turned the industries into a game of high stakes roulette. They try to cover their bases and let the wheel spin. Unfortunately, they don't really have the money to cover their bets. If someone pulled that in Vegas, they probably wouldn't make it out of town to far before Vito and the boys caught up with them.

    But, some slick jackass in an expensive suit in a bank or on wall street does it and we the people bail their asses out of the fire.

    Posted by Wolfgang1 at 09/19/2008 @ 12:07pm

13. Posted by darladoon at 09/19/2008 @ 12:02pm

    You must admit though, DARLA, it IS kind of amusing to see Hard Righties like him now forced to attack Obama AND McCain!

    McCain's previously mentioned desire to "win at all costs"...is now moved beyond him lying...

    to him sounding like a Democrat!

    Gotta love the irony!

    Posted by Maskdelta at 09/19/2008 @ 12:09pm

14. Anybody see a pattern here?!??!??

    Posted by Maskdelta at 09/19/2008 @ 11:57am

    A pattern of pathalogical liars.

    Posted by Wolfgang1 at 09/19/2008 @ 12:09pm

15. But Mask, aren't the Republicans the party of responsibility?

    Posted by onthehelm at 09/19/2008 @ 12:15pm

16. Posted by Wolfgang1 at 09/19/2008 @ 12:09pm

    But Mask, aren't the Republicans the party of responsibility?

    Posted by onthehelm at 09/19/2008 @ 12:15pm

    Sure they are. They'll take responsibility for the good times and tell you how the other guys are (or even nobody is) responsible in the bad times!

    Posted by Maskdelta at 09/19/2008 @ 12:19pm

17. " just remind the idiots making this claim that the US government came up with a trillion dollars to bail out a bunch of bankers and Wall Street fat cats when it wont come up with 50 or a hundred million dollars for people who have no choice but to work for living and can't find a job"

    no kidding! and how about all those small businesses which tanked in the last 8 years? why do they suffer the sarbaines-oxley treatment, and not the fat cat brokers?

    it's total bullshit.

    this country has two types of citizens:

    a) the rich and well-connected

    b) the rest of us

    group a) has its own justice system (one in which mr. and mrs. palin get to IGNORE congressional subpoenas with impunity). group b) gets the hammer every time.

    if i ignore a subpoena, i'm toast. if i ignore jury duty, i'm toast!

    Posted by darladoon at 09/19/2008 @ 12:21pm

18. Well put, Wolfgang. My point vis: Brooks' argument is that government is in fact very adept at policing financial activities.

    Posted by Steffes at 09/19/2008 @ 12:27pm

19. An interesting analogy WOLFGANG, but it doesn't change the fact that regulation is at best a sometimes necessary evil. People who think that the solution to the problem of the baby who chews on dangerous objects while alone is to tie him to his highchair are kidding themselves.

    Posted by CHIP THORNTON at 09/19/2008 @ 12:52pm

20. "That was a noble motivation but the lenders under estimated the risk so it was hardly the greedy on Wall Street lining their own pockets as McCain and Obama characterised it"

    competition (with liberty) for dumbest quote of the century!

    Posted by darladoon at 09/19/2008 @ 12:02pm

    This bit below, sometimes stoned lady, was what drew my attention to those nobly motivated lenders. I would really like to think there were some nice Americans, such as at Fannie Mae, over there but there you go. You would know what your mob is like better than I. Perhaps they loaned that money to poorer and insolvent Americans so they could indulge themselves in a bit of economic B & M. What do you think?

    "At Fannie Mae, we are in the American Dream business. Our Mission is to tear down barriers, lower costs, and increase the opportunities for homeownership and affordable rental housing for all Americans. Because having a safe place to call home strengthens families, communities, and our nation as a whole."

    Posted by lrjones4 at 09/19/2008 @ 1:20pm

21. Just heard this quote on CNBC's morning programming re. the 'nationalizations' of ever increasing numbers of FORMERLY private 'Financial Svcs' companies/orgs:

    "CAPITALISM without PAIN is like CHRISTIANITY without HELL".

    Of course that DOESN'T APPLY, apparently, to the "Geo. W. Bush" form of Capitalism where, when you're a dummy in school, daddy's name & influence get you both into & thru yale & harvard ... your failure to fulfill your 'rigourous' texas natl guard duties (cough, cough) are overlooked...your failure as a major lge baseball team owner is rewarded with a state governorship ... & your 7+ years of ongoing & across-the-board failures as prez, a position that you, yourself claim to make you, alone "The DECIDER", are now being yet again excused by others of your ilk. - NavyVet

    But you've got to hand it to the repulsicans ... they are exceptionally consistent with their offering of 2 MORE candidates whose resumes show consistent records of failure, impetuous decisions 'facts be damned', dishonesty & whenever they're asked to actually be specific re. an issue, they're great at pushing the 'replay' button on the last sentenced uttered.

    Sadly ... too many of their fellow Americans fit the same pattern - so I'm not holding my breath to see any real sanity return to a country where: - 'clearing brush' is considered a leadership quality; - a vp who doesn't consider his job part of the executive branch of govt (Constitution notwithstanding) +shooting your hunting partner in the face is considered a joke; - picking an ongoing lying, vindictive, ill-educated religious extremist for your running mate is considered by your party &, apparently, millions of citizens to be superb proof of presidential capability!

    We HAVE met the enemy ... & it is, indeed: US!

    Posted by rwkoch at 09/19/2008 @ 2:29pm

22. Regulation, Shmegulation! Wars are a form of regulation. Laws are regulation. Team play has regulation. Religion is regulated.

    When we don't have it, those with less scruples than others will exploit the loopholes of poor or non-existent or, in this case, Phil-Gramm-reverse-legislated- deregulation, and behave selfishly and with militant faux ignorance. They will rape, pillage and plunder the middle class by knowingly taking huge commissions on the home sale, the mortgage, the combining of layered and packaged instruments, the granting of a high rating to those packaged instruments and the resale of that paper to greedy investors world wide. All the while, they will secretly and faithfully believe the feds will make it right, should something go wrong.

    Do these people need regulation? In the worst and most urgent way. They must be give exact, hard and fast rules and consequences such as, "when coming to a stop sign, you must make a complete stop. Should you fail to do so, you may endanger the lives of others. Failure to do so will lead to the adding of three points to your license."

    What am I missing here? Regulation occurs all the time; it simply takes the same paradigm used by the military and other successful regulators. To argue that regulation isn't possible is to be militantly ignorant; one trait, I might add, of evil people.

    Posted by rayted32 at 09/19/2008 @ 9:07pm

23. "At Fannie Mae, we are in the American Dream business. Our Mission is to tear down barriers, lower costs, and increase the opportunities for homeownership and affordable rental housing for all Americans. Because having a safe place to call home strengthens families, communities, and our nation as a whole," quoth "LRJones."

    That WAS Fannie Mae's mission - back when it was still a nonprofit corporation, as it was created to be. After Fannie Mae became a FOR-profit corporation, this statement became what it is now: an advertising slogan.

    When Fannie Mae pushed the Congress to loosen regulations, it wasn't motivated by a desire to help the poor. It was motivated by PROFIT. The Congresspeople and Presidents who obligingly gave Fannie Mae and Freddie Mac what they wanted were also not motivated by a strong desire to help the poor. They were motivated by a desire to get campaign contributions from certain financial interests connected with these two for-profit corporations.

    I agree with William Greider. Make Fannie Mae a regulated non-profit, as it once was. You can't be a stock-market tycoon gambling with fuzzy regulations and help the poor at the same time. I believe this has been demonstrated to everyone's satisfaction.

    Posted by JakobFabian at 09/19/2008 @ 11:11pm

24. I agree with William Greider. Make Fannie Mae a regulated non-profit, as it once was. You can't be a stock-market tycoon gambling with fuzzy regulations and help the poor at the same time. I believe this has been demonstrated to everyone's satisfaction.

    Posted by JakobFabian at 09/19/2008 @ 11:11pm

    Well if you like to examine this report it seems Bush (in 2003) and McCain (2006) wanted to improve the regulatory framework for Freddie Mac and Fannie Mae but it was stymied by leading Democrats in Congress.

    NEW AGENCY PROPOSED TO OVERSEE FREDDIE MAC AND FANNIE MAE

    By STEPHEN LABATON

    September 11, 2003

    The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

    Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

    More here: http://tinyurl.com/4y2m2z

    Incidentally heard David Brooks say today that it was the more regulated entities that led the financial market collapse? Perhaps it is not more regulation that is required but regulation that actually works. I'm surprised that some of your mortgage lenders were able to leverage 30 times underlying asset value. That could only happen in the US and is a sure-fire recipe for exactly what is happening now. It has little to do with stock market risk but rather financial irresponsibility.

    Posted by lrjones4 at 09/20/2008 @ 03:56am

25. At last we are in partial agreement, "LRJones." We need better regulations, not just more regulations. What matters is quality, not quantity.

    But I don't think we would change much if we merely created a new layer of bureaucracy above Fannie Mae and Freddie Mac. My proposal (and William Greider's proposal) is that these institutions should once again become non-profit corporations managed in the public interest, NOT that they should continue to enrich themselves with the government covering its risks, merely with the added provision that a new government entity "supervise" them.

    By the way, it seems extremely unlikely to me that any proposal George W. Bush or his colleagues made in the year 2003 could have been "stymied by leading Democrats in Congress." The Democrats in Congress in 2003 were a weak and frightened minority party. They could not by themselves have blocked anything that the Republicans wanted.

    Posted by JakobFabian at 09/20/2008 @ 09:22am

26. Once again, in reference to "LRJones's" interesting sources, I have to express partial agreement.

    In 2006, the Democrats had more power and commensurate responsibility than they had had in 2003, and they should have supported McCain's proposal or something like it. I believe it did not go far enough and would have been too little, too late even then, but it would have been better than nothing.

    I read with interest the statements of Barney Frank and his Democratic colleagues (please, the adjective is DemocratIC) from the year 2003, which are indeed pathetically naïve. These officials either could not or would not see the greed and the fraud in Fannie Mae and Freddie Mac, hidden as they were behind a feigned dedication to the well-being of the poor.

    When Fannie Mae was broken up, which I believe was done as early as 1969, it was done as a concession to free-market ideology, above all to the notion that competition substitutes for - and indeed is locked in a zero-sum game against - regulation. Don't regulate, compete - that was the reasoning behind the creation of Freddie Mac as "competition" and the long bipartisan campaign to deregulate both institutions that followed (which might more accurately be called a long bipartisan capitulation to these and other "corporations that are too big to fail").

    In fact, regulation and competition go hand in hand. There can be no competitive football game without referees. It seems that we in the USA will now have to relearn this and all the other hard lessons that we had to learn back in the 1930s, but then collectively forgot.

    Posted by JakobFabian at 09/20/2008 @ 09:54am

27. It is bad enough that Brooks enjoys a respectable reputation that is suspect by discerning readers. From my gleanings, many of his colleagues have no respect for his writings and with good reason.

    As another commenter pointed out, he masks his neocon view point in what he/she calls BS--I call it sociological mumbo jumbo. I dislike seeing The Nation waste valuable space on his writing, even to critize it. I wish writers would do their homework on the neocon philosophy with emphasis on where their loyality lies. Condetector

    Posted by lodar at 09/20/2008 @ 10:05pm

28. There are some very good answers in the above and more generally I have the wnder of why those who are able to get microphones in the media are not more capable. As to regard to regulation. Brooks uses the word and suppose that significant instances have enough similarity to becovered in a generality subject to philosophizing. I if were going to regulate a poker parlor I might have any number of rules. One might be not to set fire to the drapes. Aotner might be not to take advanrtage of those less skilled than you. The first must be easy to enforce. The seocnd would be a mitew tougher. But both could acocmdoated within the sweeping word "regulation." I am reimidned of Socrates prayer (in effect); Lord give me the enrgey to change what I can change, the stocicism to accept what IO can;t change, and the wisdom to know the difference. Brooks, a writer with charm and intelligence usually, does not grasp that there are such things as differences in things he generalizes about. But isn't that like us all?

    cglobek

    Posted by cglobek at 09/20/2008 @ 10:16pm

29. I noticed recently that Brooks did a satirical piece on Obama for the NYT and the readers were invited to comment. I skimmed through them and all were very vitriolic in condemnation of Brooks. I did not find one supporting him. I think he was probably a little shaken by the viciousness of the Obama supporters as I noticed his articles since have tended to toe the NYT pro Obama line. One can only wonder if he was not also given a warning by the editor of the NYT to behave himself.

    He is becoming bland and less interesting than when he was an unashamed conservative. Perhaps his days at NYT are numbered given that Kristol is now the official token conservative.

    Posted by lrjones4 at 09/21/2008 @ 04:12am