My wife just posed this question to me:
So as a libertarian, given this situation, where do you stand on un-deregulation?
There certainly is evidence that the loosening of regulation did spur economic development in the 80’s and 90’s that would not have otherwise occurred.
But look where we are now… the fact that "banks" could make highly leveraged investments (meaning they only had a fraction of the money they were "investing", and could thus lose more than they actually had) meant the situation got much, much worse that it would otherwise have been.
I think my stance is this: regulate enough so you’re NOT ALLOWED TO LIE.
The main problem is that these jerks were playing with statistics and math in such a way that they claimed the securities were AAA safe, when in reality they were anything but.
Here’s how they did that.
I don’t know enough about the law to say for sure, but apparently all the lying they did with math was perfectly legal.
To this layman, it sounds like simple fraud to me, and the people that cooked the books like this should absolutely go to jail. But I’m not a lawyer. I just watch one on TV.
It seems to be if you’re not allowed to lie about the underlying risks of an investment, as these guys did, then there wouldn’t be much here to be screaming about now. So let’s make it a Big Deal to lie with numbers, and that should be enough.