The Obama administration and the Democrats in Congress constantly are attempting to undertake measures to prevent future financial meltdowns. They feel they are expert in their attempts to regulate whatever is required to maintain financial stability.
However, suggested remedies are mostly bound to fail. All they will accomplish is the message that Washington is doing something. In that respect, the politicos are simply doing what is expected politically leftward. But financially, government will be making a mess of things.
By creating what is super regulation, all the bureaucrats are setting up are moral hazards. They give investors ill-conceived confidence that markets are mistakenly being well supervised and secure. So investors will take bigger risks.
Regulators give investors the impression the latter will be bailed out if the financial system runs into a debacle. The ever-bigger-risk cycle will continue.
Moral hazards are what helped the recent financial meltdown occur, with institutions “too big to fail.” So-called “bailouts” did not work as promised. The new regulations will simply augment problems.
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