Blame the Fed, Freddie and Fannie, and Financiers

In today's Washington Post, Sebastian Mallaby—who is far from being a knee-jerk libertarian—wallops the folks who want to blame deregulation for the country's financial woes.

Instead, he points fingers at the Fed (for following a we'll-clean-up-the-mess-after-the-bubble-pops philosophy), Freddie and Fannie (where "heavy government oversight obliged them to push money" toward the marginal buyers who are now up the creek), and financiers (specifically, the already highly-regulated U.S. investment banks that bought "piles of toxic waste").

He winds up with this chilling assessment of the fading love for markets in the world today:

Blaming deregulation for the financial mess is misguided. But it is dangerous, too, because one of the big challenges for the next president will be to defend markets against the inevitable backlash that follows this crisis. Even before finance went haywire, the Doha trade negotiations had collapsed; wage stagnation for middle-class Americans had raised legitimate questions about whom the market system served; and the food-price spike had driven many emerging economies to give up on global agricultural markets as a source of food security. Coming on top of all these challenges, the financial turmoil is bound to intensify skepticism about markets. Framing the mess as the product of deregulation will make the backlash nastier.