The liberal online journal of news and opinion conducts a dual interview with Reason's Nick Gillespie and Matt Welch about their new book The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America. Excerpt from the Teresa Cotsirilos-conducted Q&A:
Well, you guys wrote your book in the shadow of the Great Recession, but the book never actually addresses how the recession happened in the first place. And critics of libertarianism often cite the different actors in the subprime mortgage crisis, arguing that they took advantage of an unregulated system to consolidate power, and took advantage of a lack of understanding amongst consumers to sell them products that they didn't fully understand.
MW: It's a big question, so I'll just take on little bits of it. One is the notion that the financial crisis was caused by deregulation… The central libertarian argument about what to do in the wake of a financial crisis is let the people who made these terrible decisions go bankrupt. And when appropriate -- and do it early and often -- send the motherfuckers to jail, you know?
If they did something illegal. But one of the problems is that if the system's been deregulated, then it's not illegal.
NG: But fraud is always illegal.
MW: Yeah, fraud has never been deregulated.
NG: When you talk about -- OK, think about it this way. If mortgage companies knew that they were on the hook for the mortgages they underwrote, they would be very careful in who they lent money to… What happened was that every mortgage originator basically knew that they would get $500 to $2,000 in fees for simply originating loans, and then when they sold them they didn't sell them to simply derivative companies -- they sold them to Fannie Mae and Freddie Mac. Because the government told these guys to buy every loan that they could get. They kept pushing banks and said, "We're going to regulate you to extend credit to more and more people who might not meet the gold standard credit regulations." … In fact, the housing collapse tracks with a libertarian understanding in that it's caused by government interventions in the private sector.
Whole thing here.