Obama Writes On Regulations in WSJ

Published January 18, 2011 4:55pm ET



President Obama has written about the need for balance between the free market and government regulations in the Wall Street Journal today. In the process, however, he repeats a canard about how insufficient regulation “caused” the financial crisis of 2008:

Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs. At other times, we have failed to meet our basic responsibility to protect the public interest, leading to disastrous consequences. Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.

The crisis was the result of a complex “perfect storm” of factors. While transparency in financial markets (particularly the mortgage market) was severely lacking, the idea that a dearth of government interference in the marketplace led to the crisis is dubious. As economist Raghuram Rajan has argued, it was the government’s role in encouraging the irresponsible extension of credit–a bipartisan effort–that is more to blame. Christopher Caldwell wrote about this last year:

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