In yet another front page editorial, the Washington Post headlined its article on the Obama administration's regulation plan: "Obama Blueprint Deepens Federal Role in Markets." The very first sentence begins: "the Obama administration last night detailed a series of proposals to involve the government more deeply in private markets... ." The increasing government role in markets line fits well with the Republican talking points but has nothing to do with reality in this case. The government is already huge involved with financial markets. The Post probably missed it, but the Treasury and the Fed have been lending trillions of taxpayer dollars to financial institutions through the TARP and the Fed's various special lending facilities. Government involvement in financial markets is not presently at issue. The issue is whether the government will impose any effective regulation to go along with its subsidies. This is comparable to getting a home inspection before buying a house. The decision to enter the housing market was the decision to buy the house, not the decision to get the inspection.
--Dean Baker
