From Deseret News archives:
Blame regulation, not greed
If they go unchallenged, however, they could hasten a "solution" that's worse than the problem. That's why it's so important to examine the record. What it shows is that government regulations and other interventions — not greed — are the major cause of our current problems.
Greed, or at least self-interest, is always present to some degree in the economy. Why has greed suddenly produced so much harm, and why only in one sector of the economy?
Firms are profit seekers, but they will seek it where the institutional incentives signal profit is available. In a free market, firms profit by satisfying their customers, investing wisely and making prudent loans. Regulations, policies and political rhetoric can change those incentives.
When the law either poorly defines the rules of the game or tries to override them through regulation, the invisible hand that makes self-interested behavior mutually beneficial may become more of a fist.
In such cases, "greed" can lead to problems, not caused by greed but by the institutional context channeling self-interest in socially unproductive ways.
To call the housing and credit crisis a failure of the free market or the product of unregulated greed is to overlook the myriad government regulations, policies and political pronouncements that have both reduced the freedom of this market and led self-interested actors to produce disastrous consequences, often unintentionally.
The two biggest players in the mortgage market are Fannie Mae and Freddie Mac. Until they were nationalized recently, they were "government sponsored enterprises" (GSEs). That meant they enjoyed all the profit potential of a private business but carried none of the risk. How would you run your business differently if you knew the government would bail you out or if Congress bullied you into adopting certain business strategies? Would you be acting greedily — or just rationally?
