I've been fairly astonished to see some of the vitriolic piling on against libertarianism with the meltdown of the derivative markets and subsequesnt bailouts.
Does anyone think Libertarians have been running the Federal Government? Really? Here's your reality check.
Ok, some point to Alan Greenspan, the erstwhile Ayn Rand devotee. You know- the same Greenspan that presided over the Fed during the entire Clinton Administration- that mythical period of time of milk & honey. I wouldn't call Greenspan a libertarian. Any libertarian running the Federal Reserve would have done anything in his power to return our dollars to specie-backed legitimacy. That certainly didn't happen. Link to Murray Ruthbard's libertarian critique of Greenspan.
Moreover, what made the trading in derivatives legal in the first place? A law signed by Congress, unanimously, in 2000. Catch 60 Minutes last night?
The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy.
It not only removed derivatives and credit default swaps from the purview of federal oversight, on page 262 of the legislation, Congress pre-empted the states from enforcing existing gambling and bucket shop laws against Wall Street.
"It makes it sound like they knew it was illegal," Kroft remarks.
"I would agree," Dinallo says. "They did know it was illegal. Or at least prosecutable."
In retrospect, giving Wall Street immunity from state gambling laws and legalizing activity that had been banned for most of the 20th century should have given lawmakers pause, but on the last day and the last vote of the lame duck 106th Congress, Wall Street got what it wanted when the Senate passed the bill unanimously.
So, at what point do we blame lawmakers. It seems pretty clear that they didn't even read what they voted on. Just like the Patriot Act. Just like John McCain and the proposal for the bailout when it was merely 3 pages long.
The bucket laws were good regulation. The bets on stocks without any skin in the game affects the stock price. It's not like a football game, where the bets do not affect the outcome of the game. (This leaves aside point shaving, NBA refs, the 1919 Black Sox, and other notorious interactions with gambling.)
Unfortunately, I believe that this one place is going to place America squarely in the pro-regulation camp for everything. It's kind of ironic, because the critics of deregulation and capitalism decry its' adherents as 'dogmatics' and 'idealogues' in the pejoritive, when they themselves as dogmatically and idealistically pro-government, pro-regulation, and anti-capitalist.
