When Sen. John McCain and Gov. Sarah Palin penned a Wall Street Journal commentary last week, they called for intensive reform of financial markets in general, and of Freddie Mac and Fannie Mae in particular. This made me and many others think of increased regulation, because you can't accomplish what McCain wants to do effectively without it.
Despite that, it seems McCain wasn't talking about regulation at all.
According to Bloomberg.com, McCain and Co. want to eventually take the struggling mortgage backers private, breaking up Freddie and Fannie and selling them off to individual interests once they've stabilized. (No worries, though. Private financial insitutions did a fine job steering clear of the housing crisis, so I'm sure this plan is completely without problems.)
The other option is more federal control of the federally backed institutions, a plan wherein taxpayers are still on the hook for liability incurred by lending but private shareholders no longer stand to gain.
In truth, either plan would probably be an improvement from the current situation, where taxpayers bear liability and shareholders reap profits.
But McCain's newest reported plan doesn't do anything to address the conditions that allowed both the Savings and Loan Scandal and now the Housing Meltdown — rampant deregulation.
Not enough regulation is just as bad for the economy's long-term health as too much regulation.
Let's hope someone ditches the dogma long enough to realize that, and let's hope there's more to McCain's calls for "reform" than meets the eye.
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