John Hinderaker at Power Line has a truly excellent post about today's hearing of the House Subcommittee on Capital Markets. Most of the news coverage has focused on the testimony of AIG Chairman and CEO Edward Liddy. But John picked up on something more significant -- testimony by the Acting Director of the Office of Thrift Supervision. As this testimony makes clear, it wasn't an absence of regulatory authority or resources that caused Thrift Supervision not to rein in AIG. It was nothing more or less than a "mistake" on the part of the regulators.
John draws the moral:
Part of the mythology that the Democrats are trying to create out of the financial crisis is that it is due to a lack of regulation (or, better yet, "deregulation"). In fact, the industries involved are heavily regulated, and I'm not aware of any instances where a lack of regulation, as opposed to a failure of regulation, is to blame for a significant aspect of the crisis. In general, what happened was that regulators and businessmen made the same mistake: they failed to foresee the decline in real estate values and, perhaps more important, failed to understand fully the consequences that would flow from such a decline. . . .
It's never been clear why liberals have so much faith that regulators are smarter or better able to foresee the future than businessmen.