I sympathize with Will Wilkinson. As a libertarian, it must be tremendously frustrating that people’s first reaction to the crisis is “more regulation,” especially when many folks’ first example of underregulation is BS (or at least not especially important). But that doesn’t excuse having the reverse reaction. Citing extensive government intervention, via both taxes, spending and financial regulations, he says:
The government’s approach to the crisis appears to about the same as Bush’s approach to Iraq: when your strategy is failing, double down.
This only makes sense if he can say government regulation and interventions have contributed to the crisis. He handwaves at Fannie Mae and Freddie Mac, but there’s no argument.
In any case, the subprime mortgages at the heart of the mess were the ones that the two corporations couldn’t touch. It seems that their failing was not directly influenced by their status as GSEs.
There are no shortcuts. Whether you’re in favor of new regulations or against them, you have to argue your case on the merits, not vague claims about the market being under or over regulated.