Financial Reform and Freedom

It is important to understand that more is at stake in the debate over financial reform than mere arguments over how the economy should operate. While we can all agree that this is enormously important, we can hopefully agree that freedom is an even more important right that Americans should have the right to enjoy.

I can hear people snickering now wondering how financial reform is relates to freedom. The answer is that any sort of government regulation inherently relates to freedom. If the financial reform bill passes, the American public will not have access to some of the risky investments that certain investors want. A group of investors prefer high risk-high reward investments. This means that there is a small percentage chance that the thing they bet on win (this could be a subprime mortgage that pays itself off or an entrepreneurial investments that becomes the next macintosh). These investors understand that there is a small chance that they will ever see their money again but if the thing they do bet on happens to occur, they will see an enormous payday.

Who is the government to judge what is too risky for any one person? If I want to buy risky investments, and am aware of the risks, then that should be my choice and my choice alone. The government should mind its own business and let me place my investments in whatever portfolio I prefer, whether it be a safe and steady investment or a high risk investment.

Two other notes about risk:

First, risk is good for the economy. Risk is what the entrepreneur takes and stakes his entire family's future on. The entrepreneur takes a greater risk than any subprime mortgage bank ever did and they need to commended for it, not chastised by an overzealous government bent on taking more control from the people they are hired to represent.

Second, I can already hear the chorus saying that the investors who bought these subprime mortgages were lied to by the evil big banks. Even if they were not lied to, they were misled. This could be true. If this is true, there are already laws in place for this. Those laws should be enforced. Unlike some of my economist friends, I am not an anarchist. I believe a limited government can be a great thing exactly because they do stop major corporations from preying on people who do not understand their investments.

The government needs to also stop acting hypocritically. If they are really opposed to risky investments that have a very low chance of paying off, but when they do, the payoff is enormous, the government needs to immediately leave the lottery business. The government operates the highest payoff, lowest chance for success bet in the world, while they chastise those who buy subprime mortgages. I would love to hear their rationale for that.

Regulation interferes with freedom, always. Never forget that.