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I thought it was funny the other day then Obama was talking about how deregulation caused the banking failures and that we need more regulation in the banking industry. He couldn’t be further from the truth. There has been plenty of banking regulation taking place over the last several years.

In fact, it was a change to the banking regulations that allowed banks to gamble more abundantly with their lending. It was further fueled by a mentality that one should take their equity from their home and invest it into something more lucrative, like the stock market. This was the principle behind the adjustable ARM loans. Go negative on your home loan, but put the money in the stock market. Because your interest rate is so low, you can make more on the stock market and generate even more wealth for yourself. Great idea as long as the stock market does actually return more than you lose on your house and your house value remains upward bound.

With limited government intervention, the free market could resolve the banking crisis rather quickly. How?

There are several large banks that didn’t gamble their lives away: JP Morgan, Wells Fargo, and Bank of America to name just a few. The government should orchestrate (and reward) the take over of the failing banks by the larger, more successful banks that didn’t play the slot machine. Free market at work without Obama having to create yet another government agency that moves as slow as molasseses. BTW, the purchase of one bank by another bank is a government regulated activity, so Obama still gets plenty of his government intervention.