Quote of the Day: Protection-Racket Capitalism

Let’s see.

1. The Justice Department is suing a rating agency (Standard and Poor’s). The rating agencies are creatures of the SEC (which created their oligopoly and encouraged them to be paid by the raters rather than the customers of the ratings).

2. The SEC is suing Freddie and Fannie, which are creatures of the Department of Housing and Urban Development, under which the two firms were regulated and also given lending quotas for “affordable housing.”

So, when is HUD going to sue a company that is a creature of the Justice Department, just to complete the circle?

One way to view the period 2005-2009 is as a massive destruction of property rights by the government. First, they destroy the right of Freddie, Fannie, and commercial banks to maintain lending standards. Then they confiscate the property of holders of securities in GM and Chrysler to pay off the labor unions. Then they sell off AIG’s assets in order to bail out Goldman Sachs and several large foreign banks. And of course, the government has made every effort to keep banks from enforcing mortgage contracts, while extracting large fines from banks.

It’s beyond crony capitalism. It’s protection-racket capitalism

This is from author, economist and professor Arnold Kling at the Askblog on the financial crisis.