Debra J. Saunders

Because the rapacious (read: greediest) lenders aren't likely to suffer the most, politicians like Chancellor Darling and Bank of England Governor Mervyn King found themselves forced into changing longstanding government policies to keep innocent investors from being the biggest losers. I doubt many small-account holders at Northern Rock would object.

In the long term, however, government proposals to remedy private market excesses create more "moral hazard" -- perverse incentives that reward risky behavior. With globalization, each bad business practice can have a domino effect felt around the world. Ditto each stretching of regulations to remedy the fallout from bad practices.

Think about it. A few years ago, there must have been loan officers who looked at no-deposit, no-interest, no-fixed-rate mortgages and smelled a rat. At business meetings, some must have voiced their reservations about approving loans that were bound to result in foreclosures.

But there was no percentage in making their objections known. If they had talked about the need to approve mortgages that a large majority of clients could afford, savvy, global-thinking professionals would have dismissed them as dinosaurs.

Debra J. Saunders

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