Even Smart People Can Be Stupid

Mark Dow, a hedge fund manager, was on video on Yahoo’s finance page here talking about how dumb people are who still believe in free market ideology.  Dow is a pretty intelligent person.  He understands  how markets work and he probably does a pretty good job of determining values of assets.  He most certainly knows a lot of facts about the market and the entire banking/housing problems the country has experienced.  Despite all of this, he’s pretty stupid. 

See, he believes that the free market is why everything failed.  The free market is why the housing market collapsed and why the banks were doing really stupid things.  He goes so far as to say people “don’t recognize the extent to which it failed.”  It makes me sick that someone so intelligent can have such a weak grasp on reality. 

Dow is basing his assumptions on the fact that banks became so crappy because government wasn’t forcing them to do certain things.  This logic is flawed.  The banks were doing and have been doing most of what they do because of political and legal pressure.  Plus, if there weren’t government-created organizations promising to buy bad loans, they would have never been made in the first place. 

I would argue that the opposite of what Mr. Dow says is true.  Had the government been hands-off, we would have never seen the housing market’s incredible, ill-advised run up.  That’s not even mentioning the fact that banks were sued and protested against for not giving loans to people buying houses in parts of the country which could best be described as sh*t.  If you had to make those decisions, would you loan money to someone buying a house in the crappiest neighborhood at a price you thought was way too high?  No, you wouldn’t.  Well, if you were a bank, you’d get sued.  Then, they’d protest your branches and call you racist.  This is followed by the federal government telling you to make those loans and they will guarantee them with Freddie and Fannie. 

Do you know what the result of that would be?  Me too!  Just what happened.  So please, Mr. Dow, don’t try to sell me some liberal spending agenda.  I understand that you want an excuse for the government to give money to people you think deserve it, but, as we’ve gone over many times on this site, that’s just not possible and it’s just not right.