John, Paul Singer’s contribution provides a welcome respite from the strawman arguments on both sides. The Democrats contend that Republicans want free markets with no regulation, the Republicans claim Democrats want to stifle markets altogether. Democrats led by the president point to “deregulation” as the source of our current problems, when the only real deregulation in the 1990s was in commercial banking. (The real failure was in failure to devise new regulations for derivatives,  an action which many supposed experts resisted vigorously.)

We’ve had plenty of regulation, but it has been woefully inadequate and inept. The SEC allowed Bernie Madoff to operate under its nose and Tim Geithner should plead guilty to fiddling while the economy burned.  None of that is to say that regulation isn’t needed, only that it is not easy to get it right.

We have seen some very troubling moves in the wake of the crisis, most specifically the acquisition of tremendous  authority in the Fed, which is shedding its image as an independent entity and losing its focus as watchdog of the nation’s money supply. There is good reason to place these powers elsewhere.

So the problem is not just a technical one; it is one of confidence and trust. Just as private businesses have lost the respect and confidence of the public so too have public institutions lost their luster. Conservatives and the public at large have every right to be wary of technocrats bearing regulatory gifts.

But conservatives have every reason to engage in the debate and help devise, to the extent they are able, a sane and workable system. The alternative is a highly personalized, ad hoc system of intrusion by Geithner, Obama and Bernanke. One is reminded of the current state of  Constitutional law, which boils down to “What does Justice Kennedy think?” Now we are at the whim of three individuals’ judgment as to the viability of firms and the rules under which they are to be governed. Far better to return to the rule of law — objective ground rules that don’t change daily and that aren’t dependent upon the personalities of those who inhabit government posts.