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As the financial crisis rages on, and the stock market looks like a yo-yo, the calls for “doing something” gets ever louder. The ugly face of free market capitalism has finally been revealed, it is said, and it is time we deal with the greed once and for all.

Gerard Baker takes a different view in The Times.

The inner Marxist rather enjoys the spectacle of rich bankers becoming victims of their own unsustainable excess, proof of the inevitable internal contradictions of the market process. Picture editors never tire of those photographs of some trader holding his head in his hands as the numbers on the screen behind him bleed red.

Then the inner Stalinist takes over and rages at the injustice of it all. How dare these Masters of the Universe with their Porsches and their incomprehensible gobbledygook bring us to our knees? Annihilate the options traders!

Finally, we get to the inner Leninist, surveying the economic wreckage and calmly insisting that Something Must be Done.

That is roughly where we are now in the Great Panic of 2008.

He goes on to argue that it might be wise to not do too much after all, and rightly points out that a lot of the problems comes from the failure of the public-private monsters Freddie Mac and Fannie Mae, and earlier misguided regulation.

There may, of course, be things lawmakers could do to improve matters. Removing some regulations, adapting others, and perhaps creating a few carefully thought out new ones might all be very well. The relevant question is whether those are the ones we would get.

With the presidential election coming up, there is a substantial risk for populist measures, no matter who ends up winning. Such measures might cause even bigger worries in the future. The preferable way forward, it seems to me, is to wait a while before deciding if laws needs to be altered.

UPDATE: For insightful and interesting comments on the crisis, I recommend George Mason’s Arnold Kling, and in particular this post in which he sums up some of his opinions.

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