In the conservative paradise, a nation of strong, hard-working individuals borrow responsibly and save for future needs. They don't need government telling them how to manage their money. If they do foolish things, they pay the price.
I like that vision, but it has little to do with the world we live in. In the world we live in, hucksters (including some of the finest names in U.S. finance) take good Americans to the cleaners.
This has been going on since the start of the Republic. If some of the world's most sophisticated investors could fall for Bernie Madoff's con, imagine how easy it was for slick salesmen to lure honest people into predatory loans or fake investments.
So the conservative argument that the market punishes the careless, the lazy and the overconfident is only partly right. And what about the truly innocent bystanders, the ones in no money trouble who must pay the costs of the cleanup?
Strong financial regulation protects us all. The reform legislation in Washington is almost a done deal. (It will soon head to the rule-making federal agencies, where a lobbyist army is waiting to influence the results.) A new Consumer Financial Protection Bureau is supposed to erect a wall between the yeomanry and the more evil financial products.
Rep. Jeb Hensarling, a Texas Republican involved in negotiating the reform bill, complains that the new bureau would "take choices away from consumers and choke desperately needed credit out of our economy."
As long as the rest of us have to pick up after Americans' bad choices, we should have no problem limiting the menu. People of modest means should not be able to take out a no-money-down, $300,000 mortgage with a tiny teaser intro rate that explodes in their faces after a few years.
Has Congressman Hensarling looked at the mortgage market lately? It's pretty much gone for all but the most sterling credit risks. Had a consumer protection agency put some brakes on the housing madness, the real-estate market would be in far better shape.
Hensarling is hardly alone in preferring a free-market fairy tale to the harsh realities here on earth. Like many other "conservative" members of Congress, he voted against the bank bailout, letting his colleagues do the heavy lifting. The bailout disgusted everyone, but it stopped a financial collapse. Politicians who argue that it wasn't necessary are like the guy who lets someone else put out a fire in his house, then says it would have eventually gone out on its own.
And spare us the phantasmagoria of a financially savvy public. Yes, some got into trouble because they were greedy to read their contracts. But America's supreme economic authorities -- including the chairman of the Federal Reserve Bank -- had downplayed the risky nature of their ventures.
Importantly, the bill seeks to stop banks from gambling with deposits backed by the taxpayers.
Future legislation will have to deal with monster twins, Fannie Mae and Freddie Mac. These two companies helped create the housing bubble by pairing cheesy mortgages with virtual taxpayer guarantees. Harrop is a syndicated columnist.