Asking the Fox to Regulate the Henhouse

Today, President Obama proposed a massive increase in government control over the financial sector:

President Barack Obama on Wednesday proposed the most sweeping overhaul of the way the U.S. government oversees financial markets since the 1930s. He pushed Congress to grant the Federal Reserve and the executive branch of government vast new powers to supervise previously unregulated aspects of the economy, while reorganizing other aspects of oversight.

Why is more government always the answer, even when government intervention fueled the crisis in the first place? We're reminded of Paul Krugman's big government solution to the last recession:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Thanks to Arnold Kling for finding this little gem from the archives. If the economy ran on hubris, Barack Obama would be a goldmine.