Not terribly up on your Adam Smith, are you?
He recognized that businessmen would steal and pillage to the extent they could, just like most people will.
He just recognized that the “invisible hand” would keep the stealing and pillaging within certain bounds. The problem with governmental interference is not that it doesn’t prevent the stealing and pillaging, it’s that it interferes with the invisible hand mechanisms.
For instance, without the government we would still have had a real estate bubble. Bubbles and irrational exuberance are part and parcel of capitalism.
But the implicit government guarantee of these loans caused the bubble to inflate a great deal more before bursting than it would have without that bubble. And then the implicit bailout was carried out, though not consistently. Which of course just encourages future bubbles to expand excessively, whereas if the government had allowed the necessary contraction, investors would be really leery of future bubbles.
“The problem with governmental interference is not that it doesn’t prevent the stealing and pillaging, it’s that it interferes with the invisible hand mechanisms.”
It also helps no one to not prosecute the stealing and pillaging.
Now, that's a laugh. Fannie Mae, Freddie Mac backed loans pushed and shoved by the government by edicts to banks and lending institutions to loan money to people who had no business or ability to responsibly own a home by payments caused the bubble.
They virtually forced banks and credit organizations to bundle up the loans and pass the liabilities off as super mortgage packages and credit derivatives.
I guess you don't remember Barney Frank and his gal pal Maxine Waters PRAISING Franklin Raines, Jaime Gorelick and Jim Johnson for their outstanding efforts in this area, do you?
The unqualified-homeowner-turned-viable by government edict is what caused the exuberance of which you speak. Millions of people getting into houses for nothing down, no closing costs, and often loans at over 100% of value. It did not prevent buyer/seller fraud; it encouraged it in a way.
There have been multiple instances where loans were obtained for purchase, and renovation/improvement that were for 10 or more times what the property was worth. All before one nail was pounded, and in many cases they never were. The money was stolen. In short, Adam Smith never met a Barney Frank, or a Franklin Raines, Jamie Gorelick or a Jim Johnson. And he certainly never met a Maxine Waters.