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KC native
06-02-2010, 08:17 PM
This will get good.

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/25/AR2010052505154_pf.html
Time for industry to end its war on regulation

By Steven Pearlstein
Wednesday, May 26, 2010; A13

The biggest oil spill ever. The biggest financial crisis since the Great Depression. The deadliest mine disaster in 25 years. One recall after another of toys from China, of vehicles from Toyota, of hamburgers from roach-infested processing plants. The whole Vioxx fiasco. And let's not forget the biggest climate threat since the Ice Age.

Even if you're not into conspiracy theories, it's hard to ignore the common thread running through these recent crises: the glaring failure of government regulators to protect the public. Regulators who were cowed by industry or intimidated by politicians. Regulators who were compromised by favors or prospects of industry employment. Regulators who were better at calculating the costs of oversight than the benefits. And regulators who were blinded by their ideological bias against government interference and their faith that industries could police themselves.

Most of us are aware by now of how lawyers for Massey Energy were able to game the appeals system to prevent the government from closing mines such as the deadly one in West Virginia that had been cited for multiple, serious safety violations.

We all know how the Securities and Exchange Commission agreed to let investment banks set their own leverage ratios and how bankers delayed for nearly two years a crackdown on excessive lending for commercial real estate.

We've seen the e-mails from Toyota officials boasting of their successful efforts to avoid a costly recall despite numerous reports of sudden acceleration.

And on Tuesday we read a report from the Interior Department's inspector general describing how oil company employees filled out government inspection reports for their own drilling rigs in pencil so that real inspectors could just trace over the results in pen before filing them.

It hardly captures the breadth and depth of these regulatory failures to say that during the Bush administration the pendulum swung a bit too far in the direction of deregulation and lax enforcement. What it misses is just how dramatically the regulatory agencies have been shrunken in size, stripped of talent and resources, demoralized by lousy leadership, captured by the industries they were meant to oversee and undermined by political interference and relentless attacks on their competence and purpose. And it makes it perfectly laughable to suggest, as many in the business community now do, that during the first 16 months of the Obama administration the pendulum has already swung back too far in the other direction.

Yet, there they were last week, trotting out all the tired old arguments in a last-ditch effort to scuttle financial regulatory reform -- how it would stifle innovation and risk-taking, send jobs and investment overseas and dry up credit for small businesses. Those were the same excuses for not regulating derivatives trading, not regulating mortgage brokers, not regulating hedge funds, not regulating insurers and industrial finance companies, and not second-guessing the underwriting of federally insured banks. Only this time, nobody was buying it.

The big flaw in the business critique of regulation is not so much that it overstates the costs, but that it understates its benefits -- in particular, the benefits of avoiding low-probability events with disastrous consequences. Think of oil spills, mine explosions, financial meltdowns or even global warming. There is a natural tendency of human beings to underestimate the odds of such seemingly unlikely events -- of forgetting that the 100-year flood is as likely to happen in Year 5 as it is in Year 95. And if there are insufficient data to calculate the probability of a very bad outcome, as is often the case, that doesn't mean we should assume the probability is zero.

Another challenge in thinking about regulation is that any meaningful analysis has to go beyond merely toting up the costs and benefits to a consideration of how those costs and benefits are distributed. Regulations limiting derivatives trading, for example, may add costs or reduce profit for a bank or its corporate customers every year, but the benefits of that regulation would mostly accrue to taxpayers and the economy as a whole if it saves them from the occasional financial crisis that requires a bailout or triggers a recession. From the banks' standpoint, such a regulation may well seem like a bad idea, but for society as a whole it would be a winner.

It's time for the business community to give up its jihad against regulation. We can all agree that there are significant costs to regulation in terms of reduced sales and profits, stunted job growth and even, from time to time, stifled innovation. But what we should have learned from recent disasters is that the costs of inadequate regulation are even greater. Strong and efficient economies require strong and effective government oversight.

healthpellets
06-02-2010, 08:26 PM
why stop with increased regulation. let's just nationalize it all. the government runs everything else without disaster.

KC native
06-02-2010, 08:27 PM
why stop with increased regulation. let's just nationalize it all. the government runs everything else without disaster.

Damn, first post in. This one came earlier than I expected.

banyon
06-02-2010, 08:33 PM
why stop with increased regulation. let's just nationalize it all. the government runs everything else without disaster.

Yes, there are only two extremes to choose from.

mlyonsd
06-02-2010, 08:34 PM
Yes, regulation. Like we've seen the government do a great job of managing anything. Brilliant. Absolutely f'ing brilliant.

go bowe
06-02-2010, 08:42 PM
Yes, regulation. Like we've seen the government do a great job of managing anything. Brilliant. Absolutely f'ing brilliant.i wish they wouold regulate pot and tax it instead of wasting resources making war on it...

regulation is not always a bad thing...

anything which could have helped avoid the need for massive bailouts would seem to me to have been a good regulation...

healthpellets
06-02-2010, 08:45 PM
i wish they wouold regulate pot and tax it instead of wasting resources making war on it...

anything which could have helped avoid the need for massive bailouts would seem to me to have been a good regulation...

point 1, i would agree with the decriminalization of marijuana. treat it in the same way as tobacco.

point 2, there was no need for massive bailouts. so regulation didn't matter.

healthpellets
06-02-2010, 08:46 PM
Yes, there are only two extremes to choose from.

what fun is it to hang out in the middle?

KC native
06-02-2010, 08:50 PM
point 1, i would agree with the decriminalization of marijuana. treat it in the same way as tobacco.

point 2, there was no need for massive bailouts. so regulation didn't matter.

Incorrect. The entire global payment system was at risk. If Citi or BofA were allowed to fail (because Citi was definitely insolvent and BofA was on the brink and there were many more that were right behind them) then it would have started a domino effect throughout the world and we would have had a much worse problem than we have today.

HonestChieffan
06-02-2010, 08:58 PM
The biggest oil spill ever. The biggest financial crisis since the Great Depression. The deadliest mine disaster in 25 years. One recall after another of toys from China, of vehicles from Toyota, of hamburgers from roach-infested processing plants. The whole Vioxx fiasco. And let's not forget the biggest climate threat since the Ice Age.

Sorta lost cred when this guy tossed that in. In fact that is an example of why regulations, many that are highly beneficial and positive, should not all be lumped together as if all regulation is good. Some regs are great. Others are terrible. And the climate issue demonstrates the danger of regulators going unregulated.

mlyonsd
06-02-2010, 08:58 PM
i wish they wouold regulate pot and tax it instead of wasting resources making war on it...

regulation is not always a bad thing...

anything which could have helped avoid the need for massive bailouts would seem to me to have been a good regulation...

Of course not all regulation is bad. For example I don't think you should be able to drive at any speed you want.

But the liberal mantra for why we're in the mess we're in is because businesses weren't being regulated enough....which is total BS.

The mess came about because politicians are regulating for themselves....not us. And we have a MSM that doesn't paint a true picture of what is going on.

And, I completely agree with your pot example.

healthpellets
06-02-2010, 08:59 PM
is that not a risk of doing business?

i mean, come on. at what point do we say "okay, enough is enough. sorry to see you go, but it's time."

maybe i have a simplistic view of the whole situation. but it seems that there are so many other business that fail every year because of poor decisions. but no one is there to bail them out.

i guess i just don't get it.

banyon
06-02-2010, 09:00 PM
what fun is it to hang out in the middle?

There aren't just 3 extremes either.

KC native
06-02-2010, 09:03 PM
is that not a risk of doing business?

i mean, come on. at what point do we say "okay, enough is enough. sorry to see you go, but it's time."

maybe i have a simplistic view of the whole situation. but it seems that there are so many other business that fail every year because of poor decisions. but no one is there to bail them out.

i guess i just don't get it.

The problem with giant financial conglomerates is that they have fingers in a lot of different businesses and governments. If they were much smaller than they are (like prior to the repeal of Glass-Steagall) then a failure wouldn't be an issue.

I favor a return to Glass-Steagall. Banking should return to being a boring business. Riskier activities which used to be handled by Investment Banks should go back to Investment Banks.

banyon
06-02-2010, 09:06 PM
The problem with giant financial conglomerates is that they have fingers in a lot of different businesses and governments. If they were much smaller than they are (like prior to the repeal of Glass-Steagall) then a failure wouldn't be an issue.

I favor a return to Glass-Steagall. Banking should return to being a boring business. Riskier activities which used to be handled by Investment Banks should go back to Investment Banks.

Particularly when we are being asked to subsidize and bail out their risks (through the bailouts, the FDIC, and the 0% Fed rate window).

KC native
06-02-2010, 09:07 PM
Particularly when we are being asked to subsidize and bail out their risks (through the bailouts, the FDIC, and the 0% Fed rate window).

Yes, although the FDIC is funded by the banking ndustry.

banyon
06-02-2010, 09:12 PM
Yes, although the FDIC is funded by the banking ndustry.

But not exclusively the investment banks.

KC native
06-02-2010, 09:13 PM
But not exclusively the investment banks.

There are no more investment banks. They either folded or were assimilated into the financial conglomerates. Hell even GS is now a bank holding company.

go bowe
06-02-2010, 10:38 PM
Of course not all regulation is bad. For example I don't think you should be able to drive at any speed you want.

But the liberal mantra for why we're in the mess we're in is because businesses weren't being regulated enough....which is total BS.

The mess came about because politicians are regulating for themselves....not us. And we have a MSM that doesn't paint a true picture of what is going on.

And, I completely agree with your pot example.the whole regulation would have saved us thing is greatly overblown...

but some regulations might have lessened the impact of, if not avoided altogether, the mess that we're in...

of course, such regulations would not have avoided a global recession, which is a big part of why we are in the mess we are in...

damn, that gets confusing...

we are in the mess we are in...

i better stop...

banyon
06-02-2010, 10:40 PM
There are no more investment banks. They either folded or were assimilated into the financial conglomerates. Hell even GS is now a bank holding company.

What I meant was that banks that are not speculating are subsidizing those that do through the FDIC, right?

KC native
06-03-2010, 04:11 PM
What I meant was that banks that are not speculating are subsidizing those that do through the FDIC, right?

Oh, yes. That's why you see the rift between the regional banks and the giant conglomerates.