Capitol Hill Blue Forums Political Issues Politics In General Why We Still Need Regulation

It has been a constant refrain emanating from the right, that there's too much regulation in the American economy and that its stifling growth and job creation. Well, I will be the first to say that where we find unneeded regulation, outdated regulation or poorly conceived regulation we should eliminate it. Periodic review of regulations is a necessity so as to accomplish this elimination of unwanted, unneeded regulation. But regulations of all types exist for a reason and that is that unregulated economic activity resulted in unsafe workplaces and products, environmental damage, violations of worker rights, reckless financial malfeasance, speculation, fraud, ad infinitum. Since the end of the 19th Century, civilized society has decided that unregulated economic activity is unacceptable, thus the need for some degree of regulation. As far as the role of regulation stifling the recovery or the growth of job creation, conservative economic writer David Wessel of the Wall Street Journal puts things into perspective: "Are there regulations that are screwing up American business? Absolutely. But is that the overwhelming problem, the reason we have 9 percent unemployment? No."

A great example of why we still need regulation is the rejection of a settlement between Citigroup and the Securities Exchange Commission by Judge Jed Rakoff in a case where Citigroup profited by short selling a complex financial product that it had promoted and knew to be highly questionable, while the investors in the security lost millions. In this case Citigroup took in about $160 million dollars in profit while investors lost nearly $700 million dollars. Even though Citigroup had agreed to pay $285 million dollars in a settlement, Rakoff ruled that the settlement was "neither fair, nor reasonable, nor adequate, nor in the public interest.” Rakoff essentially felt that the suggested settlement would let Citigroup off the hook while denying "the court, and the public some knowledge of what the underlying facts are.”

It's important to note that the investors in this questionable financial instrument were not your garden variety individual who gets a phone call during dinner from a low level stock jockey. They were what the law refers to as "sophisticated investors", that is financial professionals charged with a fiduciary responsibility to know what they are buying, selling and suggesting as investments to their clients. Thus if even the pros could be waylaid by an unscrupulous Citigroup what does that say about the dangers that lurk in the financial markets for the average soul just looking to enhance his financial future without getting cleaned out in the process? This sort of danger is more than just a passing issue as conservatives have long advocated the privatization of Social Security as a way to bolster retirement savings for future generations of Americans. With this case in mind and the memory of the financial debacle, borne of lax regulation, that we went through in 2008, does anyone still think that a wholesale removal of economic regulation is truly a sound idea? I doubt it.

So what then is the point of conservatives pushing for wholesale and widespread deregulation? Well in the aftermath of the economic meltdown of 2008 there isn't any so one would wonder why they continue to push for this? Moreover, the informed student of history would point out that we've already experienced the "benefits" of unfettered free market economics and that that reality was emphatically rejected across the length and breadth of the civilized world starting at the end of the 19th Century and carrying through to the present. That said it would appear that pushing for wholesale and widespread deregulation would appear to be a losing strategy for conservatives and it will, more likely than not, be relegated to the fringe elements among the right where it could live on as a dream indefinitely.


Steven J. Gulitti

11/29/11

Sources:

What, If Anything, Will Speed Economic Recovery? http://www.npr.org/2011/11/15/142336152/will-anything-besides-time-speed-up-economic-recovery

Behind Rakoff’s Rejection of Citigroup Settlement; http://dealbook.nytimes.com/2011/11.../?scp=2&sq=judge%20rakoff&st=cse

Judge Rejects Citigroup, SEC Settlement; http://www.npr.org/2011/11/29/142880334/judge-rejects-citigroup-sec-settlement?sc=emaf

Judge Scraps Citigroup Deal; http://www.npr.org/2011/11/28/142864275/judge-nixes-citigroup-deal?sc=emaf

I feel that most Conservatives are greedy at heart, and are for getting as big a handful of the pie as possible. They also want something for nothing, when they want to pollute without paying for clean up costs, or when their products/services hurt the consumer.

Everyone needs rules to live by. Think of it as the disciplne needed for children.

They wanna party like it's 1899, plain and simple.
Dispatch a few paid thugs to have a little chat with the folks who don't like the way you do business and voila, no more problem!

Oh and then there's that nice little fellow Ron Paul. He sounds so sincere!

He just wants the free market to help us all!

Awhile back I wrote this piece about the need for financial regulation. Seems the beef industry needs some oversight as well: "Beef Investigation By Kansas City Star Uncovers Serious Risks, Including Fecal Contamination"; http://www.huffingtonpost.com/2012/...ent=NewsEntry&utm_term=Daily%20Brief

Pfffft, not just the beef industry SJ...
Look at the HSBC situation.
Your article fooled me into thinking you just published it today, because it's so perfect for today's news.

Matt Taibbi:'HSBC Committed The Worst Behavior That Any Bank Can Possibly Be Guilty Of'

'

The people who most need to be regulated are the rich and powerful.

Oh they need to be "regulated" alright...

'
I've got a little list, I've got a little list,
Of social offenders who might well be underground,
And who never would be missed, who never would be missed !

And 'St 'st 'st, and What 's-hls-name, and also You-know-who,
The task of filling up the blanks I 'd rather leave to you.
But it really doesn't matter whom you put upon the list,
For they'd none of 'em be missed, they'd none of 'em be mlssed !

You may put 'em on the list, you may put 'em on the list,
And they'll none of 'em be missed --- they'll none of 'em be mis-s-s-ed !!

[with apologies to Gilbert and Sullivan]

I heard an interview on PBS the other day, with the author of a new biography of Joseph Kennedy. He said Kennedy graduated from Harvard with a business degree, but couldn't get a job at any of the Boston banks due to being Irish Catholic. So Joe went to Hollywood and got into the business end of the motion picture studios. He made enough money at that to be able to invest on Wall Street.

He had a deep understanding of just how the stock market worked, and made a lot of money by pumping & dumping, using insider information, forming consortiums to manipulate prices, etc. He also understood just how much of a bubble was in progress. So he shorted all sorts of American companies, starting in 1928, and kept that up for the next three years. The crash turned his few million into something over a hundred million dollars.

He was a Hoover supporter but by the time FDR ran, Kennedy had realized that Hoover's ideas were not working and some other approach was needed. His support and influence contributed enormously to FDR's win, and then FDR appointed Kennedy to head the new SEC. He promptly outlawed all the shady techniques he had used when he was trading stocks, because he understood that people would not start investing in the stock market again until they had some confidence that it was not a rigged game.

Which connects directly to the thread topic: Even the biggest "I got mine, now screw you" capitalist ever, came to realize that we need government regulation and oversight to make free markets work.