Regulation and Markets

[Palouser]

Meaningful and necessary regulation did not lose credibility. The ideological and political appointees (Greenspan, and executive branch and Congress) who more or less crippled regulation because of their Polly Anna views have lost ALL credibility on the idea capitalism has the willingness or motivation to regulate themselves. These aren't community based operations anymore - and when they were there were severe problems from time to time. Adam Smith recognized the role of regulation and knew business leaders would try and stack the deck in their favor if given a chance to band together. The push to demonstrate ideological purity in a perfect world has gone altogether to far. If you're going to believe in 'survival of the fittest' then you're going to be living in a jungle. Modern civilization cannot be a jungle.

Here are the facts.  In the jungle you can identify friend and foe - if you see them in time. In the modern world you cannot defend yourself from predatory practices when you walk in the door.Look at MF Global. In the information age you can't see the essential facts regarding complex financial institutions. It's no different than testing batches of concrete for a huge sports stadium to assure the many citizens that may depend on its safety. You want survival of the fittest and nonregulation in that instance? That would be the height of stupidity. If you ran a campaign on that premise you'd deserve being laughed off the stage. That is where we are today with large financial institutions and global business. Any other view is just posturing in an attempt to manipulate.

[Nebrfarmr]

Personally, I want just enough regulation to ensure honesty and fairness, but not so much as to smother initiative.

However, where I think we are severely lacking, is putting teeth in the laws.  If someone rips someone else off, or defrauds them, they need to spend some quality time, in a small cell block, with a big guy, who needs a new 'boyfriend' for a while.
After that, they should pay off all their debts, one license plate at a time, until every dollar they ripped off, is paid back.  It just sickens me, when I hear that some crook defrauded many families out of their life savings, or retirement fund, and is punished with 'severe fines', yet you still see them in designer suits, and riding limos.  Call me a heartless *%*(& if you want, but if I had my way, they wouldn't ever be in a position to ever defraud anyone again, nor would they be living any better than the worst of their victims.

[NCcorntrader]

Pal-

I dont know anyone suggesting that a complete absence of regulation is appropriate, and that is most assuredly NOT where we are right now with large financial institutions. Look up Dodd-Frank and I think you will be amazed at the level of regulation that is presently in place.

With regards to MFGlobal- in my view there is NO amount of regulation short if the regulators actually running the company that could have prevented that fiasco. My understanding is that the collapse occurred over the span of a couple of days, and that the key players were maliciously breaking the law in order to try and save their ass from financial ruin. They are thieves and should be treated as such, and hopefully they will. As I said, NO amount of regulation will prevent desperate people from breaking the law.

Finally, to use your concrete analogy- like I said I dont think anyone is suggesting that NONE of the concrete be tested, but, to test ALL of the concrete would not be an effective use of resources and ultimately would not make the building any safer. 

Of course determining the appropriate level of regulation is the key, and it is not an easy thing to do. I would say that more regulation= less liberty, so I would err to the side of less regulation. 

[Palouser]

I would make the argument that more regulation = more freedom in today's world (I'll add caveats, never fear). The FDIC guarantees deposits and spreads risk. This make it more efficient for me operate w/o the worry and fear of default wiping me out. I don't have to spread my risk in so many places. Is there a cost? Yup. Well worth it - as long as there is regulation to hold the savings and loans to standards that minimize the losses due to bad practices (remember we had a trial run with savings and loans - and again, lax oversight).

My argument can apply to a lot of the economy and make it more efficient, not less. One thing to remember. Regulation SHOULD flow to where there are problems that affect citizens through no fault of their own, whether they be customers, workers, whatever capacity. The courts can handle individual matters that don't indicate a systemic problem (businesses file 90% of liability cases last I heard). Sometimes a free society means transparency. In this day and age it is critical. My argument is not for regulation of everything or 'over regulation'. It does demand a trained and open bureaucracy. I've been to India and I know the downside. But, the main argument is we need to march past the ideology that any regulation is a hindrance to our freedom - not necessarily. The withholding of regulation by insiders can hurt our freedom much more than the regulation that is undermined (also my basic argument with the historical CBOT).

[NCcorntrader]

Pal-

Taken to its logical conclusion (more regulation=more freedom) , then total and complete regulation of every aspect of our lives would result in total freedom. I hardly think this is the case. Regulation is a cure that politicians prescribe for malfesance, but it never works for long. Those who want to bend the rules or flat out break them will do so for their personal gain.

Regulation by definition is a hinderance to our freedom- we are no longer able to do something without the supervision of someone else. Can rules make our society more efficent? Of course. But they can also make it less efficient. And the thing about rules is, if people are intent on breaking them, they will.

[Palouser]

Bull crap NC! Read what I wrote. My reasoning doesn't head toward that conclusion at all. But you simply can't resist playing the ideology card - which was specifically what I was aiming at in terms of 'the logical conclusion'!

I rest my case.

[NCcorntrader]

Pal-

Im not trying to be objectionable, maybe I just misunderstand your comment (which is easy to do in this type forum)- I guess maybe I would just pose a question: What kind of regulation do you think should be in place that isnt already there?

And as an aside, what is so wrong with an ideology? Yes you could say that I am ideologically opposed to government regulation. I think it is an affront to our freedom and liberty. We clearly disagree to some extent but how does that constitute a "card" that has been played? 

[Canuck_2]

I do not think many would enjoy freedom if there were no rules.

With no rules it would not be safe to drive on our roads because no one would sto at a red light.

With too many rules no one has much freedom and nothiing happens efficiently because everyone is busy entering paper work for permission and to cover themselves because of rules.

Therefore i think the discussion comes down to what needs rules and regulation and yes lots of things do because too many people are willing to take advantage without someone watching over them.

It is unfortunatley my experience that virtually all rules are made becasue someone has abused others with out the rule so rules were deemed necessary.

[Palouser]

Are you ideologically opposed to stop signs? Are you ideologically opposed to requiring drivers to have auto insurance or some type of bond to drive on the road? How about bonding for commercial buyers of grain? Or the examples regarding testing concrete stadiums?

I didn't raise the possibility of going to 'the logical extreme' you mention, because it isn't logical. Regulations in place may be fine - but they have to be enforced to be effective. I think it's demonstrable that hamstringing regulation can cost us freedom, as in the case of the Wall St meltdown. Wall St was largely unregulated, because that's the way they wanted it, outside of securities - which the real estate based securities certainly were, as were the CDS. Tell me we didn't lose freedom as a result. Losing your job is losing your freedom. Losing your health care and house are too if it's involuntary and essentially results from other's actions from irresponsible behavior. How about losing promised retirement benefits that were part of your contract?

[Palouser]

Part of my view on 'ideology' is it is often used to dodge reality. It's much harder to address concrete reality by coming up with solutions than saying something that sounds like a principle but is also irrelevant [to solving problems with practical and necessary solutions].