Regulatory Arbitrage Is an Outrage

The idea that congress could streamline anything is as likely as an ice age coming to your neighborhood soon. Once in power, politicians are all about holding on to power or even increasing it, not sacrificing it for the common good. That’s why Blumberg and Davidson of NPR on a recent “Morning Edition” discussion are pessimistic about any effective changes in how congress might better regulate the markets. Trying to merge the SEC and the CFTC would be more difficult than trying to cross an elephant with a donkey: it just won’t happen. There is too much influence and money at stake among congressmen who supposedly supervise these overlapping agencies to risk merging the two. Lobby largesse would go missing from the coffers of congressional election campaigns.
Both Barney Frank (D) and former Representative Mike Oxley (R), the current and past chairs of the House Financial Services Committee respectively, agree that trying to merge the SEC and CFTC, both of whom supposedly oversee financial services, would be impossible now and in the future. Somebody would have to give up some power, and that simply doesn’t happen in congress when campaign contributions are at stake. It appears that you can add regulation more easily than you can make it more efficient. And adding regulation is like adding cooks to the kitchen: nothing gets cooked because each cook thinks another will do the cooking.
It’s all a great dodge. America is Dodge City, the perpetuation of the Wild West where anything goes and laissez-faire capitalism still rules, thanks to congress’s approach to regulation. Simply write enough laws and create enough overseeing agencies, and real responsibility will fall through the cracks, over and over again while the lobby money keeps rolling in.
There is an ad currently appearing on television that shows what justice would be like if loggers ruled the world. They are portrayed as even-handed in doling out justice by sawing everything in half including houses and cars but stopping short of King Solomon in sawing a couple’s pet in half, implying that joint custody will serve in limited instances. There is something appealing about that simple justice in the face of the dithering lip-service congress pays to justice in matters such as securities regulation and health care where the stakes for the country are so high. And yet their self-interest apparently transcends any thought of common goodness or justice.
Is it democracy itself that brings out the worst in our politicians, or is it our cultural narcissism that grew and flourished amidst previously unheard of materialistic wealth during the last fifty years mutating into a malignant form of hubris incapable of either humility or humanity? Where is public service when we truly need it? Did it die with Ted Kennedy who, despite his shortcomings, appears to be the last of the great public servants in congress?
If the only safeguard or producer of goodness left to us is competition, what a commentary on our sad state of affairs. Maybe Coolidge was right: “The business of America is business.” And it is business as usual in all facets of our culture in spite of the serious flaws we all have witnessed in the last year. If congress won’t do anything to make things better, who will? The President can’t do it alone.
Meanwhile, the very banks that brought the world economy to its knees have been temporarily saved by federal transfusions of cash but little of that cash has trickled down to the economy of Main Street. The banks apparently are living off the transfusion while they organize the next campaign to dupe investors with glossy financial products that have no more relation to the actual manufacture of goods than the most recent bungle of derivatives. But they are the largest source of lobby money (your tax dollars), so don’t count on your congressman to do anything to threaten that pipeline.
We keep hearing about the “green shoots” as if just around the corner is the actual economic recovery. With unemployment projected to crest above 10 percent before the year is out, there aren’t many “green shoots” to comfort the unemployed. In Bhutan, where the culture measures itself by GNH (Gross National Happiness) rather than GDP, there are real green shoots growing, thanks to the intervention of the government that recognized a growing deforestation problem. Bhutanese like to honor their dead by placing prayer flags on poles, which were being harvested from the country’s existing forests. The government decided to act and began planting fast-growing bamboo to provide its inhabitants with adequate poles without continuing to compromise the existing forests. It was a simple solution to a simple problem. And they don’t need loggers to harvest it for them. Ah, if only we could do the same.
I fear our economic system is so convoluted and complex that it has become a monster we no longer can control. Even before we elect our politicians they are “purchased” by corporate lobbies and owned by corporations for the duration of their careers. Even self-proclaimed “mavericks” are owned and manipulated by corporate wealth. There is no power to govern these monsters, and so we are defenseless against their best laid plans.
Maybe we could save our own forests by electing loggers to congress. They would appreciate the pay and would probably not tolerate a lot of dithering among their colleagues. And perhaps they would put an end to derivatives on Wall Street by chain-sawing through the red tape and complexity that Wall Street hides behind. They also might just cut a few opening to allow the bailout money to flow to Main Street. Yes, I can see the bumper sticker now: “Break the log-jamb in congress: Elect a logger as your congressman”!