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 Well, I will be the first to say that where we find unneeded regulation, outdated regulation or poorly conceived regulation we should eliminate it.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/2011/11/28/behind-judge-rakoffs-rejection-of-s-e-c-citigroup-settlement/?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
