April 15, 2009

Reinventing (intelligent) regulation

The Washington Post’s Steve Pearlstein wrote another on-target column today outlining the roles of the financial regulators that will be needed to keep bigger-is-better thinking from causing future financial crises. He wisely warns of dangers of creating an intelligent regulatory system in a rush, and as a reaction to the current mood of populist outrage about Wall St et al. Outrage is great for stimulating awareness of a problem, but it’s a poor basis upon which to create something new and better.

What Steve misses in his analysis is the critical role the US congress must play in any regulatory overhaul. And there’s the rub. Congress has allowed itself to fund its election campaigns through private contributions rather than through public funds. Call it government-by-the-highest bidder. As long as this is the “American way” don’t expect smart and even-handed regulation of the economy.

If you want to see something saner, support groups like Common Cause who are working hard to take the influence of money out of government. It’s an uphill struggle. Most members of Congress got there because they were good at playing the current game. Incentives are few for game-changers, and those who are elected soon learn the ways of the game players.


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