Friday July 16, 2010
Self Serving Bureaucracies
The bill "is a 2,300-page legislative monster…that expands the scope and the powers of ineffective bureaucracies," said Sen. Richard Shelby (R., Ala.).
"We failed completely to understand the complexity of what the impact of the national decline in housing prices would be in the financial system," said Ms. Yellen, currently president of the Federal Reserve Bank of San Francisco. "We saw a number of different things, and we failed to connect the dots."
WSJ Report on the Financial Regulatory Bill
The upshot then is that the same group that failed to see the danger coming is now in charge of ‘fixing the system’ so that it does not happen again. Our theme today is not to discuss the financial regulatory bill, who could? The Bill creates yet another ‘Consumer Agency’ within of all place, the FED. The FED of course has failed to prevent every financial crisis since it was created in 1913. Our theme is that once organizations grow to a certain size, they no longer service their intended constituency, they serve themselves.
Barney Frank and Chris Dodd, the architects of free housing for all, crafted this legislation. And we understand that along with Ted Kennedy replacement Scott Brown, there are lots of goodies for the finance companies headquartered in Boston, their state capitol. Is anyone surprised? As a veteran of the industry, I can assure you that finance is rife with rules and regulations, and Bernie Madoff and Bear Stearns and Lehman followed every one of them. Janet Yellen admits the FED failure, yet she is re-appointed and the FED grows not shrinks. A rational society would strip the FED of all powers and send the bureaucrats packing.
Such Federal incompetence is on daily display. From the Twin Towers (twice) to the border to the oil spill to the monster that is the IRS, the failure to connect dots is continual. And the solution is always the same, hire more bureaucrats that fail to connect dots. The idea that a salaried bureaucrat can legislate good judgement, especially among those determined to know and thwart the rules, is ridiculous.
This same theme is repeated over and over again. The most omnipresent threat the looming failure of states and cities to pay bills and pensions. Congress of course is doing nothing on this issue. The State of Texas has made headlines on the content of social studies books. Yet among my students, I cannot discern at the college level, that anyone has ever read a book, period.
As one veteran of municipal government remarked, only the State of Texas can charge you to put waste in your own landfill. The IRS presumably has all the 1099s various entities have sent them regarding your and my affairs. Yet it is our job to find and report on them, or else. Such meddling in our affairs only raises the ire of citizens, now on display as more incumbents are defeated.
But we cannot defeat the Janet Yellens, still on the job and still failing to understand the complexity of the system. Janet, there is nothing complex in allowing a purchase without payment, the zero down home buying approach. And there is no surprise that such a buyer, with nothing at stake, walks away when the bet fails to pay off.
And so it goes. We are awash in useless regulations that grow bureaucracies. Goldman Sachs just paid $550 M to settle charge sit duped clients; of course they did. And not a single person at Goldman or the SEC lost a job. Does anyone seriously think that the largest settlement ever, but chump change for Goldman, will change behavior? Indeed, now Goldman knows to the penny just what bad behavior costs, it will provide a handy measuring stick against future transgression.....
The American Revolution had a convenient Atlantic Ocean between itself and King George. After a few years the British went home to other tasks. The French had no such luxury between themselves and Marie Antoinette. And so they stormed the Bastille; off with their heads was the cry.
The Taxed Enough Already crowd has already taken to the streets. But Washington sneers at their protests passing ever more expensive legislation to expand their control over everyday life. The Tipping Point draws ever closer, another terrorist attach, another spill, another meltdown....
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