There is no question that the recent financial contraction had a negative impact on this country. Regulatory reform makes sense. But, who do we turn to for that reform?
Let us assume we want to have someone advise us on our personal finances. We could begin by looking for an experienced consultant, with a track record that we can inspect. We could talk to Bernie Madoff. After all, Bernie made managed lots of other peoples money. He was the darling of investing. Sure, he lost billions, and many people are hurt by his fiscal mismanagement but he has big time experience. I think we should consider bringing Bernie Madoff out of prison to reform our financial industries. After all he has a track record you can inspect.
Wait, don't you agree? You don't think Bernie is qualified because he squandered all that money and peoples trust?
Well, then why would we even consider having the government reform the financial industry. Inspect their track record and you will see it is just as bad as Madoff's.
- The US government is spending more money then it takes in. How does this qualify them to "reform banks. (Incapable of managing their own money, disqualified)
- The US government has invested all social security funds into the general treasury and provide IOU's from the future American taxpayer in exchanged. Talk about junk bonds. This practice violates the trust of the people by investing in super high risk investments, and by violating the rules against co-mingling of funds that would put a banker in jail. (Fraud and misuse of funds - disqualified)
- The oversight committees are chaired by politicians that need to raise a lot of money. They take huge sums in the form of campaign contributions, hundreds of thousands of dollars from the very people they are supposed to regulate. In any other industry this would be called a bribe. But we call it freedom of expression. OK, I am all for that. People should be able to contribute as much as they want, as often as the want. If George Soros wants to give a billion dollars to own Chris Dodd, I support that. It is George Soro's right. If I want to give a million dollars to Steny Hoyer, it should be my right. The silly laws we have enacted in the name of Campaign finance reform are as stupid giving politicians responsibility to regulate the financial industry. (Conflict of interest - disqualified)
In short, the congress is disqualified from regulating the financial markets, therefore they have no basis for proposing reforms.
What could congress do to prove they are qualified?
* Reduce spending below their income, without increasing taxes.
* Change compensation practices in the government so that bonus above minimal compensation are based on spending less without providing less, and are tied to "profitable operation". (i.e. you fix all the roads, but spend less than you take in)
* Fully fund social security. No more IOU's
* control costs through reduction in force, and break the strangle hold of government employee unions.
But of course, the government we elected won't do it. And since they won't t manage their own finances, it is time to stop pretending they can be trusted to reform the financial industry.
The harsh reality is government can't reform the finance markets. They only distort them and put investors at greater risk. The only reform that will work is to reform the expectations of the investors. When investors are distrustful of easy money, the markets will reform themselves.
Cross posted at Freedoms Light Organization