Wednesday, December 14, 2011

Self-Regulation is Self-Destruction

We hear a lot about how regulations destroy jobs and ruin the profits of business. We hear how they take away our freedoms and make us slaves to the state. Well, there is another side to regulations, the good side, and this is the perfect example of why we need common sense, not overbearing, regulations.

MF Global is the new poster child for financial mismanagement, having somehow lost some $1 billion in customer assets. The problem, as stated in the article, is that regulators pulled back their oversight and gave MFG more freedom to control its own lending practices.

To describe how insane this is, imagine telling a drug addict that you are going to scale back your supervision of them while they continue to have access to their drug of choice, and say that you are going to trust that they can contain themselves. Would anyone be surprised if the drug addict took advantage of that?

So, when we have companies that are profit-junkies, and only care about the dollars rolling into their private pockets, why would anyone think that such groups could self-regulate? It makes no sense.

I know that most Republicans don't want to get rid of all regulations. I know that most just want to simplify the system. I agree with that completely. But there is a group that wants to de-regulate everything, and let the markets and the private sector work themselves out. To me, that is insane.

So, regulation and oversight are good to a degree, and can be helpful. Lessons learned from groups like MFG should stick with us and continue to change our attitude about the government's role in the markets.

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