Saturday, September 20, 2008

Regulation Good, Regulation Bad

I am of two minds. One the one mind, I don't care for unduly regulation and cumbersome bureaucracy. To me, it seems to be a way to create jobs for mediocre bureaucrats and politcal cronies. Take "welfare." A half or more of "welfare" costs are in the admnistration of the welfare to make sure people don't cheat. let 'em cheat, its cheaper. Of course, what happens to all those case workers and clerks who staff that welfare adminisration, many of whom would be on welfare without that job. See what I mean, by "two minds."

Big government bailouts and degrulation seem to go hand in hand. When is the last time a heavily regulated area went belly up? Any water companies out there go belly up? Electric generating companies go out of business leaving their customers in the dark?

Was it 1979 when the Carter administration deregulated the airlines? Prices went down, profits went up (Carter imposed a windfall profits tax) and the Air Traffic Control system began to degrade.

Flying used to be almost a pleasant experience...not any more. Though, it is probably still cheaper than it was in 1979 under regulation. And the industry, as a whole, doesn't seem profitable. Time for the amtrakization of the airlines??? Both are about as good right now.

About the same time didn't Chrysler need a bailout because they were too big to fail, as well? The auto industry is not a heavily regulated industry and has resisted increased regulations for years and years, witness CAFE standards.

Then banks were deregulated under Reagan and then later bailed out under Reagan...because of mismanagement and risky loans to Latin America.

Next big deregulation was in the telecommunication industry. We got cable TV, and goofy phone service. A lot more services (really toys if you want to know the truth...I mean it is nice, but we can't live without text messaging and v-cast?). I pay A LOT more for phone service now (but I am getting so much more). And my cable never works right.

And following telecom deregulation, while no bailouts, we did have massive scandal, about the same time with Enron, remember??????????

And now, we have bailouts of the mortgage lenders. After deregulation of course of the financial markets, or reallly, a failure to regulate as they developed and new products came aboard.

In the end, we pay, meaning taxpayers and who is hurt by any of this. There are little guys, who shoulndt' have dabbled in house flipping who have pretty much lost everything and then the moguls who had to sell their multi-million dollar mansions and move into a single million dollar mansion.

I read a piece where Franklin Raines, the once wunderkind, now scandal tainted, divorced, and living in a single million dollar mansion, said, he told the gov't that not backing Freddie or Fannie, whichever he was running at the time, was a mistake, but the Bush administration refused to do so. We doing it big time now....half a trillion. What happens if this doesn't work? I mean the Republicans cynically know that deficits don't matter politically, but what about economically???

I may be wrong, but I seem to remember when I bought my first house, in 1987, that there was a rule of thumb about how much house one could afford. There was a simple formula. Of course, I recall, that I thought that was ridiculous, becuase it seemed more than I could afford (I didn't follow, and bought much less house), but maybe regulations, at least in the home mortgage industry, should be long term.....a bit paternalistic with first time home buyers, and not facilitate putting themselves into bad situations. Make that first home an easy one to afford and build equity in, not one that requires everything to go perfect. Think about keeping the person for a customer not just a transaction.

Lastly, this is a good object lesson in what happens if we "deregulate" social security. There will be a period of unbelieveable success, then abject failure and the gov't (meaning taxpayers) will be bailing out social security and a half trillion won't cover it.

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