Robert Reich says its time for regulation to make a comeback:
The Rebirth of Regulation, by Robert Reich: What do oil giant BP, the mining company Massey Energy, and Goldman Sachs have in common? They’re all big firms involved in massive plunder. BP’s oil spill is already one of the biggest and most damaging in American history. Massey’s mine disaster, claiming the lives of 29 miners, is one of the worst in recent history. Goldman’s alleged fraud is but a part of the largest financial meltdown in 75 years. ...
Where were the regulators? Why didn’t the Department of Interior’s Minerals Management Service make sure offshore oil rigs have backup systems to prevent blowouts? One clue: You may remember MMS’s wild drinking parties exposed during the Bush era.
Where was the Mine Safety and Health Administration before the Upper Big Branch mine exploded? MSHA says it fined the company for a whole string of violations, but the law didn’t allow fines high enough to deter the company. Which raises the next question: Given Massey’s record, why didn’t the Bush-era MSHA seek to change the law and increase the penalties?
Why didn’t the Securities and Exchange Commission spot fraud on the Street when it was happening? Well, as we all now know, the Bush SEC was asleep at the wheel.
But don’t blame it all on George W. For thirty years, deregulation has been all the rage in Washington. Even where regulations exist, Congress has set such low penalties that disregarding the regulations and risking fines has been treated by firms as a cost of doing business. And for years, enforcement budgets have been slashed, with the result that there are rarely enough inspectors to do the job. The assumption has been markets know best, and when they don’t civil lawsuits and government prosecutions will deter wrongdoing.
Wrong. When shareholders demand the highest returns possible and executive pay is linked to stock performance, many companies will do whatever necessary to squeeze out added profits. And that will spell disaster – giant oil spills, terrible coal-mine disasters, and Wall Street meltdowns – unless the nation has tough regulations backed up by significant penalties, including jail terms for executives found guilty of recklessness, and vigilant enforcement.
After thirty years of deregulation, it’s time for the rebirth of regulation: Not heavy-handed and unncessarily costly regulation, but regulation that’s up to the task of protecting the public from companies and executives that will do almost anything to make a buck.
It's not at all clear that "the largest financial meltdown in 75 years" will result in new financial regulation that is more than window dressing designed to appease voters without actually curtailing financial sector activity. If, in the end, the regulatory change that is implemented does little to make us safer from future financial meltdowns even after such a large economic downturn, that's not a good sign for those who are hoping that the gulf oil spill will provide the motivation for new and substantial environmental regulation. But maybe financial regulation will turn out better than I expect.