President Ronald Reagan stepped through the tall French doors of the White House Oval Office into the bright sunlight of a lovely fall morning…
The president stood at ease for a moment and looked out over the assembled guests, beaming with pride and satisfaction. He had promised the American people that he would get government off their backs, that he would deregulate the private sector.
I predicted more problems almost a year ago.
Twenty years ago, Ronald Reagan signed legislation that led to the end of the Savings & Loan industry. His administration allowed the S&Ls to slide ever closer to oblivion, turning a blind eye to the disaster shaping up across the country. Lack of regulation allowed the S&Ls to be pillaged and burned while Reagan, like Nero, fiddled happily away. Bush Sr was elected to office and started the takeover of the failing institutions through the Resolution Trust Corporation. RTC moved too fast, just as Reagan moved too slow – or not at all.
This is what’s wrong with the idea that there’s too much regulation. A little bit of regulation can go a long way, too much and the market begins to sink into oblivion. Not enough and you have RTC, Enron and Arther Anderson. Leaving the S&L industry alone in the late 80s and we might not be where we are today with our current mortgage meltdown.
Leaving a tiny piece of regulation in place that kept CPA firms from offering “consulting services”, a euphemism for “what else can we ‘sell’ to our clients?” might have saved Arther Anderson and even possibly prevented the implosion of Enron.
Leaving the regulation alone that controlled mortgages might have reduced or prevented the so-called housing bubble and the current pop that is beginning to affect banks worldwide. With his “what, me worry?” attitude Baby Bush encouraged companies to lend money to people who could neither afford their mortgage nor qualify if properly asked to.
Regulation attempts to reduce the greed factor; if it’s done properly. The whip-saw of Sarbanes-Oxely is a massively expensive choke hold on companies that will do little to prevent another Arther Anderson. A simple rule that prevented them from offering consulting services – in any way – to companies whose books they audit would have been sufficient.
We are seeing the extremist positions of Republicans over the last 35 years. Reagan stabbed the S&Ls in the back, Bush Sr grabbed the dagger and twisted. Dubya cut regulation on mortgages – arguably to allow those who are barely making their rent to own a home and it’s taking banks down around the world.
McCain has been along for this entire ride. We cannot afford to have his finger on the pulse of the country; the republican response to a slowing heart rate is to remove the oxygen mask and shut off the life support.