Do you believe in deregulation?

I think too much deregulation is a bad thing, as is too much regulation.

So, I think somewhere in the middle is good.



Right now, we are too far into deregulation...

However, I can cite some areas in which arcane regulations are left over from the 30s that still hurt new businesses and should be deregulated, so the question is a bit generic.

DD

 

The problem with deregulation as a philosophy is that it's not a philosophy. The absence of something is not anything.

 

i'd rather be more deregulated than regulated, that's for sure.

I just hope these recent events dont scare people to the point where they want the govt overly involved. That would be worse than what is going on now, i.e. corrections. I would like to be confident in thinking, that people realized they pushed the envelope and are paying the price for it now. Maybe next time a little more prudent decision making will be employed. Of course, that should be the thinking...then again, people have short term memories now in days.


ANd i wouldnt call deregulation a "not philosophy" by any means. Not having big brother looking over your shoulder doesnt mean that there is "nothing". By that token, you could look at the other end of the spectrum and say having "something" isn't necessarily better than "nothing".

 

Maybe deregulated, with criminalization of wreckless behaviour?

DD

 

Deregulation, for Republicans, has been a fetish, like cutting taxes. There is no circumstance (barring a historic financial meltdown) where they would acknowledge that more regulation could be a positive thing. And even in the present circumstance, you know that the McCain/Palin platitudes about the need for "comprehensive" regulation of the financial markets is nothing more than happy talk. If they were elected, we'd get some weak sauce, ass covering "reform" initiative, that wouldn't be worth a bucket of warm spit.

 

McCain's idea of fixing wallstreet.



DD

 

Life is about balance. You can have too much of a good thing. You can even die drinking too much water. Good regulations prevent people from screwing themselves and others while not hindering innovation in the market place.

 

Any industry that expects the government to bail them out when bad things happen need to be open to being regulated. It like raising children. My house, my money, my rules.

 

Well said.

Regarding the OP, "deregulation" is too general of a term. Even when applied to specific industries, the details are too important for the question to be answered as stated. My generic position is deregulation is a great ideal, but practical matters get in the way of the ideal. Logic & common sense must prevail. The idiot-logical drive by some right-wingers to get the government out of everything and let the free market decide everything is stupid. The free market doesn't solve every problem or always make the right decisions. Obviously neither does the government. There is a balance.

I favor deregulation. Most of my life, I've argued with lefties who want to shackle innovation and creativity. But over the last 10+ years, the intellectual dishonesty of right-wing kooks has pushed me back towards the middle.

 

The only notion of regulation - or deregulation, isn't about whether it's good or bad, but of how much.

The whole purpose of it is two-fold.

1. encourage as much enterprise as possible, thus providing growth and job, and allowing the creation of wealth
2. protecting consumers, minimizing legal risk, preventing catastrophic collapse of industry or economy

Problem is that too much of one or too little of another is really bad. And this has to be approached carefully. Deregulating an industry can result in boon for both consumers and business. Deregulating can also allow practices that put the entire country at risk as we are now seeing.

Regulation can actually create long term growth by ensuring practices that create long term value, prevent lawsuits against businesses, as well as protecting resources (particularly employees and consumers....such as OHSA and environmental standards, or the FDA), but they can also be so restrictive that it makes business impossible to conduct (think liquour licenses that take years to get at a cost of $45,000).

So you can't favor de-regulation or regulation. It's like saying you are in favor of tape vs. glue, or in favor of glue vs. tape. It really depends on the exact problem you are trying to solve. You wouldn't use tape to fix your table lamp, and you wouldn't use glue to close shipping boxes.

 

I believe there is a time and place for everything.

 

can anyone site examples of where it has and hasn't worked? also, what is the primary reason to deregulate (why are people for it)? [edit: some of these questions have already been answered]


it seems to me that it has failed in regards to electric companies in texas. in actuality, maybe it has worked, in the sense that we are now the #1 wind producing state. but that comes at the cost of paying twice as much as other states.

also, something that was strange to me in regards to wind power. i signed a 12 month contract for 100% wind in june '07. the rate was 13.9¢/kwh. 2 months ago when they wanted me to renew my contract, they wanted 17.9¢/kwh. a 3¢/kwh jump in price. did wind become more expensive, or is it just the cost of doing business?

 

I haven't seen this reported yet. If true, this would indicate that a large part of the collapse was due to the SEC allowing firms to circumvent existing regulation.


Ex-SEC Official Blames Agency for Blow-Up of Broker-Dealers

'They constructed a mechanism that simply didn't work'
By JULIE SATOW, Staff Reporter of the Sun | September 18, 2008

The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.

The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.

Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC's trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.

"They constructed a mechanism that simply didn't work," Mr. Pickard said. "The proof is in the pudding — three of the five broker-dealers have blown up."

The so-called net capital rule was created in 1975 to allow the SEC to oversee broker-dealers, or companies that trade securities for customers as well as their own accounts. It requires that firms value all of their tradable assets at market prices, and then it applies a haircut, or a discount, to account for the assets' market risk. So equities, for example, have a haircut of 15%, while a 30-year Treasury bill, because it is less risky, has a 6% haircut.

The net capital rule also requires that broker dealers limit their debt-to-net capital ratio to 12-to-1, although they must issue an early warning if they begin approaching this limit, and are forced to stop trading if they exceed it, so broker dealers often keep their debt-to-net capital ratios much lower.

In 2004, the European Union passed a rule allowing the SEC's European counterpart to manage the risk both of broker dealers and their investment banking holding companies. In response, the SEC instituted a similar, voluntary program for broker dealers with capital of at least $5 billion, enabling the agency to oversee both the broker dealers and the holding companies.

This alternative approach, which all five broker-dealers that qualified — Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley — voluntarily joined, altered the way the SEC measured their capital. Using computerized models, the SEC, under its new Consolidated Supervised Entities program, allowed the broker dealers to increase their debt-to-net-capital ratios, sometimes, as in the case of Merrill Lynch, to as high as 40-to-1. It also removed the method for applying haircuts, relying instead on another math-based model for calculating risk that led to a much smaller discount.

The SEC justified the less stringent capital requirements by arguing it was now able to manage the consolidated entity of the broker dealer and the holding company, which would ensure it could better manage the risk.

"The Commission's 2004 rules strengthened oversight of the securities markets, because prior to their adoption there was no formal regulatory oversight, no liquidity requirements, and no capital requirements for investment bank holding companies," a spokesman for the agency, John Heine, said.

In addition to computerizing the risk calculations, the new program required time-consuming oversight of the broker dealers by SEC officials, and in many cases, the use of subjective judgment calls.

"An important component of the CSE program is the regular interaction of Commission staff with senior managers in the firm's own control functions, including risk management, treasury, financial controllers, and the internal auditor, as well as onsite testing to determine whether the firms are implementing robustly their documented controls," SEC chairman Christopher Cox testified in a hearing of the House Committee on Financial Services in July.

Despite the increased oversight and supposed strengthening of the rule, the SEC did reexamine its efficacy after the Bear Stearns collapse. "Immediately after the events of mid-March, when the run-on-the-bank phenomenon to which Bear Stearns was exposed demonstrated the importance of incorporating loss of short-term secured funding into regulatory stress scenarios, the CSE program revised the analysis of liquidity risk management, with enhanced focus on the use and resilience of secured funding," Mr. Cox testified at the July hearing. "The SEC has also worked closely with the Federal Reserve in directing this additional stress testing."

Two months after Mr. Cox testified, however, two more broker dealers have collapsed, and yesterday there were reports that one of the two remaining broker dealers — Morgan Stanley — is now in talks to merge with Wachovia.

"The SEC modification in 2004 is the primary reason for all of the losses that have occurred," Mr. Pickard, who is now a senior partner at the Washington, D.C.-based law firm Pickard & Djinis, said.

The director of equity research at Fusion IQ and an influential Web logger, Barry Ritholtz, called the 2004 rule change "a hornets nest" that "proves the importance of having stringent rules in place."

The SEC said it has no plans to re-examine the impact of the 2004 changes to the net capital rule, and last week, it put out a proposal to revise the rule once again. This time, it is looking to remove the requirement that broker dealers maintain a certain rating from the ratings agencies.

"The SEC doesn't want to appear they are endorsing the efficacy of ratings agencies, but once again, they are going to simply cause more problems down the road," Mr. Pickard said.
http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/?print=6067571221

 

^It had something to do with the former Basel 1 standard, and the loophole they exploited in the creation of SIVs and the 44 trillion dollar shadow derivatives market.

I wish I knew what that meant though...

 

40-1 leverage.

Did they really believe they could sustain it? Were they really that stupid? 40-1?

 

Deregulations has been more negative than positive

Rocket River

 

The government will undoubtedly over-regulate after this mess though you can't blame the reaction as the Fed stepping in has as NYU's Roubini states has "privatized the gains, but socialized the losses."