On Friday, the U. S. House of Representatives approved "sweeping new financial industry regulations."
The bill, among other things,
hands regulators broad new powers likely to impact everyone from the average mortgage applicant to multibillion-dollar financial houses that lord over the global economy.Among its most applauded — and controversial — components, the 1,279-page bill would create an entirely new regulatory agency, the Financial Services Oversight Council. Its charge would be to protect consumers and give regulators the power to pre-emptively dismantle companies if they conclude those firms threaten the economy.
The premise of such regulation is based on a fanciful idea. Those in favor of regulation such as this believe that government functionaries have some idea how to successfully manage an industry, or at least some portion of it.
This premise has no basis in fact. Even if one believes that Wall Street firms and bankers are evil and must be reigned in, this regulation does not solve the problem.
It merely substitutes the evil bankers with evil, and incompetent, bureaucrats.
More regulation is not the answer. More regulation results in more rules. More rules means more time and money must be spent in complying with those rules. It provides incentives for those that can find loopholes in the rules. It costs money to enforce the rules.
Society eventually ends up spending more time and resources arguing about commas, definitions and exceptions to arbitrary regulations than to actually solving the perceived problem.
The problem can be solved with one rule, and it is already in place:
Do not commit fraud.
All people, even Wall Street Bankers, should be able to engage in any voluntary transaction with any other person as long as no fraud is perpetrated.
This simple rule, however, does not allow politicians to control anything. They do not get to create new agencies. They do not get to hire new regulators. They do not get to pay off political debt. Nor do they solve the problem.
But it is not about solving the problem. It is about control. And the House bill gives Congress plenty of that.