Quote of the Day: “It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow.” — James Madison (1751-1836), Father of the Constitution, 4th US President, Source: “Federalist” # 62
Politicians have a standard cure for every problem — REGULATION. But what happens when there are so many regulations that not even the regulators can know them all, or understand what their consequences are? A case in point . . .
Widespread reliance on credit rating agencies, and a lack of knowledge about how those agencies were regulated, were major contributors to the 2008 financial meltdown.
Just this one example (explained in our sample letter below) is enough reason to reject the so-called financial reform bills being put forward by Barney Frank and Chris Dodd. Complicated regulations helped cause the 2008 mess, and they are NO part of the solution.
If you agree, please send Congress a letter telling them so.
You may borrow from or copy from this sample letter . . .
Wall Street is already the most regulated sector of the economy. Too many regulations means that even the regulators don’t know them all. Jeffrey Friedman of the Cato Institute shows how this helped cause the 2008 financial meltdown. http://www.cato.org/pubs/policy_report/v32n1/cpr32n1-1.html
It appears that both the banks and the Federal Reserve were unaware that a 1975 SEC rule turned S&P, Moody’s, and Fitch into a legally protected oligopoly, protecting them from competition from other rating agencies!
* Commercial banks believed in the soundness of the ratings from these agencies
* Other federal regulators wrongly believed S&P, Moody’s, and Fitch were subject to “market discipline”
* But because these agencies were actually protected from competition, they got sloppy, and provided unreliable ratings
* This caused many financial institutions to purchase bad mortgage poolsIn other words . . .
Regulators were unaware of the regulations! So how will MORE regulations help?
New regulations constantly address “the unintended consequences of previous regulations.” They never really fix anything.
Instead of over-regulating the economy, strike at the root with real reform . . .
* End subsidies and bailouts — make companies feel the consequences of their actions
* Stop creating monopolies, as you did with the credit rating companiesMore regulations cause chaos, confusion, and catastrophe. Freer markets promote caution, transparency, and long-term growth. Therefore, I want you to oppose the Frank-Dodd financial reform bill.
END LETTER
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Thanks for being part of the Downsize DC Army.
Jim Babka
President
DownsizeDC.org, Inc.