This week’s edition of The Economist has an excellent article on over-regulation in the United States, and how it is stifling economic growth. For example, America’s share of initial public offerings (IPOs) fell from 67% in 2002 to just 16% last year. Firms increasingly listed their shares abroad to avoid the increased cost and difficulty of listing them in America in the wake of Sarbanes-Oxley legislation, which not surprisingly, passed in 2002.
As if Sarbanes-Oxley did not harm American financial competitiveness enough in 2002, the 2010 Dodd-Frank Act will likely negatively impact the industry even more. The Act contains some 848 pages of law. There are also additional rule clarifications, some of which are hundreds of pages. The so-called “Volcker rule” in particular, includes “383 questions that break down into 1,420 subquestions.” One industry study estimates that this single rule could cost companies and investors more than $350B.
Jaime Dimon, the chairman and CEO of JPMorgan Chase, summed up the law’s unnecessary complexity best:
The financial industry is not the only one suffering under the crushing weight of unnecessarily complex and ham-fisted regulation. Despite its stated intent to lower costs, President Obama’s healthcare legislation will do anything but reduce regulatory complexity, and by extension, costs. Next year, the number of federally mandated categories of illness or injury for which hospitals can claim reimbursement from the government will expand from 18,000 to 140,000. According to The Economist, these new categories contain nine codes classifying parrot-related injuries, and three codes that cover burns related to flaming water skis.
Yes, there are actually nine codes that cover parrot-related injuries. Why? Because some government bureaucrat deemed it was necessary to cover every permutation and combination of the hazards associated with parrot cohabitation. What’s worse is that we, the people of the United States, paid this bureaucrat to do it.
A recent study for the Small Business Association has found that regulations add $10,585 in cost per employee. Is it any wonder that unemployment is still at 8.3% today?
Regulations are a necessary evil in today’s business world. However, unnecessarily complex regulations are just plain evil. The Dodd-Frank Act seeks to accomplish much of what the original Glass-Steagull Act of 1932 did, only Dodd-Frank is 23 times longer.
Regulation simply need not be this stupid. It should just be simple.
Reflections of a Rational Republican 
Dodd-Frank doesn’t do nearly enough. Glass-Steagall was fairly strait forward. It stated: if you want to be a commercial bank, you can’t gamble with the house money (you can’t also be an investment bank). With that rule, if an investment bank wants to gamble recklessly, they can, because it’s not going to destroy the economy if they go under. And when you have a bill as big as Dodd-Frank, it has to be full of loopholes.
I think if the government simply went back to the simpler Glass-Steagall, all would be well. Instead, we have an unnecessarily complex behemoth that is, as you rightly noted, is “full of loopholes.”
Regulation? Complex regulation? How does one define these terms and where do they come from???
My dad use to use Benzene to clean his tools. Made one hell of a solvent. How long did it take for companies to actually state it was a huge carcinogen? It took regulation because the companies wouldn’t regulate themselves. But, they had the opportunity first. Gov’t regulation came AFTER they refused to do the right thing.
OSHA didn’t come about because there was a bunch of lazy people sitting around in a room trying to divise a way to screw up the private sector. It happened out of necessity, because once again, companies wouldn’t regulate themselves.
Child labor laws.
Minimum wage.
Over time.
The list goes on and on and on!!! Regulation is born out of necessity. Yet, the complaints only come when the regulations are put in place. I say, shove a mirror in thier face and say, “Hey dumbass, you had the chance. Don’t gripe now because WE DID YOUR JOB!”
Banking?? OMG!!! Do we and did we ever need more regulation. You think I’m going to listen to some guy from JP Morgan Chase has to say about ‘regulation’…. I’m sure he didn’t have his hands in the cookie jar that they had to regulate… right??? GIVE ME A BREAK!! I couldn’t care less what someone from JP Morgan has to say, they were part of the problem that got us where we are at. Again, “You had your chance, you went FOUL!! Don’t gripe now… after your chance… that we had to put regulations in place to MAKE you do the right thing… because you wouldn’t do it on your own!!!”
I own a business. Have for over 12 years. Certain aspects of gov’t regulation are over bearing. In my industry, we have a book with the industry standards. It’s point blank and easy to understand. Might be stupid, but regardless… it’s easy to go by and do the job correctly.
I have very little problem with gov’t regulation in my business. But then again, I do the job I’m supose to.
Right now, today, there is no ‘regulation’ against chicken eggs produced by chicken drinking radio active water. Why, hopefully there is not radio active water available. Yet, rest assured, if some dad gum farmer can buy this water for pennies less a gallon, at least some of them are going to do so because the don’t think the market ‘pays a fair price’ so they are ‘forced to take short cuts’. Then, when eggs start glowing, and a regulation is put in place… HERE COMES THE GRIPING!!!
Idiots… maybe you shouldn’t have cut corners inviting the gov’t in??? HMMMM? Could be.
I can probably refute any and all statements you choose to throw out. In actuality, regulation ALWAYS comes after the fact, AFTER THE FACT… PERIOD!! They can’t regulate what they don’t know about. It always has and always will take experience… to regulate.
Personally, I hope they put a whole lot more on the banks. And here in Texas, deregulation of energy has helped me a whole lot. NOT!!!
Do any Texas regulations cover “radioactive chicken-related injuries?” 🙂 Perhaps they could do a government study on the POTENTIAL for radioactive chicken-related injuries (“from Mars”!), funding a team of 40 researchers (when only 10 are needed) just so the government can keep that extra $1,000,000 worth of funding it was at risk of losing not just this year, but next year as well, as they hire another 40 people to produce the report for this study as well. Perhaps they could hire a bunch of their congressmates’ kids as “interns” on the study, too, as research partners?
Sarcasm aside, I don’t think anyone here argues that regulation isn’t needed (see the discussion here on fracking, for instance). I think the point trying to be made is that excessive, unnecessary, and as a result burdensome and bureaucratic regulation can often do as much if not more harm than what it is often trying to prevent.
On a personal note, some of this banking regulation you speak of, for instance, led to our Canadian banks putting a mandatory hold on new US funds for 20 days. Keep in mind that these are on checks from our OWN US bank to our Canadian bank to cover our Canadian operations, not a check from what could be an already-under or fraudulent company. We can afford that 20 day hold now, but that would have literally killed our business four or five years ago as a startup. We have a 6 month sales cycle, and the deposits we receive have to cover our expenses for another three months on top of that. Then to add effectively another month? And do you think the banks had to pay us interest on that money? Nope.
That’s just a small, “light” example but the point is there’s consequences to the “little guy” from both not enough regulation, and too much regulation. I think what’s truly being argued here is that BOTH have to be considered. Beyond that, however, I agree with you that I wouldn’t trust any industry at all to regulate itself without government no matter what it is. My argument, therefore, is think the same as most here in that government is trying to do too much where it shouldn’t be, and not enough where it should be, and is horribly and dangerously inefficient at both.
“Regulation? Complex regulation? How does one define these terms and where do they come from???”
Troy, complex regulation is a bit like pornography. I cannot precisely describe what is, but most people know it when they see it. I think a regulatory regime that has nine separate codes for parrot-related injuries fits this criteria. Don’t you?
I don’t disagree with you that some regulation is necessary, and most regulation occurs after some half-wit does something extraordinarily stupid. That said, government frequently develops regulations that treat all people like half-wits on the edge of doing something incredibly stupid. Witness the Consumer Financial Protection Bureau for instance.
We’re also not talking about Benzene here. We’re talking about a system that has evolved to the point in which a government bureaucrat spends time developing criteria for three different varieties of flaming water ski incidents. Surely, you can see the unnecessary and unproductive complexity in this?
Thanks for the read, it was a pleasure.
9 separate code sections on parrot-related injuries and 3 sections on the dangers of flaming water skis (are you kidding me?) definitely falls within the category of over-regulating “some half-wit who does something extraordinarily stupid.” What ever happened to being responsible for the consequences caused by one’s actions? The government has no business regulating things like this.
We should all be offended that a government treats us like “halfwits.” If you treat people like they are stupid and the government undertakes to protect them from their own “incredibly stupid” actions, you destroy any hope that people will consider the consequences of their actions before they do something, and they will become dependent on the government. Sounds like socialism to me.
“Sounds like socialism to me.”
Nevermind socialism, increasingly complex regulation is just plain stupid.
OMG!!! Regulation has something to do with socialism??? OMG!! Give me a break!!!
Like I said, I can play volleyball with this subject. My serve:
Simplistic regulation… what a dream. Just take a look at our current economic situation, much of it due to the banking industry. One never would have thought there needed to be a regulation stating, “You can’t take shit, paint it, and sell it as a commodity”. Well, were we ever proved wrong!!!
Sorbanes/Oxley: no one ever would have thought it was necessary to dictate EXACTLY how one does accounting, considering accounting has been done for centuries… yet again, Ken Lay taught us a lesson on that.
The regulations get more and more complex as each individual industry finds the little itty bitty loop holes which end up padding their back pockets.
HMMM? Illegal to take water out of the great lakes… right…. wrong. One Corp. figured out a way to buy some land on an inlet and extract some 400k gallons a day. Not off the ‘lake’, off the ‘inlet’ . Now, because some idiot, who knew the ‘heart of the law’ but played lawyer on the wording of the law… the gov’t will have to be even more complex in it’s writing of laws.
There is NEVER some people so bored in life, sitting around trying to figure out how to put the screws to someone. It happens quite the opposite. Someone gets ‘screwed’… laws are made. I live in Houston, actually Friendswood, a suburb of Houston. The great BP refinery which blew up is about 20 minutes from my house. Up to date, they still are not up to code. Why is that?? Profit is more important than saftey. Imagine that. Much of the chemical industry is the same way. What is the average life span of someone retiring from this industry? If you check, you will find it to be very short… maybe, it was just something in the air???
I’m a Christian. Being such, I understand that I am living in my fallen nature. We are driven by greed, lust, envy, and the list continues. Then when faced with the reality of our situation, we look around for someone to blame, because surely, it can not be the man in the mirror.
Yet, you tell me, where does one go for direction??? I’m not sure either?? But good luck getting your ‘answer’ across.
“Simplistic regulation… what a dream. Just take a look at our current economic situation, much of it due to the banking industry. One never would have thought there needed to be a regulation stating, “You can’t take s**t, paint it, and sell it as a commodity”. Well, were we ever proved wrong!!!”
Much of it was also due to simple greed, and consumers who were too stupid to do simple math when buying their homes. The government could have just as easily demanded a minimum IQ for people to buy a house or minimum income, etc.
The fundamental problem with attempted to regulate every possible eventuality is that people just stop following the law, because it becomes too expensive (or more likely) too complex for someone to possibly be able to follow every rule or detail that government’s promulgate. The government very quickly becomes the little boy who cried wolf. The more laws it creates, the less power it has to enforce them.
Ok Sean, was the parrot and flaming skis in reference to Obama care? I tried looking it up and the only reference I could find was to Obama care. So, is that it?
If so….
Unfortunantely, this requires TMI.
I’m married with two kids. Being ‘responsible adults’, we are not having any more kids. As opposed to her taking me to the vet to get nuetered, we use an IUD. They last 5 yearss. Great.
Well, 5 years had passed and time to get a new one. She goes to the doctor and the doctor tells her its will be under her co-pay and that we’ll have to pay $800 for this little plastic “T”. NOT!!
At Super Bowl party, wife happens to be talking to lady who says she went through the exact same thing. She told us to call our insurance company back and say, “X, Y, Z”.. and most likely they’ll pay for it, they did her.
We called, she called, and guess what…. they did… for $40 dollars.
Get this, the way it would have cost $800 is had the doctor given her a perscription and had she taken it to HEB to be filled.
But, if the doctor supplied it, then it was covered.
BS!!! Intentionally bad information given up front until intelligence could be proven. NO DAD GUM PERSON IN THE WORLD IS GOING TO DO IT THAT WAY!! When we explained our doctor was ‘supplying it’… our mistake, it’s covered.
Someone point blank needs to be hit upside the head… and I’m more than willing to get in line.
I can COMPLETELY UNDERSTAND the gov’t having to lay out every single thing they and their 5 year old kids can think of with relation to insurance coverage!!!
“You must cover a person’s broken arm if they walk in and are wearing poka dots and stripes at the same time, and No, it is not a cause for denial if the patient is wearing white pants before Labor Day.”
Ignorant? I completely understand, but it appears that one has to be that way when dealing with insurance companies!!
My daughter and I have asthma. OOOOOH, asthma!!! An over the counter allergy med, a rescue inhaler, and a preventative… and kabaam.. no problems.
If not under my wife’s insurance… we can’t get dad gum insurance that covers anything. It’s a joke. I’m going to give someone a ‘pre-existing condition’.
Enough for 6:45 am.
Well, I cannot. Neither can other business people and policy makers. The recent February 18th edition the The Economist magazine has several excellent articles outlining the stupidly of our Congress and how excess regulation is killing American competitiveness. In fact, President Obama apparently agrees with me to an extent as evidenced by his appointment of Cass Sunstein to reduce unnecessary regulation.
OMG!! I just got finished reading your blog on The Morality of Government. A few questions for you that might help my understanding?? Possibly???
How old are you?
Well, I guess that’s enough… for now.
I perfectly supose that you would claim yourself to be a’christian’…. like most of the right wing variety. Yet, something I think most forget to read is “love thy neighbor as thy self”, “Easier to get a camel through the eye of the needle than a rich man into heaven.”, the rich man and Lazarus, “The first will be last, and the last will be first”, and the list goes on and on and on. For some reason, these are not taught much.
What is quite comical in my own personal life is that my degree was in Poly Sci/Econ and that I use to make part of my living as a ‘conservative political consultant’. To be where I am today is almost an about face of ‘right wing nut’ I use to be. Don’t worry, I have/had credentials… and still dabble in the game today.
Digression:
A few years back immediately following Hurricane Ike, I had the pleasure of meeting quite a few Amish who had come, on thier own tab, to help people they didn’t even know get thier feet back on the ground.
It was almost intoxicating hanging out with them!! They had a certain peace about them I had not experienced in YEARS!! We forged genuine friendships and I was invited to come stay with them; something totally out of the norm as they usually do not invite outsiders.
There definitely was a certain fear as the day approached for my departure from the ‘norm’. “No electricity, no car?” Point blank, I was scared.
That ended after my first night there!!!
What I found was an amazing culture that could teach our society a thing or two…. or three, or four….. hell, maybe start over from the beginning.
“You brood of vipers, you hypocrites”…. said over and over and over again in a certain Book I just happen to love!
“The Morality of Government Entitlements”, with all it nice quotes and pictures of ‘perfection’. And the title speaks of “MORALITY”????
Morality??? Let’s talk about that for a second, shall we?
Those Amish friends I spoke of, do you know what thier ‘divorce statistics’ are? Less than 1%. On the “Moralistic” side, it’s 51%. Moralistic? MORALISTIC!! Give me a freaking break!! Thier is nothing ‘moralistic’ about your claims. Pink Floyd portrayed your point better than your blog, just say it, “Money”…. “Keep your hands of my stack”.
Back to the Amish:
They do not pay or collect Social Security. They further do not have any type of insurance.
Yet, essentially the reason for SS and for insurance is that society want do ‘what is good for the society as a whole’. In the Amish culture, if a family member gets sick with a major illness, whole heartedly it is first the families responsibility. However; there is complete understanding that no one person can financially face cancer on thier own.
Due to that, the ‘society’ comes together to pay the medical expenses necessary. It’s amazing. The whole community takes care of the problem. Unique concept!! With the ‘whole community’ coming together, there is little burden on each person and the problem is addressed in an overwhelming manner.
Possibly a better example: Tornado
Not too long ago in Missouri, a tornado came through and did quite a bit of distruction to thier community. Numerous houses were destroyed as well as the school. Amazing thing happened!!! IN LESS THAN TWO WEEKS, THIER COMMUNITY WAS RESTORED TO NORMALCY!!!
How? Amish from ALL OVER flocked to Missouri in order to ‘Love thier nieghbor’. In less than two weeks, every destroyed house was totally replaced and the school completely rebuilty. There was no waiting on or bickering with insurance companies over what was covered and what wasn’t. Strictly neighbors coming to the rescue of the others. There was no ‘responsible party’ being spoke of. THere’s a problem, let’ fix it. Simply. Again, an amazing concept, the ‘community’ coming together to take care of it’s own!! Amazing!!!
Morality??? Laughable to say the least!!! PLEASE< PLEASE, DON"T GET ME STARTED!!!
Divorce rate of our society over 50%… there is no 'morals' I care to be associated with there.
Fighting for the 'sanctity of marriage'?? Give me a freaking break!!!! I think 'divorce' just might not be 'fighting for the sanctity of marriage'.
"Right to life"??? Really??? I love speaking with these 'idiots'.. and yes I said it, IDIOTS!! If they do not have 'skin in the game', I just perfer they keep thier little moralistic mouth closed!!! Do you know anything about our foster system??? I do, as a 19 year old 'victim' of our foster system sleeps in my house.
These moralistic people fighting to protect the 'sanctity of life' with thier precious signs in front of abortion clinics. Personally, I despise abortion. Don't worry. But, I also have skin in the game… and he has a name, Khiry.
This letter could go on forever!! And most likely, wasted time. God tricked me a little over 5 years ago with a homeless person.. that I didn't realize was homeless. At that time, my family opened a 'transitional living home' for homeless men, addicts, and excons. To say it's been an eye opener would be the biggest understatement ever.
I would challenge you that there might be a little more fruit under some trees dedicated to helping people obtain thier dreams than under those trees dedicated to protecting the 'fertilizer'.
Ignorance is bliss. I use to have a lot of it!!! That is, until I saw the 'reality' of the situations. If you ever dare, let me know, and I will be more than willing to take you on a field trip of sexual slaves, homeless veterans and kids, and numerous other detestable circumstance taking place right here in our society. If, you are able to remove the blinders for a minute, you will see there is little to no actual help or volunteers in this endeavor, but tons…doing exactly what you do.
In the Chronicle today, there is a story about the Nabor's executive donating $466,000 dollars. WOW!!! Amazing!!! Sounds awesome doesn't it!! Yet, in actuality, it's less than 3% of his wages. Now, that my friend, is a lot of 'compassion' and concern for society. That's what I see day after day, all the time complaining about 'taxes'. Give me a freaking break.
Troy,
If it isn’t too much trouble, could you please copy and paste this comment in the thread for “The Morality of Governmet”? Mark Sussman authored the post, so he will be better positioned to reply to your comments on his piece.
Thanks.
I think we miss the big pitcher while looking at a portion of the pitcher. To me it seem as if big companies and gov has colaberated together at our expences. So OSHA and EPA adds one regulation after another with the penelty of fines, But who actually pays for these fines. If you watch the prices of the goods you buy in relation to the regulations imposed on the companies there is no question that we do.
If there is an oil spill or fire on a rig the price of fuel goes up and does not go back down and if it does it is only for a short time for political reasons. We know that oil is not a huge profitable investment so why does our gov refuse to get it from under our own feet? I beleive it is because war and the act of protecting our investments (oil) is a whole lot more profitable. Why did Boeing move a lot of its contracted military production to China? Maybe because it is a whole lot easier for Wall Street to hind the war investments in forien investments. It seems as if we are being played as fools they are useing us as pawns bickering and fighting amonst ourselfs to keep our eyes off their prize. Its not one or the other but it is Gov, Wall Street, and the big corp.all in collusion with one a nother follow the dollar and allways question the gov in what they do. Remeber , governorment is a nessassry evil.