Why More Regulation Will Not Help

Treasury Secretary Tim Geithner wants to have the authority to intervene in any hedge fund or other company that is big enough to bring the banking system down.  The goal is to create oversight and regulation that will help protect us from another recession like we’re in now.

However, we are already supposed to have government agencies looking out for us, and the Supreme Court just ruled that even if they are in place, they are not responsible.

The case I am referring to is one where the Court ruled that even if there is an FDA approved label on a drug, the drug maker and patient are responsible in case something goes wrong.  I can’t remember the specifics right now, but the drug was causing potentially fatal side effects, and the Court just threw it back in the face of drugmakers.

They just passed the buck back to the drugmakers, doctors and patients.  Why then, does the FDA exist in the first place?  If they are supposed to be monitoring drugs that go out to make sure they are safe, why can they shed any sort of responsibility?

I’m sure the same thing would happen if a lawsuit was ever brought against the SEC.  The onus would end up falling on the investor and mangers to do their own due diligence.  Look at all the fraud that had to occur to create the real estate bubble.  Have they brought charges against anyone?

Why then, do we continue to believe that a regulating body will help at all?  Has government regulation proven to be effective?  And even if it works, when something goes wrong, they don’t have to bear any responsibility.

What we need is some good, old-fashioned tough medicine.  Let these banks fail.  Show them that you will not be there to stop their collapse.  If banks knew that they did not have the government as a backstop, they would make wiser decisions.  The moral hazard we have created is going to lead us to our demise as a nation.

We do not need more government regulating bodies, especially ones that have all the authority, but ultimately no responsibility.  The only proven regulator has been the free market.  Let’s let it work.

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