Debate: Do We Need More Regulation … Or Less?

The Issue Is Not Really Regulation … It is a Malignant, Symbiotic Relationship Between Government and Wall Street

In a new debate at Bloomberg, Jeff Madrick – Senior Fellow at the liberal Roosevelt Institute – argues we need more regulation.

Chris Whalen – the top independent bank analyst in the country, and a diehard conservative – argues we need less.

But they both agree that we need more transparency.

And the government could enforce regulations and laws already on the books … like basic fraud law

Indeed, as Jarrod Penwell notes, regulation is disproportionately applied too the little guy:

There is both too much regulation and too little regulation. Small firms are aggressively regulated. This makes it difficult for them to become significant competitors to big firms. Meanwhile big firms are not regulated at all. It is called a small-target bias.

The pattern is the same at most federal agencies, including the DOJ, SEC, FINRA, EPA, FDIC, FHA, FTC, etc. All of these agencies demonstrably exhibit a tremendous small-target bias. In order to demonstrate this yourself, take a look at any of these agencies’ enforcement actions over any significant period of time.

Moreover, the whole left-versus-right melodrama is a fake dichotomy. Specifically, conservatives tend to view big government with suspicion, and think that government should be held accountable and reined in. Liberals tend to view big corporations with suspicion, and think that they should be held accountable and reined in.

In other words, conservatives hate big unfettered government and liberals hate big unchecked corporations, so both hate legislation which encourages the federal government to reward big corporations at the expense of small businesses.

No wonder both liberals and conservatives are angry that the feds are propping up the giant banks – while letting small banks fail by the hundreds – even though that is horrible for the economy and Main Street.

Indeed, the government helped and encouraged the giant banks to get even bigger, and then has hidden their insolvency and shielded them from the free market, and helped them grow even during the severe downturn. In return, the big banks and giant corporations have literally bought and paid for the politicians.

The Dodd-Frank financial legislation wasn’t a compromise where things landed somewhere in the middle between liberal and conservatives ideas. Instead, it enshrines big government propping up the big banks … more or less permanently .

A 2010 Rassmussen poll found:

70% [of all voters] believe that the government and big business typically work together in ways that hurt consumers and investors.

(and see this).

Conservatives might call it “socialism” and liberals might call it “fascism” – they are the same thing economically.


The corrupt, giant banks would never have gotten so big and powerful on their own. In a free market, the leaner banks with sounder business models would be growing, while the giants who made reckless speculative gambles would have gone bust. See this, this and this.

It is the Federal Reserve, Treasury and Congress who have repeatedly bailed out the big banks, ensured they make money at taxpayer expense, exempted them from standard accounting practices and the criminal and fraud laws which govern the little guy, encouraged insane amounts of leverage, and enabled the too big to fail banks – through “moral hazard” – to become even more reckless.

Indeed, the government made them big in the first place:

As MIT economics professor and former IMF chief economist Simon Johnson points out today, the official White House position is that:

(1) The government created the mega-giants, and they are not the product of free market competition


(3) Giant banks are good for the economy

And given that the 12 Federal Reserve banks are private – see this, this, this and this– the giant banks have a huge amount of influence on what the Fed does. Indeed, the money-center banks in New York control the New York Fed, the most powerful Fed bank. Indeed, Jamie Dimon – the head of JP Morgan Chase – is a Director of the New York Fed.

Any attempt by the left to say that the free market is all bad and the government is all good is naive and counter-productive.

And any attempt by the right to say that we should leave the giant banks alone because that’s the free market are wrong.

The [corrupt, captured government “regulators”] and the giant banks are part of a single malignant, symbiotic relationship.

Indeed, both progressives and conservatives – in America and all over the world – are demanding an end to the crony capitalism which is destroying our economy.

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