Regulate This

The discussion of regulation is usually a debate between conservatives who want less (preferring free markets) and liberals who want more (preferring government.) Think about how much better it would be if the discussion were about making regulation more effective. Some recent examples:

1. Stock trading. Despite months of debate and thousands of pages of House and Senate bills on "Financial Reform", nobody apparently thought about the fact that computers can generate a trillion dollar market drop in minutes, in part because the different exchanges have their own rules about "circuit breakers" to slow trading in a rapid decline, and that orders can get unintentionally switched to an exchange where very low volume allows bottom feeders to clobber investors.  Regulators - public or private - need to think of the industry, and not just let individual exchanges write their own rules.  And how many other loopholes are there, not thought about by anybody except the guys with mansions out in the Hamptons. (Note to self: avoid "market orders" and "stop losses" which automatically trigger sales.)

2. Bernie Madoff. Bernie's $65 billion scam was not the result of inadequate regulations, just inadequate people enforcing them. Fortunately there was eventually a courageous whistle-blower. So, what's happened to those SEC guys who were asleep at the switch? A bit of public embarrassment; some shuffling of staff; congressional exhortations to do better; an apology.  

3. Allen Stanford. Stanford limited his decade-long scamto $8 billion, but used congressional leaders to avoid investigation of his Antigua-based operation.  Like Madoff, he'll get jail time and have to give up some of his gains, but the regulators... still there.  

4. The Gulf oil spill. Among other things we find that the Minerals Management Service (which is responsible for safety and collecting royalties) relies on the rig operators to police their own safety procedures, and that US deaths are four times that of other countries doing offshore drilling. The safety management program propagated by the American Petroleum Institute is not audited. Lacking in the Deepwater Horizon incident were a "blowout plan" when drilling was originally approved, and a number of back-up devices used in North Sea operations.  

5. The April 5 West Virginia coal mining accident which killed 29 miners. We find that the Mine Safety and Health Administration had thousands of  deficiency notices against Massey Energy, none of which resulted in closing the mine. In fact, a "pattern of violations" rule passed in 1977 has been used only once to shut a mine and thousands of violations go unaddressed.   

So, what lessons can we draw?

1. There needs to be some broad thinking and sharing of "best practices"  among agencies upon which we rely - the Food and Drug Administration; the Securities and Exchange Commission; the Nuclear Regulatory Commission; the Department of Transportation; the Department of Agriculture; the Occupational Safety and Health Administration; the Justice Department; and several others. When I was in the food business in the 80's there was a shift from quality control checks of the final product to Japanese-style thinking about managing the critical risk points in the production process. (This sounds simple, but the change is profound.) Some experts advocate a similar shift in regulatory thinking. It is logical for the regulations to be led by industry groups who have detailed understanding, but audits must be frequent and enforcement must be sure.  

2. There should be long "cooling off periods" during which senior regulators cannot seek employment in the industry being regulated.

3. Whistle blowers should be protected (and perhaps rewarded) and have access to Inspector General-types in the appropriate agencies.

4. Bums should be prosecuted.

We have had enough problems in enough agencies to recognize that this is a generic problem, and that results vary greatly across agencies. Hopefully the group regulating the nuclear industry has many of the answers - unlike coal and oil.  As more and more of our lives and economy are being controlled by the government, it would be nice to know that the public's interests mattered more than the industries being regulated, the employee unions of the government regulators, the careers of the managers, and the campaign funds of the politicians. That is a bipartisan wish.   

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   This week's You Tube is an ad that the Arizona governor is running relative to her state's illegal immigrant law. This is the very benign text for those who have only heard the talking heads rants.

And again, the top fiscal conservative in the 102d Congress, Tom Campbell for Barbara Boxer's senate seat.

bill bowen - 5/14/10

Comments

[Bill McCormick]

Country and Western star Toby Keith wrote a song about a girl who ignored him when he was young: "How Do You Like Me Now?". The Tea Party and Sarah Palin could play it now for the President as the score at midseason now stands: Tea Party 6 Obama 0. For a group the President likes to laugh off in the same manner as he laughs off the anti illegal immigration crowd, the Tea Party and their often laughed at informal leader Sarah Palin have emerged as no laughing matter for the President, Harry Reid and for that matter for Republican power brokers as well. Now sweeping Republican turncoat Arlen Specter out of office after 30 years and brushing aside Republican leader Mitch's hand picked candidate in Kentucky in favor of balanced budget amendment candidate and son of Ron Paul, the Tea Party looks back at victories in Virginia, New Jersey, Massachusettes and adds Pennsylvania, Kentucky and perhaps forced the runoff in Arkansas for Blanche Linclon. Harry Reid, Senator Nelson and even John McCain have to be uneasy about November. Obama has to wonder what lies ahead.

Interesting in it all (if you watched) was the now Pennsylvania Democratic replacement ignored by Obama and Biden, Joe Sustak's triple turn about in the hours that followed. First he claimed to be anti government, pro Tea Party and a house cleaning candidate headed to DC to change things. Then when asked if he resented Obama's snub he proclaimed his anxiousness to get in there and help his leader change things. That was follwed quickly with an all out attack on GWB for his role in "tripling the size of the national debt". He went on endlessly in blaming Bush for all the massive deficits and debt we are facing. Let's see--when did the Democrats regain control of the Congress and our spending? Another candidate who has only won a primary and now can't seem to remember why he ran and who he supports. Tea Party man or another Democratic fraud like the guy who registered in Nevada to split the anti-Reid vote?

So what is the country saying?

Fire the bums--after just 18 months ago saying to Republicans "your fired" the enraged electorate frustrated with inept, fraudulent leadership are turning on Democrats and some incumbents in frustration with another clear "your fired". Donald Trump --you must be proud.

Americans have no desire to become Europe or Japan or any other organized society of socialistic people organized and managed to behave like a bee hive. First the Soviets tried it. The wall fell. Then the European's tried it and the buildings of Greece are burning. The Japanese tried it and the Yen tanked. The Chinese are the new Russia using Japanese tactics of selling low cost goods in America's markets while subsidizing intrusions into American dominated industries at the expense of their citizens' health and the world's environment. The Chinese wall will fall too unless the USA copies the often failed model of socialsim. Meanwhile the USA being briefly, I hope, led into some trance that makes us believe we can have everything for nothing, that we are to save the world environment alone, that Iran is just kidding with those nukes, that Islamic Terrorists will somehow leave us alone if we read them their rights and that the US economy can absorb 31 million Mexicans and still maintain full employemnt AND increase our benefits. No wonder California's Democrats would like to legalize drugs--in order to keep us in this trance. The 5th largest economy in the world--California--cannot even balance it's own budget. And they are trying to boycott Arizona for enforcing the immigration laws.
So, like many other times in American history the people are trying to defend their freedom of individual rights and opportunity from those who would try to deny it. Looking back: the Germans, the Japanese and the Soviets were our greatest threats and all of them are socialistic organized societies and all of them failed. And all of them cost America Millions of lives and Trillions of dollars to defeat. This internal conflict will likely be won with votes and not bullets. It appears the contest has begun based on the past several elections.

[Bill McCormick]

A special thanks from the President and VP: Yesterday was the final day of campaigning for the Pennsylvania primary. Senator Specter, a long time Republican who changed parties to vote for the Obama Healthcare bill, is in the race of his life to try and win his place on the Democratic ballot. President Obama flew over PA yesterday and made no stop to thank the good man for his support and support his reelection. VP Biden was nearby giving a speech and never spoke a word for the man. With friends like this who needs enemies? Leadership is a rare character. So is loyalty. Perhaps after remembering the results when they "rushed in to help Senator Brown's opponent"in Massachsettes the President has learned that his support may poison the man's chances. On the other hand Senator Specter certainly didn't help himself when he recently twice referred to his Democratic audiences as Republicans! With comments like that who needs Biden to speak for them?

[Bill McCormick]

Obama the conservative?? Voters are begining to be heard evidently. Or is it the voices of Democrats who supported the blizzard of red ink programs Obama promised would bring a new America? Now they are facing near certain defeat for their loyalty. So the "enlightened" Obama comes to the rescue looking like a full fledged conservative. A bill now being put together to extend the Bush tax cuts for one year--just long enough to get this round of elections over with. Then he approves offshore drilling only to be hit with the biggest oil disaster in modern times. So he gets "Mad as hell" at the big oil companies and the "Federal Government" for their lack of safety standards on offshore drilling rigs. WOW--I thought the Feds were the answer to all our problems. And, those CEO's of big oil--minimizing safety for the sake of dollars deserve to be chastized. And, who might the CEO of the Feds be? And, where are the United Mine Workers Union leaders? Aren't they supposed to blow the whistle on all the mine safety violations? Or are unions just a political contribution source?

And, where are the regulations for the oversight of Fannie and Freddie? Dodd will be gone soon. And if we could get rid of Barney then perhaps we could get some regulation. Now after that angry showing on Capital Hill where all the politicians who took money from Goldman Sachs yelled and cursed at them where are the financial reforms?

In Afghanistan we are about to have our scheduled "big battle" for another home city of the Taliban. We havn't even fought it yet and the "I" man is assurring us the troops are on their way home. Wow--he won a war in only 6 months that Bush fought for 7 years with only 30,000 more troops. Winning is a funny thing for Obama--the poppy crop remains guarded by our Troops and the Taliban visit Iran.

Meanwhile Iran inks some kind of Uranium enrichment agreement with Brazil and Turkey promising to deliver "some" of their enriched uranium to them for storage in return for some enriched reactor rods. What does "some" mean? And, what are they doing deep under ground with the rest of it? Perhaps enriching it to 90%? Didn't the Iranians just turn down that deal with the Russians and French? Or perhaps it didn't include "some".

Immigration continues to baffle Americans who can't believe either party understands the need to close America's borders in order for the US to begin to control the deficit spending coming from unfunded mandates. Being the leader that he is Obama "laughs it off" as if the people --67% of them--once again don't understand the issue as well as he.

His Attorney General makes himself look absolutely irresponsible with his responses to Congressional questions. Admitting that he had not read the Arizona law before declaring it unconstitutional and failing to admit there are such people as radical Islamists who create terror attacks.

And Obama now goes on the attack "against Republicans who opposed his programs" declaring they should have cooperated. Perhaps the "I" man should have asked them to come to those closed door sessions so they could have listened to his lectures.

In the end Obama will delay the attack on American businesses and the moves toward the society he is trying to create trying to undo some of the anger that has built up. It will probably work to some degree. And, the tea party will cost the Republicans some victories around the country. But, Harry Reid and Obama's greatest hope is the economy. If the economy improves then they have a chance of avoiding huge defeats as it will mitigate some of the anger they are now facing. If the economy does not then you can expect the voters to rebel. Obama is in full campaign mode again blaming GWB and Republicans for everything he has either failed to achieve or pushed on the people. It won't even surprise me if he "extends the census" to keep those 800,000 previously unemployed people (conducting the census) and scheduled to be laid off in September on the Federal payroll through November to keep that 1% from being added to the unemployment figures. The economy is improving and if they leave it alone it will recover. But, leaving anything alone is very tough for Obama and his "project of the month program" will continue.

[Bill McCormick]

Nicely done, Bo. In private industry as well as government success is more about vigilance of rules and procedures in place than the nedd for more rules and procedures. In the vigilance game support must come from the top in order for the auditors to have the power to observe and investigate behavior of those being observed. Too often the support from the top is "smoke and mirrors" rehtoric designed for marketing purposes and deception. Much like the Obama administration uses to tell us they are either addressing a problem like jobs or to hide a flaw like an undetected nearmiss terror attempt quickly labeled a "lone wolf". We see similar behavior at Toyota where the quick fix of one problem is ultimately seen as a ruse to cover up a company wide lack of quality control. By the time lack of vigilance is discovered a price has been paid by the customer and a vigilante committee has formed be it angry customers or angry voters ready to throw the bums out. Leadership comes from leadrs who will stay the course and sudit frequently to make sure rules and practices are maintained not from "smoke and mirrors" managers who excuse and promise change.
Right now the nation requires leadership on immigration, Iran,defict spending,domestic security, energy development and international economics--and so far no one has stepped forward to provide it. The current leadership is woefully inept and inexperienced bordering on amatuerish. Private industry leaders are not exactly leading either. Where are the industry leaders proposing audits of payrolls for illegals? Inovative techniques to make oil drilling less catastrophic and enforcement of mining statdards? Self regulating procedurtes for monitoring Wall Street rogues? IT systems to detect and alert for trading errors or cyber attacks? Are leaders born or trained and where have they gone?