Blaming Regulations Rings Hollow

I keep hearing that government is incompetent, can’t do anything right and should get out of the way, especially when it comes to financial regulations.
As reported on the PBS NewsHour: “The JOBS Act supporters in Congress argued it will create jobs by helping startup firms raise capital. Under the Jumpstart Our Business Startups, or JOBS law, such companies have longer exemptions from disclosing financial information and don't have to register with the Securities and Exchange Commission until they have 2,000 shareholders, instead of the current 500. The statute also permits so-called crowd funding, allowing small online sales of stock to a large number of investors.”

John Coffee is a professor of law at Columbia Law School specializing in corporate and securities law. He testified about the new law on Capitol Hill and said, “Congress is in effect saying, welcome back, go and sell stock your old-fashioned way by promoting it with inflated recommendations. That may work for a couple offerings, but that's a short-term perspective. You will lose investor confidence. And when you lose investor confidence, the cost to capital goes up and all companies will be hurt.” Where’s the charges of incompetence in failing to safeguard “business confidence” now?

The administration is eliminating regulations, which according to John Coffey, lessen government oversight creating the same situations which allowed shadow banking of sub prime derivatives sold with triple A ratings. Even when the current administration “gets government out of the way” it’s barley noticed. Yet the charge of too many regulations due to an incompetent government will continue, even though, it may not be true.

This bill curbs SEC authority and says John Coffey “It tells a variety of basically sensible self-regulators, the Financial Accounting Standards Board, the Financial Industry Regulatory Authority, and other self-regulators, they no longer have any authority over these emerging growth companies.” “But you have written some permanent rules now that allow those companies that want to hide in the dark to do so.”

Letting banks operate in the dark is what led to the global financial meltdown. Where’s the charge of incompetence now? It should be evident that self regulation does not exist in the gargantuan financial industry that has become the US economy. Add to that more opportunities to take advantage of weaker rules, all on line with little supervision.

The complaint of too many regulations isn’t always necessarily true but it does redirect focus away from laws like this that pass without much attention. Maybe that’s the point.