Thursday, November 17, 2011

The regulation distraction

The topic of regulation has poked its head into what passes for political discourse in our country. The Democrats insist that deregulation caused the economic crisis; it follows then that tighter regulation is needed to ensure no future crises occur. Meanwhile, the Republicans maintain that regulation restricts growth; that various pieces of legislation which Obama has signed into law--including his eponymous healthcare bill--ensure that the economy will not add jobs at a rate sufficient to bring about an economic recovery.

All this talk about regulation is little more than a curious canard. For what occurred during the housing bubble was no less than grand scale fraud by the banks. Fraud is not something one regulates against. It is prosecuted, not because it is a violation of some arcane minutiae buried in some back page of a manual at a regulatory agency, but because it is a provision of common law. Prohibition against fraud is an integral part of the western tradition. It has also been written into the United States Code of Law:

Whoever knowingly executes, or attempts to execute, a scheme or artifice—
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

No one knows how much fraud the banks have committed. We know that there has been some. There are probably more guilty bankers out there, which is why, despite their economic ignorance, the Occupy Wall Street movement is still by and large a good thing. The protestors realize what many of the Republicans and President Obama deny: the rule of law is not being applied fairly to those who are rich and well-connected.

Indeed, just this week, a story was published in which President Obama alluded that the actions taken by bankers were "not necessarily against the law." Yet he has no way of knowing to what extent the law has been broken. But rather than investigate banks to determine if fraud has been committed, he wants the banks to pay a measly $20 billion fine to handle the mortgage mess. That may seem like a lot of money, but it's not to bankers. If they have committed no crimes, this fine is unjust, but if they have broken the law, the people have a right to know about it--and for the criminals to be punished accordingly.

This focus on regulation is distracting us from a very discomforting fact: the rule of law no longer applies in America. Bradley Manning is being held indefinitely, without charges; an American citizen was assassinated by our own government; banks commit fraud, pay small fines, and get bailed out. We should hear no more talk of regulation from presidential pretenders. What the American people need to hear is whether or not the rule of law will again apply, or whether we shall continue to be ruled capriciously by despots. Bromides to American greatness may convince the willfully duped, but those with eyes to see are beginning to notice that the image projected by politicians bears little resemblance to the reality: that we can no longer be considered a great country.

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