Freedom Line Blog

From Obamacare to the current Gang of Eight immigration bill, the only thing more threatening to consensual government than enormous pieces of legislation is the even larger corpus of rules and regulations that they inevitably breed. Consider this analysis of Dodd-Frank, as reported by The Hill:

Rules implementing the Dodd-Frank financial reform law could fill 28 copies of Leo Tolstoy’s War and Peace, according to a new analysis of the Wall Street overhaul [by the law firm Davis Polk]…

All told, regulators have written 13,789 pages and more than 15 million words to put the law in place, which is equal to 42 words of regulations for every single word of the already hefty law, spanning 848 pages itself.

And if that seems like a lot, keep in mind that by Davis Polk’s estimate, the work implementing the law is just 39 percent complete.

I don’t think you have to be a limited government conservative to realize that government of this scope just can’t work. We no longer have a meaningful legislative branch if members of Congress are only responsible for writing 2 percent of what eventually becomes the law (the easiest 2 percent, it should be noted — it’s in the rules and regs, not the statutes, that oxes really get gored). There will be no one capable of enforcing all of these provisions, nor anyone capable of complying with all of them (though you can bet that they’ll be an army of consultants offering compliance services for a pretty penny).

Larry Summers, the economist whose resume includes helping create the kind of mortgage default swaps that crashed the financial system, being fired as President of Harvard for sexist remarks about female scientists, and resigning in disgrace as his infrastructure-heavy stimulus package failed, is back with a plan only a Soviet central planner could love.

Writing for Newsweek (itself an entity that’s seen better days), Summers tells his former boss, “Mr. President, We Need a 10 Year Plan.” Give Summers credit for brashness; in Soviet Russia the Communist Party considered it a success if it could make good on any of its 5 year plans.  (It never did.)

I’ll use Summers’ piece as an excuse to do something otherwise thought impossible: praise President Barack Obama for firing at least one bad economist.

It’s not about central planning, Larry; it’s about incentives.  Reform the tax code and streamline regulations with incentives for hiring and producing, and the economy will grow.

George Soros, the leftwing hedge fund billionaire and part-time Hungarian Bond villain, announced last week he’s opting out of the regulatory straitjacket he demanded of his industry.  Taking advantage of a little-known loophole in the Dodd-Frank financial “reform” law, Soros is evading the kind of “transparency” he championed for others.

Per Michelle Malkin:

Under Title IV of Dodd-Frank, hedge funds were required to abide by new registration and reporting requirements in an attempt to better police systemic risk (not that the feckless Securities and Exchange Commission has ever been able to fulfill that mission). To evade the regulations, Soros and other firms have used a recently passed rule allowing so-called family offices to shield themselves from both registration and disclosure rules that would have subjected Soros Inc. to a new “Financial Stability Oversight Council.”

But what would Soros want to hide?  More Malkin:

Soros and his family shelled out $250,000 for Obama’s inauguration, $60,000 in direct campaign contributions and untold millions more to liberal activist groups pushing the White House agenda.

…

Over the past year, Soros provided coveted support for Obama and the Democrats’ Byzantine financial “reforms” under the sweeping Dodd-Frank law. He preached to financial publications around the world about the need for increased regulatory controls over his industry. And in November 2008, while paying obligatory lip service to concerns about going too far, he submitted a statement to the House Committee on Oversight and Government Reform that recommended: “The entire regulatory framework needs to be reconsidered, and hedge funds need to be regulated within that framework.”

That is, unless you’ve got creative lawyers and a disingenuous president’s ear.

For all the ink spilled trying to divine the cause of the present financial crisis the most stirring theory is that culture – not capitalism – failed America.  It’s a theory that lies at the heart of the Citizens United documentary “Generation Zero” and is discussed in eye-popping detail by William Cohan in today’s New York Times.

Asserting the commonsensical notion that people do what they are rewarded to do, Cohan (a former denizen of Wall Street) claims that when firms morphed from partnerships to corporations they simultaneously shifted the risk of loss from executives to stockholders.  That simple change in legal form privatized profits while socializing losses.

Here’s Cohan’s solution:

To my mind, its central feature should be that each of the top 100 executives at Wall Street’s remaining “systemically important” firms be personally liable for the risks they take. Not just their unexercised stock options or restricted stock, but every asset they have in their possession: from their cars to their fancy homes to their bulging bank accounts.

…

Pretty harsh, right? Maybe, but Wall Street deserves no sympathy. Had this security, or something like it, been in place at every Wall Street firm five years ago, there would have been no mortgage bubble, no financial crisis, no deep and unsettling economic recession with nearly 10 percent unemployment, no need for the Troubled Asset Relief Program, and no need for Dodd-Frank or Basel III.

Why? Because human beings do what they are rewarded to do — especially on Wall Street — and if they are rewarded for taking prudent and sensible risks, that’s exactly what they will do.