Joe Nocera writes for the New York Times Op-Ed page, and also has a pretty regular slot on NPR’s Weekend Edition Saturday with Scott Simon. He’s been writing about business issues for decades, and he’s top-drawer.
I’ve read two Nocera pieces in the past week or so, The Man Who Blew the Whistle and Lessons Not Learned. I also read How Uber Will Conquer America, written by Andrew Leonard for Salon on Friday, August 22.
There’s a common thread; first, though, a bit of background. The whistleblower was Bill Lloyd, a MassMutual employee who received 25% of a $1.6 million fine, paid by MassMutual because it tried to screw annuity holders out of earnings it promised when it sold the annuities. The facts are complicated and not especially important. Important is the fact that MassMutual sold a product based on a contract, it tried to breach the contract, and because of certain provisions in the Dodd-Frank law, there was a remedy and annuity holders were protected.
Lessons Not Learned reports on the passing of Congressman Fernand St Germain (D-R.I.), who was the House sponsor of the Garn-St Germain Depository Institutions Act of 1982. Garn-St Germain deregulated the savings and loan industry, which led as sure as night follows day to the collapse of the savings and loan industry and a big recession five years later. Mr. Nocera notes the lack of memory, and its impact on the really big recession in 2008, as well as the failure to send anyone to jail in the recent collapse. (The “St” without a period is not a typo; Congressman St. Germain told many there was no period because he was no saint.)
The Uber story is about Uber, the relatively new transportation company. There’s a bunch of commentary on the Internet about Uber avoiding regulations, how that appeals to young people, how Republicans will benefit, et cetera. (I really don’t know whether the Uber model adequately regulates drivers already, or if we need new laws to address its business model. I’m focused on those who argue that regulations are bad.)
The thread? Government exists, in part, to regulate the private sector. Does it always perform its function well? No! Both in designing and enforcing regulations, government falls short. When I last checked, human beings work for governments, they’re fallible, and they’re charged with writing regulations that focus on extraordinarily complicated aspects of our lives.
So, what? Well, one side says, pretty much, “it’s all bad, trust businesses to do the right thing, and no government is the best government.” I’m sure someone will call me out on this statement, and it’s a generalization, but I’d like to see concrete examples of Republican leaders advocating for regulatory schemes in any sector.
And from the other side? Because we live in a polarized world, the Democrats don’t say, often enough, that regulations are imperfect, and that when they are badly drafted or poorly enforced, they need to be fixed.
Keep in mind, in all this, that we’re dealing with complicated stuff. I do some HIPAA work. I waded through 600+ pages of final regulations last year. Tough stuff, and fodder for the “it should all be on five pages or less” crew. But guess what? When regulations get drafted, they must try to deal with all possible eventualities. “Aw, skip that, it’s hard to explain” is unacceptable, and it ought to be.
Now, along with a regulatory scheme, we control bad behavior with the civil tort system. When someone suffers damages he or she can sue. No one likes to be sued, and in many cases losing in court—and, yes, sometimes just getting sued—will change behavior. Unfortunately, the same crew that wants to do away with governmental regulatory schemes advocates for tort reform. Limits on damages, no class actions suits, punitive damages limitations that allow corporations to engage in wrongful conduct because the profits exceed the costs.
In fact, with an intelligent regulatory scheme, we’d all—consumers and business—be better off. The banks and others in the lending world got creamed in 2008-2010. Now, maybe in the long run they’re “up for the season” if the season runs from 2008 through 2014, but I suspect they all would have been better off if someone was watching the hotshots who cooked up the “hotsy-totsy” mortgage crap that got us all in the soup.
At the end of the day, separate and apart from much of what I’ve written, regulations benefit real people. If you bought an annuity from MassMutual, Dodd-Frank and a regulatory scheme make your life better. If you are in an Uber car and the driver causes an accident, you want to know there’s someone you can look to for relief. Bad things happen to lots of people, and an unregulated economy catches many people.
Hats off to Joe Nocera for focusing on the benefits of a regulatory regimen. It’s necessary, and if we could all accept that premise, fixing the excesses/problems would probably be akin to child’s play.