WHERE IS REGULATION NEEDED?

(This post is modified from one on the Motley Fool METAR  Board.)

There are many industries that can be deregulated. Interstate trucking was regulated by the "Commerce Clause" (Interstate  Commerce Act of 1887) but was finally deregulated by Jimmy Carter in the Motor Carrier Act off 1980.  The industry went through a difficult two years afterward of mergers and failures. A relative who worked in this industry said that ultimately he thought the consumer benefitted. The airline passenger industry may be another.  It was regulated by the Air Mail Act of 1925 and the Air Commerce Act of 1926.  Its deregulation was completed by President Carter in 1978.  I'm not sure in this case that the flux in the conversion is over yet, though I'm sure that over all there are benefits to the consumer.

Financial institutions cannot be degregulated. We are seeing the problems of doing so in our present economic situation (We are seeing that more regulation of derivatives is needed, not less.), but we are not alone. Financial institutions continue to be scandelous. The laundering scandal by Standard Chartered Bank involving $250 BILLION has followed hard on the scandal of involving lying about their LIBOR rates, principally by Barclay's. I take little comfort in these two scandals, brought to light just this year, are not primarily involving U.S. financial institutions.  Subpoenas for the scandal have now been received by Citigroup and J.P. Morgan Chase as well as by Deutsche Bank, HSBC, and Royal Bank of Scotland.

We have seen that financial insitutions will take every opportunity to make a quick buck, will lie, and cheat. It is very difficult to make them stick to their honest business of taking in money at some interest rate and loaning it out at another in a responsible way.

I am hardly alone in thinking that some financial insitutions have gotten too big and too diversified. Even David Stockman (Ronald Reagan's first OMB chief) feels that Glass-Steigal needs to be reinstated.


http://www.npr.org/blogs/thetwo-way/2012/08/14/158790727/british-bank-agrees-to-340-million-settlement-over-laundering-charges
http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/08/10/the-libor-scandal-and-you
http://www.bbc.co.uk/news/business-19276506
http://www.nytimes.com/2012/08/14/opinion/paul-ryans-fairy-tale-budget-plan.html?src=me&ref=general