Regulating the Monkeys

“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” James Madison - Federalist No. 51

Recent revelations that instead of fulfilling their mission--overseeing the exchange of securities to protect investors--senior officials at the Securities and Exchange Commission were instead flogging their dolphins as the United States’ financial infrastructure crumbled, is a surprise to exactly no one. Nero fiddled, the SEC diddled.

The colossal failure of the U.S.’s existing financial regulatory apparatus is well documented. In the second of his three-part series about the mortgage crisis in America, Jerry O’Connor, President of the National Bank of Waupun sums up the matter concisely:

“Interestingly the banking regulators failed to identify this huge [housing] bubble growing. Neither did they spread the cautions that the Washington/Wall Street mortgage models could end in the level of calamity we have seen.

The Securities Regulators did not see the Credit Default Swap as a security product, but then again the Insurance Regulators did not think it was an insurance product. The banks and other investors looked at this product as a risk management tool, without knowing if the companies standing behind it were solid enough to face a crisis. The Federal Reserve never saw this coming.

In the end, the new “cocktail investment offering” [Mortgage Backed Securities] that ultimately fueled an economic tsunami went completely unregulated. How could this happen?

The entire government apparatus that is supposed to protect the public was AWOL.”

Indeed. Now at least we know what they were doing while AWOL. (A Google search for euphemisms for pleasuring oneself produced the following gems: “Oliver's Twist”,
”Challenging Alexander Pushkin to a one-handed duel”, “Conjugating the verb”, “Roughing up the suspect”, “Boxing the Clown”, and of course the perennial, “Spank the Monkey”. This seems a splendid opportunity to add to this list, so by all means feel free!)

Predictably, the current leadership in Washington’s response to this farce of epic proportions is both Leftist and ham-fisted (another one for the list?). They would weed out age-old human depravity and fecklessness through increased government regulation. In this we are reminded of the American Left’s incessant attempts to bolster gun control legislation, oblivious to the fact that outlaws with guns care not a whit about their silly rules, existing or intended. “Guns don’t kill people,” argue the Second Ammendmenteers, “people kill people.” In the current financial crisis we might adapt that slogan to “Existing Regulations don’t fail to monitor wrongdoing in the financial sector, porn-surfing, masturbating SEC officials do.”

The fault here is not the machine, but the quality of the individuals operating it.

We find ourselves pondering, yet again, whether the ignorance of Congress and the Administration is genuine or willful as they push for ever more authority over the financial industry. Mr. Emanuel’s infamous “never let a good crisis go to waste” axiom resounds cacophonously. The Wall Street watchmen fell asleep at their posts. Now the collectivist wolves prowl the farm unopposed and shall do as they please.

As we have noted before (ad nauseam!), the belief that basic human failings—greed, lust, sloth, fecklessness, incompetence etc. etc. etc.—can be regulated out of human institutions by the power of government is both hilarious and horrifying, for history has shown repeatedly that, when put into practice, this belief ultimately results in cultural devastation, mass destitution, and mountains of human corpses.

A buzz-kill for even the most agile of porn-surfers.

Cheers,

Charlie