NY Times Editorial - "It’s the Regulations, Not the Regulator" - MUST READ

This editorial is consistent with my earlier post that the outrage-a-thon is actually being used to obscure the real need for reform, and that we are about to repeat the mistakes following Enron and Worldcom:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8272920

My point in my earlier OP was that with Enron and Worldcom, Bush initiated splashy prosecutions, but ignored efforts to reform financial regulations. As a result, five years later, the entire economy is rocked by an even bigger financial crisis. Will we make the same mistake?

This NY Times editorial makes a similar point:

http://www.nytimes.com/2009/03/19/opinion/19thu1.html?_r=1

/snip

In recent days, the unfolding fiasco of the American International Group and its federal bailout seems to have reinforced the drive for a systemic-risk cop — and the notion that putting one in place is the key to solving all our problems. Speaking of the insurance company’s mess on Wednesday, President Obama said that he had consulted with his economic advisers and with Representative Barney Frank, the chairman of the House Financial Services Committee, about developing tools to “prevent ourselves from getting in a situation where an A.I.G.” can threaten the entire financial system.

There’s just one problem with all that. The premise is false. The financial crisis, including what went wrong at A.I.G., is not just the result of a missing regulator, a gaping structural gap in the regulatory framework.

Rather, it is rooted in the refusal of regulators, lawmakers and executive-branch officials to heed warnings about risks in the system and to use their powers to head them off. It is the result of antiregulatory bias and deregulatory zeal — ascendant over the last three decades, but especially prevalent in the last 10 years — that eclipsed not only rules and regulations, but the very will to regulate.

/snip

In short, John McCain would just say fire "(insert name) employee/regulator/CEO" then move on with his I-Am-Fundamentally-A-Deregulator business. Bush did that with Enron and Worldcom. The challenge is for Democrats to keep our politicians focused on the big picture. Or, will we grin like happy sheep when we get the head of the scapegoat of the moment?

job to legislate and regulate. The deserve ALL of the blame along with Bush for singing all of the degregulation bills over the last eight years. I don't give a crap what the Fed or the Treasury advocated. They don't make the laws. And Clinton deserves blame for allowing the repeal of Glass Steagall, but mostly it's CONGRESS. The President is not Congress's boss -- they need to do their job and take responsibility for not doing their job.

We have a Congress full of irresponsible, finger-pointing jerks who caused a global economic meltdown.

Executive enforce and or implements those same regulations.

Though the legislation overall "regulates." But what are legally called the regulations are created by the executive branch as the details in how the legislation will be enforced. Congress only writes the legislation itself, the statutes.

they've been doing for the past 12 years, repeal regulations.

we had some state chartered banks in my state. The Banking Commissioner knew they were not healthy but kept them alive until he retired. New Banking Commissioner shut them down 3 weeks after arriving in office. Ultimately things worked out with a small infusion from the state but guess which regulator has the bad reputation here? The one that fixed the mess. Can't even remember the name of the regulator that let it get bad.

We need to sing for the unsung regulators who are doing their jobs.

I agree with the editorial's conclusion. The quick fix is the creation of new czar or a criminal prosecution. This is what happened with Enron and Worldcom. The Bush justice department pursued a few prosecutions, then called it a day. This is why I am so worried about folks getting caught up in bonus gate, and forgetting that the real problem is that the federal government had to bailout AIG back in September 2009 due to its failure to properly regulate AIG:

/snip

Unfortunately, the systemic-risk regulator is more often presented, at least at this early stage of the regulatory reform effort, as an overarching and primary fix for the broken financial system. It is not. Congress must not substitute the quick fix for the hard work of regulatory reform. To do so would squander current public support for re-regulation and would ultimately leave the system vulnerable to a repeat of the same calamities that afflict it today.

/snip

Republicans want to turn AIG on its head, and make bonuses the issue, rather than lack of regulation. If AIG did not fail , we would not give a shit about AIG paying bonuses. The corporate media is deathly afraid of regulations that could prevent the ponzi schemes of the past, so they will try to change the subject.

Thus, we need to keep on focus, and push regulatory reform, and avoid being placated by a scape goat. Otherwise, we learned nothing from Enron and Worldcom.