Rant: What do we have to do to get adequate financial regulation?

Markets are institutions. They are complex institutions. Even the simple open air produce market depends on a system to assure that weights and measures are fair.

If you buy milk you want to be sure that what you are getting is all milk and not half milk and half water. In theory it is easy to check in milk has been watered down by simply inserting a hydrometer in the milk. When I worked as a health planner in South America I discovered that the guys who went out to the farms to assure that the milk was not watered were being killed for their efforts -- farmers reacted violently to the government cutting their profits from watering the milk.

The stock market is regulated in a lot of ways, importantly by requiring firms to use standard accounting practices, to employ outside auditors, and to publish their financial data. The regulation of the stock market resulted from a long history of watered stocks, Ponzi schemes and other misconduct.

It should be clear enough from the current problems caused by unregulated derivative markets that we need good regulation.

I really believe that our society depends on good institutions, and that strong markets are among the most important of those institutions. Good government is also an important institution.

The Republicans in Congress seem to feel that the public will not notice nor care that they are pandering to a greedy, already wealthy elite rather than taking care of the public business. Their refusal to debate regulatory reform before the public demonstrates that fact. I will remember their failure in this and future elections and suggest my readers do so as well!

The problems in Europe today suggest that we may not be over the worst of the financial problems that started a couple of years ago. We need to see governments in Europe do hard things for the global economy. We are also going to have to see the government of the United States play its part.

I note that the United States can not successfully regulate the financial services industry alone, since the huge firms are global in scope, as are financial markets. That has been made very clear over the last couple of years. Nor, I fear, is there any possibility of something like the World Trade Organization effectively regulating the financial services industry. What will be needed will be an agreement among sovereign nations to regulate their financial service industries to common standards. Governments will be meeting to determine those standards, and should be led by the United States as the world's largest economy. To provide the leadership the world and our citizens need, the Congress should step up and do the right thing.

Lets see some open debate about the merits of alternative regulatory mechanisms, and some strong and effective legislation NOW!