Being a regulator is a tough job. Whether it be on the streets of LA or the basements of government buildings in DC, as a regulator, you have to take measures to ensure compliance with the laws and regulations that the people you are charged with protecting expect from you in order to ensure the safety of many.
But often, this system fails. Since the 1980's, many Republicans have advocated for deregulation of financial markets, allowing Wall Street investment banks to make riskier and riskier decisions while selling the financial fallout of those decisions to other banks and investors. This is the transaction many of us imagine when asking a bank for a mortgage: you put on your nicest clothes, fill out some forms and get interviewed by a banker who is trying to assess whether you are likely to pay back the money they lend you. Why is he doing this? Because if the bank gives you money and you don't pay it back, the bank loses money. However, in reality what happens is that a banker decides to make a loan and then sells that loan to another bank, so if the loan fails, the original lender doesn't lose money since they've already passed that risk on to the loan buyer. Then a complicated string of similar transactions occurs and by the end, it's difficult to assess who actually carries the financial risk that you won't pay your mortgage.
When the industry that has acted this way for many years leads the entire country into an enormous financial crisis, one would think that as a direct result, regulation of this industry would be increased exponentially. Yet this is complicated by the fact that compliance with regulators often costs these companies money and is further complicated by the fact that these are the same companies that offer lucrative jobs that attract government regulators.
This is not unique to the financial industry. Recently, the nuclear regulatory commission has come under fire, in light of the nuclear crisis in Japan, for similar reasons. Companies (with lots of money and lobbyists in Congress) resist attempts to comply with costly government safety regulations, and government regulators, many of whom are later offered lucrative jobs with these companies, have a tough choice to make. How do you regulate when a buster is resistant to change? You need an arsenal that forces them to change. Many of the fines imposed on these companies are not effective deterrents. The other problem, one that is more complex, is that when companies are forced to make expensive safety repairs that affect their profits, the trickle down effect results in a decrease of salaries, loss of employment, hiring freezes. In other words, the top executives retain their standard of living, but the ones affected are the average workers.
There seems to be a disturbing pattern here between government regulators and private industry that leaves a bad taste in my mouth. Financial industry, Nuclear energy industry, Environmental Protection Agency. The lucrative employment opportunities and the ability of large companies to use their financial power to influence politics (through litigation, lobbyists and campaign contributions), impacts the jobs of government regulators.
The culture of government regulation of private industry must be changed if we want to actually protect the financial, physical and psychological safety of individuals both now and in the future. Lessons to be learned from the consequences of greed are all around us: Goldilocks and the 3 bears; the parable of the three sons, Willy Wonka and the chocolate factory. Our society disdains the vice of greed, yet so many of us can rationalize its existence in our lives. The reality, though, is that as long as it is the rich companies (and not the government) holding the stick dangling the proverbial carrot, they are the ones who regulators will succumb to.
So maybe Warren G can teach us a lesson. What is the difference between what goes on in Warren G's world on the street and the drab buildings in DC? Loyalty. Say the thugs trying to rob Warren G offered Nate Dogg a bunch of money to join them and turn on Warren G, what would prevent Nate Dogg from doing that? His relationship with Warren G. His feelings about his friend and his loyalty. So, how can we get that to translate to government regulators? Damned if I know.
(this post is dedicated to Jeff Landau, who introduced me to Warren G and the late Nate Dogg)
Photo provided by Mike Owsianny. www.owsiannyphotography.com
