Category Archives: regulation

Equal Outcomes

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New York has them.

A 7-yr-old in New York tried to sell lemonade from his stand last week, and he was shut down by the State’s Health Department.  He didn’t have the required business license, you see.

Up stepped Governor Andrew Cuomo (D), who offered to pony up for the boy’s license next year.  As if a child needs one.  However, as the WSJ put it regarding this Progressive-Democrat version of largesse,

will [Cuomo] pay for every child in New York caught up in illicit lemonade sales?

And

New York can’t keep the subways from breaking down, its public housing has a lead-poisoning scandal, and Mr Cuomo’s crony capitalists who received state subsidies were recently convicted of corruption. But the Health Department is crackerjack at treating a 7-year-old selling lemonade like he’s dumping waste in our drinking water.

New York: an equal opportunity failure inducer.

“As Necessary”

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Recall the kerfuffle over whether senior government officials—an ex-CIA Director, for instance—should have their security clearances continued when they leave government services.  As Sean Bigley put it in a recent Wall Street Journal op-ed,

The idea was that senior administration officials should be allowed to retain their security clearances after leaving government so they could consult with successors as necessary.

Bigley suggested that this particular rationale even “makes sense for a brief, defined period.”

He’s overstating the case, though.  “As necessary” doesn’t justify an automatic continuance of a clearance that’s no longer automatically needed, nor does “as necessary” come close to representing a continued need to know that is a Critical Item in granting clearances.

All government personnel, regardless of rank, should lose completely their security clearances as soon as they leave government service.  “As necessary” is not continuous; it’s case-by-case.  Post-government service clearances should be granted on that case-by-case basis and no other.

Foreign Business Inside the PRC

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The Qualcomm’s acquisition of NXP Semiconductors is supposedly in jeopardy as the People’s Republic of China threatens approval of the acquisition in its prosecution of its long-term trade fight with the US.

But wait—Qualcomm is an American company, and NXP is a Dutch company.  Why does the PRC even have a say in this?

[The PRC] is the last of nine markets where Qualcomm and NXP need approval from competition authorities….

There’s a perfectly straightforward way around this.  The two could stop doing business in the PRC, which is not a business-friendly nation, anyway, what with the nation’s demands that foreign companies give up their technology to domestic “partners” and that they install backdoors into their core softwares so the PRC government can go in and poke around at whim.

Certainly, there would be large initial costs from walking away from such a large market, and there would be market share reduction in the middle term from ceding that market to competitors.  But what would be the costs, really?  Less anticompetitive restrictions on the combined company’s operations, less government sanctioned—even demanded—theft of proprietary and intellectual property, saddling the PRC albatross to those competitors anxious to fill the “gap.”

And real gains from quitting the PRC market: more efficiencies from better focus on the other eight markets, and a better ability to keep and expand the combined company’s technological edge over its competitors by not having to give up that edge to the PRC.

Auditors and Regulators

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American regulators regularly inspect American auditors—particularly the Big Four accounting firms, Ernst & Young, Deloitte & Touche, KPMG, and PricewaterhouseCoopers—in order to give confidence to investors and the market at large that the auditors are giving accurate and balanced reports on balanced and accurate audits of the companies they audit.

Inspecting the auditors in the People’s Republic of China is a different matter.

Big Four accounting firms use their Chinese and Hong Kong affiliates to do significant work on the yearly audits of dozens of US companies doing business in China, including Walmart, Pfizer, and 3M, according to regulatory disclosures the auditors recently made for the first time.

Those “affiliates” actually are separate entities, and the PRC won’t allow those auditors to be checked up on by our regulators.  That’s a problem, as The Wall Street Journal put it:

The arrangement could leave investors in some of the world’s largest multinationals feeling like they can’t have full confidence that the auditors who scrutinize the companies’ finances have themselves been fully vetted by US regulators. And the regulators have no way of knowing whether those companies’ tens of billions of dollars of Chinese business has been subjected to outside scrutiny to help prevent errors or fraud.

It’s not small potatoes, either.

Walmart, which has more than 400 stores in China, is primarily audited by the US arm of Ernst & Young, but Ernst & Young’s Chinese affiliate did 10% to 20% of the work on the company’s latest audit, according to an EY filing with regulators. Pfizer, which got 7% of 2017 revenue from China, is primarily audited by KPMGs US firm, but KPMG China did 5% to 10% of the work.

Obviously, the PRC’s block needs to be an item of “discussion” in trade talks between the US and the PRC.  In the interim, the regulators should think—hard—about requiring companies doing business in the PRC that are audited, at least in part, by PRC auditors to report the details of those PRC auditors’ audits.  That way investors and the market at large could have some idea, at least, of the quality of the books of those American companies’ PRC branches.

Musical Desks

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The Acting Director of the Veterans Administration is replacing his acting head of Veterans Health Administration with another acting head.  The current acting head needs replacement, not through any malfeasance, but because the incumbent acting head is moving to take another position within the VA.

Bad as the VA is, it isn’t helped by this instability in its management team.  Not a bit.

This continues to illustrate the waste of resources that is the VA.  Get rid of it, and use its current and future budgets for vouchers for our veterans.

Veteranos Administratio delende est.