Category Archives: regulation

Federal Overreach

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As C Boyden Gray and Jim R Purcell note in a recent Wall Street Journal op-ed, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is an especially egregious example, an Act that arrogates vast power to the Federal government and then concentrates it in the Executive Branch.

As they note,

Dodd-Frank created both the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, giving each agency effectively unlimited power. The FSOC can declare a financial firm “systemically important”—that is, too big to fail—based on “any” “risk-related factors” that it “deems appropriate.” And the CFPB can punish even responsible lenders who in good faith offer loans that the bureau later deems to be “unfair,” “deceptive” or “abusive.”

Demonstrating just how far this overreach is intended to go, the illegally appointed head of the CFPB, Richard Cordray, has instructed Congress that it is “probably not useful” to define in advance what an “abusive” lending practice is.  No, he’s just going to use his enormous, and unconstrained, his enforcement powers to retroactively punish lenders based on his carefully ex post definition of the “facts and circumstances” of each of their cases.  Nice company you got there.  Be too bad if something was to happen to it.

That this overreach is deliberate is demonstrated by the Act’s cynical elimination of any pretense of control by any branch of the government over these two Executive Branch bureaucracies, and the Act’s cancelation of even the most ephemeral separation of the three branch’s powers.

The CFPB is not subject to Congress’s “power of the purse,” which James Madison knew to be Congress’s “most complete and effectual weapon.”  Instead, Dodd-Frank lets the CFPB claim more than $400 million from the Federal Reserve each year and prohibits Congress from even reviewing that budget.  The president’s control over the CFPB is limited because by law he can remove the agency’s director only under strictly limited circumstances.  Finally, Dodd-Frank limits the courts’ review of CFPB’s legal interpretations.

And

The FSOC is similarly free from checks and balances.  For example, when the Council—a working group of the Treasury secretary, Federal Reserve chairman, comptroller of the currency, and other unelected regulators—anoints a financial institution as too big to fail, the courts are prohibited from even reviewing whether the regulators properly interpreted the applicable laws.

And that illegal appointment?  Cordray was given a recess appointment while the Senate was in session.

So much for the Constitution, that document that’s more than 100 years old and hard to understand.  So much for the Rule of Law.

RTWT.

But It’s the Wrong Problem

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Ron Williams, a former Chairman and CEO of Aetna Inc, in a recent Wall Street Journal op-ed, described his evolution toward opposition of Obamacare’s Individual Mandate, which he had supported initially.  He then offered a couple of alternatives to the Individual Mandate; however his alternative solutions are as erroneous as the Individual Mandate is an overreach of Federal government power.  The reason for his error is that he’s pursuing the wrong problem.

Williams says

As a society, we have a moral obligation to ensure everyone has access to affordable health care.  We must find a way to cover those who are no longer healthy but need care.

No.  There is a difference between health care and health insurance; the two are conflated far too often—sometimes cynically and deliberately, sometimes out of genuine ignorance, and sometimes just out of careless thought.  People who are no longer healthy do not need health insurance; they need health care.  We must find a way to help them to get that care.  Moreover, this social obligation is not at all a government obligation, or even a legitimate government task.  Society is not our government—it is us.

When government butts out of our affairs, when it leaves our money in our hands, it becomes a lot easier for us as individuals to see to our obligations ourselves, and in our own way.  Then we can do more of what we need to do—directly, or through our local communities, or through our churches and private charities, or some combination of these.  Government legitimately comes into play only as a last resort, not the first resort—or only resort, as some would have it—and the Federal government must be last among these.  New York’s tax funds, to the extent they’re involved at all, should go first to New York’s poor, not first into a general national pile from which, for instance, Illinois or California might draw ad lib.

On top of that, competitively sold health insurances policies, sold nationwide rather than within 50 different state jurisdictions, would be a powerful market solution that would potentiate our ability as a society to act on this imperative.

Free Speech and the UN

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There is a carefully sub rosa international attack on free speech in progress, and unless our government takes a more active role than it has been, that attack is going to have very serious negative repercussions right here at home.  Gordon Crovitz described this in a recent Wall Street Journal op-ed.

The UN’s International Telecommunications Union is hosting a World Conference on International Telecommunications this December, which will be attended by all 193 of the UN member nations, including the US.  This meeting has been utterly devoid of publicity, and any knowledge we have about the agenda and goals have come to us only through leaks.  But here’s what we know, according to Crovitz.

A 200+ page “planning document” indicates the UN’s goals for the conference, and Eli Dourado, a George Mason University researcher, summarized the document’s contents thusly:

These proposals show that many ITU member states want to use international agreements to regulate the Internet by crowding out bottom-up institutions, imposing charges for international communication, and controlling the content that consumers can access online.

The proposals include the following:

  • give countries authority over “the information and communication infrastructure within their state”
  • require that online companies “operating in their territory” use the Internet “in a rational way”

Since these proposals come from the People’s Republic of China, this means government authorities and government definitions of “rational way.”

Other proposals would actually let the UN regulate Internet content:

  • “protect” against computer malware or spam
  • inspect private communications
  • measure Internet traffic along national borders and bill the originator of the traffic
  • give the UN authority over allocating Internet addresses, replacing ICANN, the self-regulating body that presently ensures the stability of the Internet

These proposals come from Russia and Iran; although amazingly, Europe supports the billing drive (perhaps not so amazingly considering the penchant for government controls that EU member nations have).

So far, our government’s reaction to this assault on free speech—and on American free speech—has been…muted.  The best the Obama administration has been able to do is to mumble about

“unnecessary and beyond the appropriate scope” of UN regulation

and

the text [of the planning document] suggests that the ITU has a role in content-related issues.  We do not believe it does.

This is a far cry from the bolder response we took took when the UN’s UNESCO became too ideological and not enough concerned with science and education: we cut off funding to the organization.

This administration needs to become a whole lot more forceful in opposing this attempt to grab the Internet and to use that control to stifle free speech.

Regulations and Foreign Law

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The Fed wants to put our own banking system under the aegis of international banking regulators.  Not directly, but by requiring all American banks—including even our smallest institutions—to meet the capital requirements of Basel III.  Basel III is an international standards “agreement” carrying international bureaucrats’ view of what constitutes a bank’s capital adequacy; those bureaucrats’ view of proper stress testing of a bank; and those bureaucrats’ view of the adequacy of a bank’s liquidity, apart from its capital adequacy.

There’s more: the Fed intends to impose on each bank a 1%-2.5% surcharge on its (increased) capital—because the Fed has a better understanding of how the bank’s capital should be used than does the bank.

Aside from whether US businesses should be under the control of foreign quasi-governmental agencies—a meme this administration is increasingly embracing—smaller financial institutions will have trouble meeting the additional requirements.  This is apparent from the results, in market share and profit margin, of this sort of intervention.  Lenders with $1 billion or less in assets have seen their market share fall to the neighborhood of 10% from the 31% they held in the early ’90s, and smaller banks had a return on assets of 1.22% for the first quarter of this year, compared with 1.52% for those with more than $1 billion in assets, just from the existence of the Fed’s domestic regulatory requirements.  So much for too big to fail.  The Fed is busily instituting too small to survive.  (And as an aside, notice those profit margins.  So much for fat cat bankers.  Those are the margins of chain grocery stores.)

There’s yet more.  The Fed doesn’t want banks to rate their riskiness in any effective way.  It intends to  force banks to stop relying on credit ratings when looking at their own assets’ riskiness.  Instead, the risk classifications of another foreign entity, Organization for Economic Cooperation and Development, are to be used.  The OECD Knows Better.

Hmm….

Coal and CO2

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We get over half our national electricity supply from coal.  Nevertheless, President Obama is intent on shutting down our coal-based electricity through his EPA regulations.  This has been commented on by lots of folks.

The Obama fantasy driving this is that by killing off the US’ capacity to use coal in energy production, he’ll put a serious dent in the production of CO2.

Never mind that CO2 is not a harbinger of disastrous warming (its atmospheric warming capacity is quite trivial, especially compared to, oh, say, methane, or to the atmospheric cooling capacity of water vapor through its reflection of sunlight back into space), but a confirmation of the health of the planet.  The record, for instance, from ice cores as widely disparately collected as Greenland and Antarctica demonstrate that atmospheric CO2 increases lag global warming, not precede it.  And of course the increases would lag.  The planet warms, as from a major Ice Age, or the Maunder Minimum, or…, and life flourishes.  That life exhales carbon dioxide, and as the life spreads in the warming climes, CO2 in the atmosphere increases.

But nor the Obama administration nor the pseudo-scientists of the Global Warming Funding Project want to talk about that.  Except the latter, to change their group name to the Climate Change Funding Project.