Tag Archives: regulation

Regulating Reputational Risk

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Progressive-Democrat ex-Presidents Barack Obama and Joe Biden used their banking regulators to “encourage” banks to do no businesses that might inflict “reputational risk” on the bank’s soundness and to end existing business relationships with such enities. Those reputation-damaging businesses—according to those administration men—centered on such Nasties as payday lenders, gun retailers, and crypto.

By focusing on reputation risk, supervisors attempt to understand and anticipate public opinion regarding issues and events and then to attempt to directly connect this public opinion regarding issues and events to an institution’s condition in ways that have proven nearly impossible to assess or quantify with accuracy[.]

Those are the words of the Federal Deposit Insurance Corporation and Comptroller of the Currency bosses as they work on a rule that would bar regulators from “reputational risk” evaluations. If regulators can’t quantify what it is they want to regulate, they have no business trying to regulate it—that’s on top of regulators need to be limiting on their regulatory activities in the first place.

Reputational risk assessments in particular are entirely subjective, and that just excuses and enables administrations of whatever stripe to regulate out of business any enterprise of which the regulators or their political bosses disapprove.

The market is fully capable of assessing reputational risk, and it should be left free to do so without government “assistance.”

That’s One Spin

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The DC Circuit Court has denied Anthropic’s appeal of a DoD decision to cut the company out of Defense contracts as a security risk to Defense supply chains. Meanwhile a Northern District of California Federal court judge has upheld Anthropic’s appeal on free speech grounds. This, of course, creates a split of sorts that, ultimately, the Supreme Court will need to resolve, unless the 9th Circuit overrules the District judge wih a ruling that substantially aligns with the DC Circuit.

What’s interesting, though, is Computer & Communications Industry Association CEO Matt Schruers’ characterization of the split.

The DC Circuit’s denial will prolong ambiguities regarding whether political considerations can drive federal procurement[.]

This is Schruers’ conclusory characterization centered on his preferred outcome. It couldn’t possibly be the California district judge’s ruling that is prolonging ambiguities.

Big Brother’s Nanny Sister

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President Donald Trump (R) wants to let businesses allow private equity investments be included in their 401(k) Plans so employees can invest in them with their retirement savings. After all, unions, those voting bloc and funders for the Progressive-Democratic Party do, with enthusiasm.

Nope, say those same Progressive-Democratic Party politicians. We get to do it. You others don’t. Just look at those collapsing private equity funds now. Besides, the Labor Department is only letting those 401(k)s have risky investments that could include Trump meme coins.

Labor says otherwise.

The Labor Department is proposing to clarify that employers don’t violate their fiduciary duty merely by incorporating private equity, real estate and other “alternative” investments in 401(k) fund options.

Nothing else.

I agree that private equity is a terrible, horrible, no good, very bad investment. However, that’s a matter for the individual investor to decide. It should not be a matter for Nanny Statists like Party politicians to actively bar, nor should it be a matter for Republicans of any stripe to passively bar by not permitting.

Caveat emptor, and caveat collocator.

A Nanny State Pusher

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Pam Krueger, Founder & CEO of Wealthramp, wants employers offering 401(k) plans to provide access to a vetted network of independent, fee-only fiduciary registered investment advisers as a no-cost employee benefit.

This is because, dumb-asses that all of us Plan participants are, when we are confronted with conflicted advice, hidden fees, and unsuitable products, we’re wholly incapable of evaluating any of it on our own. We need safeguards, she insists, but who would do this vetting? She neglected to say.

Never mind that we already have access to such a network, vetted by independent fiduciaries: NAPFA, The National Association of Personal Financial Advisors. One impediment to employing one, though, is their fee structure, and many participants might be unwilling to pay the fee. Hence the insistence that the employer pay the advisor in our stead.

Have I mentioned, yet, that Wealthramp has its own stable of fee-only financial advisors?

Wealthramp has its own stable of fee-only financial advisors.

Hmm….

It’s a Feature, Not a Defect

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In the race for Artificial Intelligence dominance—which isn’t necessarily existential, but it comes close—the US has a slight global lead, the People’s Republic of China is close behind, and the European Union is…not participating.

The EU Artificial Intelligence Act, the Digital Services Act, the Digital Markets Act, the Data Act, and the Cyber Resilience Act, among others, impose stringent and duplicative regulations that stifle innovation, drive up compliance costs, delay product launches, restrict access to data, and expose companies to billions in fines.
Before AI systems are even put on the market, the AI Act alone requires predeployment risk assessments and mitigation systems, high-quality data sets, detailed logs, documentation of system functionality, and human oversight.

All this is done in the name of what the EU thinks of as safety—protect the environment, transparency for the sake of transparency, protect the consumer from…something, protect…. It’s being done, too, with careful deliberation and full knowledge of the consequences, both of being right and of being wrong.

The EU has chosen, and it has long done so in a broad reach of milieus, what it views as safety over what it views as freedom—here, to innovate. As someone once more or less noted some years ago, those who choose safety at the expense of freedom will have neither. And from that, they will lose security.

This is the EU opting out of the contest, hoping that the winner will remember the EU with fondness and a willingness to share. Which is no security at all.