Why Don't Regulators Regulate?

Good question. My theory is that all bureaucracies exist for themselves and their mission is incidental. For example, schools exist to provide jobs for administrators and teachers and students just get in the way. The FAA exists to provide lots of jobs for controllers and inspectors who then do things like talk on the phone while helicopters and planes are running into each other over the Hudson or miss little things liked cracked wing panels on commercial jets. The mission is incidental.

A particularly egregious example of this principle involves the SEC. Bank of America took over Merrill Lynch in a shotgun wedding last year during the financial meltdown with the U.S. Government acting in the role of holding the shotgun and performing the ceremony. In seeking approval of the deal from shareholders, B of A said Merrill Lynch would not pay bonuses without B of A approval. In fact, B of A already knew that Merrill Lynch executives had accelerated $3.6 BILLION in bonuses and neither disclosed this in their required SEC filings to shareholders. Incidentally, these bonuses were paid despite the fact that Merrill Lynch lost $27.6 BILLION in 2008. Makes you wonder what kind of bonuses they would pay in a good year doesn't it? (Ed. note: I definitely missed my calling - I can run a company into a ditch for half that!) The SEC brought an enforcement action but couldn't be bothered to follow though, so it recently sought to settle the case for a measly $33 million. The judge, God bless him, refused to approve the settlement and ordered the case to proceed to trial. Now we will see who the connivers really are. What a surprise too that B of A was one of the biggest recipients of TARP money. Investigate Goldman Sachs anybody?

The moral of the story: government exists for government and the mission of protecting the citizenry is incidental. Think about it when you consider nationalized health care, cap and trade, and all the other Big Government goodies. Government will protect us - you betcha!

www.oregonlive.com/business/index.ssf/2009/09/judge_rejects_secbofa_deal.html