For a company that makes a substantial portion of its revenues from the banking and finance industry, Bloomberg and its editors have taken a courageous and principled stand with this editorial. This is welcome proof that there are indeed those in and around southern Manhattan who have retained a balanced view of government regulation.
Gratuitous regulation on any industry – especially in a global economy – risks a loss of some degree of competitiveness. But to see all regulation of industry as equally bad (the less regulation, the better) or equally good (the more regulation, the better) is to substitute Doo-doo economics for common sense. If corporations are to exist as legal entities in a democracy, they, like people, must be subject to such limitations on their freedom of action so as to ensure the actions taken for their own benefit do not damage others.
The principle we should use to judge whether regulation is excessive is to ask whether a statute or administrative rule deprives a company of a fair reward in return for the risk taken when taking into account all costs involved, both public and private. Federally-insured banks have their risk absorbed by the American public. Their rewards should be limited accordingly. We use the same principle with public utilities: in return for a monopoly, returns are limited in the form of rate controls. Private risk, private benefit. Public risk, public benefit.
This is pure common sense. As opposed to, say, self-interested rhetoric.
- If the bankers hate it, the Volcker rule must be good (seattletimes.nwsource.com)
- Wall Street and Washington React to Volcker Rule (dealbook.nytimes.com)
- Robert Kuttner: Simplify Banks and Bank Regulation (huffingtonpost.com)
- Volcker Rule Risk Concentrated in 25 Banks (ritholtz.com)
- Citigroup’s Vikram Pandit: Volcker Rule May Strike the Right Balance (blogs.wsj.com)
- Paul Volcker: Too-Big-To-Fail Problem ‘Not Yet Convincingly Settled’ (huffingtonpost.com)
- With Volcker Rule, Wall Street Braces for Change (dealbook.nytimes.com)