McCain / Palin to require highest standards and regulation

In today’s Wall Street Journal, John McCain and Sarah Palin call for the highest standards of “accounting, reporting and transparency ever demanded in government“. Bravo! This is exactly what we expect from good government. And, exactly what makes government so different from business. Business cautiously guards trade secrets, seeks immunity from prosecution wherever possible, and worries not nearly so much about public process. Government, however, is responsible to the people, for the people, and by the people. And, government is held accountable every election.

But, what worries me is that McCain and Palin go on to suggest that lenders will be “will be held accountable for the quality and performance of those loans, and strict standards must be required in the lending process. Every lender must be required to meet the highest standards of ethical behavior, with recourse if they do not perform.” This suggests a massive government bureaucracy, massive sets of new regulations, huge levels of government oversight, and a field day for the trial lawyers who will be responsible for pursuing ‘recourse’.

Now, admittedly, the financial industry is already heavily regulated. But, imagine any other essential industry – perhaps utilities, perhaps airlines, perhaps automobile manufacturers, and the same level of accountability to government, the same setting of strict standards of performance, the same mandate for ethical behavior would set most American hearts aflutter. Isn’t that what the market is for?

The problem seems to be that McCain and Palin are having a hard time separating the public enterprise from private enterprise. It could all too easily move from a regulatory approach towards public subsidy of risk to enable private profit-taking. And, that distorts the market in ways we have seen all too well with Freddie Mac, Fannie Mae, Bear-Stearns, the airlines, and the Detroit 3. They are, apparently, all too big to fail.

If McCain and Palin were serious about accountability, reporting, and accountability, then they might start with military contractors like Halliburton, KBR, and Blackwater. They operate in a legally protected, liability-immune business environment where they specialize in “black contracts” that generate what has been described as a “Carnival of Fraud“. Overcharging, unfinished work, and excessive executive compensation seem to go hand-in-hand. Unfortunately, the ability of government to fulfill its security mandates has been so seriously dismantled in the name of government efficiency, that there is now no choice but to utilize these public-private partnerships. You and I ought to be prepared. We’ll soon be bending over backwards, taking it in the toosh. Again.


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