Take Our Regulators—Please!

On behalf of the editorial board and staff of TR, I want to extend my best wishes for the new year. I hope that you had a wonderful holiday season, that Santa was good to you, and that you are ready for 2009, rejuvenated and restored. Although it had its moments of exhilaration, 2008 was a rough year, full of disappointment and anxiety. Like a baby, a new year is very welcome.

While the challenges confronting the United States are great, I am nevertheless optimistic. With a new president and a strong determination to chart a better future, I predict genuine progress in solving problems that have long vexed our country. Near the top of the list, of course, is the current healthcare system, which is rife with inequity and inefficiency. How brave will Americans be in enacting change to our troubled system? Only time will tell.

The celebration of 2009’s arrival may have been more muted and restrained than those of the past. With the Dow Jones plunging, a recession deepening, and bonds offering returns of 0%, money is scarce. As 401K plans became 201Ks, a low-end bubbly from Costco sufficed as revelers in Times Square smooched and tooted their horns in an avalanche of confetti.

As anyone who follows the news knows, one of the main causes of our financial woes is a failure of regulation as Wall Street and banks ran wild with an anything-goes attitude, securitizing mortgages and collateralizing debt. (Which shows you what I know about economics—I thought that debt is electrophoresed.)

“Let’s regulate,” is the current cry as citizens seethe with the knowledge that, in the past year, their nest eggs have been boiled, scrambled, or fried.

The Regulation Solution

I agree with the drive for more regulation. I don’t want to see my retirement funds fall any further nor watch my university’s endowment vanish as the whizzes who once produced 20% returns were caught with their investment pants down—and I mean far down.

Regulation is a tough, grinding business. It requires lots of vigilance and legions of no-nonsense gumshoes and FBI types to scrutinize the books and ledgers. Given the shambles of the financial and mortgage industries, I would guess that the country will need tens (or hundreds?) of thousands of regulators to make sure that the treasury does not again fall asleep at the switch as the banks cook up new magic schemes to manufacture money from thin air.