Reg­u­lat­ing the nation into a de­pres­sion

The Washington Times Weekly - - Commentary - Tony Blank­ley

In a much-dis­cussed live tele­vised fo­rum two weeks ago, Jamie Di­mon, CEO of JP Mor­gan Chase, asked Fed­eral Re­serve Chair­man Ben S. Bernanke the 64tril­lion-dol­lar ques­tion.

While most com­men­ta­tors fo­cused on the apt ques­tion, it was Mr. Bernanke’s an­swer that shocked me when I heard it — and ought to shock the nation much more than it has so far. Ques­tion: “Now we’re told there are go­ing to be even higher cap­i­tal re­quire­ments, and we know there are 300 [fi­nan­cial reg­u­la­tory] rules com­ing.

“Has any­one both­ered to study the cu­mu­la­tive ef­fect of these things?

“And do you have a fear — like I do — that when we look back and look at them all, that they will be the rea­son that it took so long for our banks, our credit, our busi­nesses, and most im­por­tantly, our job cre­ation, to start go­ing again? Is this hold­ing us back at this point?” An­swer: “No­body has looked at it in all de­tail, but we cer­tainly are try­ing as in each part to de­velop a sys­tem that is co­her­ent and that is con­sis­tent with banks per­form­ing their vi­tal so­cial func­tion in terms of ex­tend­ing credit.”

Be­fore break­ing ground on the con­struc­tion of a build­ing, bridge or other sub­stan­tial con­struc­tion pro­ject, the ar­chi­tect cal­cu­lates the cu­mu­la­tive stresses on all the load-bear­ing parts of his struc­ture to be sure that when the thing is built, it will not col­lapse of its own weight and kill thou­sands of its oc­cu­pants.

Af­ter Pres­i­dent Obama, Mr. Bernanke is the man with the most com­pre­hen­sive re­spon­si­bil­ity for designing the new fi­nan­cial reg­u­la­tory struc­ture of the United States and, in fact, of the en­tire world, as Mr. Bernanke and the United States are also the dom­i­nant force in co­or­di­nat­ing the U.S., Euro­pean and Asian fi­nan­cial reg­u­la­tory struc­tures.

The bald-faced ad­mis­sion that there has not been an ef­fort to as­sess the cu­mu­la­tive load- bear­ing ef­fect of the pro­posed new reg­u­la­tions on our fi­nan­cial sys­tem brings into ques­tion the min­i­mal com­pe­tence of both the Fed­eral Re­serve gov­ern­ing board and the most se­nior elec­tive and ap­pointive level of the U.S. gov­ern­ment, which has the ultimate re­spon­si­bil­ity for the new fi­nan­cial reg­u­la­tions.

Af­ter all, it’s only the eco­nomic sur­vival of 300 mil­lion Amer­i­cans at stake if the fed­eral gov­ern­ment mis­cal­cu­lates the new fi­nan­cial reg­u­la­tions it is busy pro­mul­gat­ing.

If our fi­nan­cial sys­tem buck­les un­der the com­bined weight of all those new reg­u­la­tions, no one, from CEOs to as­sem­bly­line work­ers (if we have any left af­ter this is over) will be safe from the col­laps­ing ed­i­fice.

Think of the ter­ri­ble im­age of the thou­sands of peo­ple run­ning from the col­laps­ing World Trade Cen­ter tow­ers on Sept. 11, 2001, and pro­ject it (fig­u­ra­tively) to all of us run­ning from a col­laps­ing econ­omy in­duced by un­bear­able reg­u­la­tory weight on our fi­nan­cial in­sti­tu­tions.

Maybe this is part of the ex­pla­na­tion for a re­cent CNN poll.

The poll showed 48 per­cent of Amer­i­cans said they thought it was “likely” that the nation would be in a new Great De­pres­sion within the next 12 months.

Maybe half of the coun­try is wor­ried about some­thing that has not dawned on our Fed­eral Re­serve chair­man or other se­nior ex­ec­u­tive branch of­fi­cials.

“No­body has looked at it in all de­tail” Mr. Bernanke said.

Why in heaven’s name have they not “looked at it”?

If I were the pres­i­dent of the United States or the speaker of the House or the ma­jor­ity leader of the Se­nate, I would have raised holy hell when the Fed­eral Re­serve chair­man made that ad­mis­sion on live tele­vi­sion.

Short of war and peace — and maybe even more im­por­tant — is the fi­nan­cial sys­tem of our coun­try.

It is the lifeblood of our econ­omy.

If through ineptitude and inat­ten­tion the fed­eral gov­ern­ment im­poses a reg­u­la­tory struc­ture that crushes our fi­nan­cial sys­tem, not only our jobs and pros­per­ity are threat­ened, but even our na­tional strength and our na­tional sovereignty.

Many his­to­ri­ans think that start­ing in the 17th cen­tury, the rea­son the Bri­tish Em­pire sur­passed the French Em­pire and be­came the dom­i­nant force on the planet for two cen­turies was the greater strength and sta­bil­ity of Bri­tish fi­nance.

Who can doubt that Amer­i­can dom­i­nance in the world — in­clud­ing the ca­pac­ity of our in­dus­try to out-pro­duce our en­e­mies dur­ing World War II — has been the re­sult of the great power and sta­bil­ity of our fi­nan­cial in­sti­tu­tions?

And as we go about the most com­pre­hen­sive rewrit­ing of our fi­nan­cial reg­u­la­tions since the Great De­pres­sion, the Fed chair­man ad­mits he hasn’t even tried to cal­cu­late the com­bined ef­fect of all the daffy reg­u­la­tory ideas be­ing put for­ward and there is not a peep of crit­i­cal com­ment from the White House, the Trea­sury or Congress.

No won­der half the coun­try is brac­ing for a new de­pres­sion.

Tony Blank­ley is the au­thor of “Amer­i­can Grit: What It Will Take to Sur­vive and Win in the 21st Cen­tury” (Reg­n­ery, 2009) and vice pres­i­dent of the Edel­man pub­lic re­la­tions firm in Wash­ing­ton.

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