When companies lie to the government

THE U.S. Department of Labor will probably soon finalize a proposed rule requiring brokers who provide retirement advice to put the best interests of their clients ahead of their own interests. It seems reasonable to expect that this will cause some unpleasantness for those brokers. (If it wouldn't, why aren't they doing it already?) And so some brokerage firms have pushed back against the rule, trying to get the Labor Department to revise or abandon it. The way you do this, in our modern administrative state, is that you submit comment letters on the proposed rule, saying that if it's adopted as proposed, it will be a disaster for the retirement-advice industry: Costs will go up, retirees will lose access to investing advice, brokerages will go out of business and the Earth will crash into the sun.

On the other hand, some of those brokerages are also public companies, and their shareholders have questions. Questions like: If this rule is, as expected, adopted, will that be a disaster for the retirement-advice industry? How much will your costs go up? Will you go out of business? Will the Earth crash into the sun? And the way you answer those questions, in our modern age of financial capitalism, is by saying, hush hush, we have an excellent plan to adapt to new regulations, we will be fine, and we'll probably even take mar- ket share from our less adaptable competitors.

This is all very standard and not at all unique to the particular controversy over the Labor Department rule; you can see a similar duality in reactions to all sorts of post-crisis financial regulations. For the most part, nobody wants to be more regulated, so they argue against regulation by playing up the bad consequences of the regulation. But nobody wants to panic their shareholders, either, so they play down those bad consequences when talking to the shareholders.

Is that ... is that dishonest? Is it fraud? I mean, the comments to the regulators and the comments to the shareholders are both contingent predictions about the unknowable future, so you can't really hold anyone responsible if they turn out to be wrong. And nobody actually makes different unconditional quantified falsifiable predictions to the two different audiences -- no one says to the regulators "this rule will definitely cost us $100 million a year no matter what we do in response," while also telling the shareholders "this rule won't affect our bottom line at all no matter what." They make vague, conditional predictions; they stress the problems to the regulators and the solutions to the shareholders.

Still it is at least a little bit embarrassing to see the predictions side by side. For instance:

In July 2015, Dennis Glass, the president and CEO of Lincoln National said in his comment letter that the proposed rule was "immensely burdensome" and "extremely intrusive," and would be "so burdensome and unworkable that financial advisors and firms will not be able to use it."; while two months earlier, Mr. Glass told investors that he didn't "see [the proposed rule] as a significant hurdle for continuing to grow that business."

None of those are unconditional quantified falsifiable predictions; they are just adjectives. But the tone is different, sure. Or:

In July 2015, the president of Jackson National Life Insurance Company said in his DOL comment letter that the proposed rule would "be very difficult, if not impossible for financial professional and firms to comply" with; then, in August 2015, the president of Jackson's parent company told investors that a similar rule in the United Kingdom actually led to an increase in retail sales and that the company was positioned to "build whatever product is appropriate under that set and adapt faster and more effectively than competitors."

Again "very difficult, if not impossible" and "adapt faster and more effectively than competitors" do not directly contradict each other, but, sure, the semantic overlap is narrow. Those quotes come from a letter that Senator Elizabeth Warren sent to Securities and Exchange Commission Chairman Mary Jo White today. (Here is her press release.) Warren -- here, and generally -- takes a somewhat broader and less humorous view of what is fraud than I do, and she thinks those contradictions might be fraud: Both sets of industry claims - that the proposed rule will harm them and their business model, and that the proposed rule will not harm them and their business model - cannot possibly be true.