Let's Talk about the Clueless Financial Regulators

I had an email from a fan last week quoting the tariff plank from the 1928 Republican Party platform. That was the year before the Republicans walked the plank on the Smoot-Hawley tariff in one giant step for a generation of Democratic rule. For a century, the Whigs and the Republicans had lived by the tariff. And then they died with the tariff in the riptides of the Great Depression.

But not to worry, because the new lot are just as stupid. Enter Peter J. Wallison, who wrote a minority report for the Financial Crisis Inquiry Commission on the Crash of 2008, reminding the conventional wisdom that it wasn't greedy bankers but government policy that did it, specifically Fannie and Freddie.

Now Wallison's worried that the Fed and the U.S. Treasury are answering to the Financial Stability Board, a unit of the G-20 debating club.

So here's a bureaucratic unit with no legal authority that's part of an international association with no legal authority and it's dictating policy to the administration of a sovereign national state. The only thing worse would be if the Fed and the Treasury were answering to a regulatory unit of the European Union or the United Nations.

Now, I agree with Wallison that it's monstrous for our government to truckle to a bunch of unelected international regulatory bureaucrats. But that's not the point.

The point is that all regulatory bureaucrats are useless, especially financial regulatory bureaucrats. Which bureaucrat at the SEC stopped Bernie Madoff from ripping off thousands of rich Americans? Which bureaucrat stopped those greedy bankers? Which bureaucrat at the FHFA stopped Fannie and Freddie in time?

Which bureaucrat at the independent FCC stopped President Obama's improper arm-twist to push “net neutrality?”

Let's go back in time a little. Which bureaucrat got the Fed to do its job after 1929 and do its job as the lender of last resort?

President Harry Truman had a phrase for your average elite bureaucrats in the State Department. He called them the “striped pants boys.” We have a similar situation now with State Department spokeswomen like Harf and Psaki, the sorority sisters. Now we have well-born women with connections getting high-profile jobs in the elite bureaucracies.

Back in the day, liberals used to talk knowingly about generals fighting the last war. They had a point. Ever since the Prussians invented the general staff, the officer corps has been a military bureaucracy. After each war the senior military bureaucrats hold a “lessons learned” conference and reorganize the military to fight the last war properly. Now you know why the U.S. Department of Defense was set up after World War II.

For some reason I haven't heard the “fighting the last war” argument recently. Perhaps it's because liberals know that the United States is chock full of liberal-staffed bureaucracies busy fighting the last liberal war on poverty or something. Talk about re-enacters. Or perhaps it's because today's “progressives” don't know nothing about historee, as the song goes. They only know activism and destroying people like they do on Comedy Central.

Hey, here's an idea. Next time the Dems talk about the “war on women,” let's say they are worse than generals fighting the last war.

The problem with bureaucracies is that they conjure up an aura of expertise, an illusion that things are under control. They aren't! And financial bureaucracies are the worst of the lot, because their real job is to pretend to keep the financial system under control while the government bets the farm and puts the credit system at risk with its cheap money, its quantitative easing, its zero interest rate policy, its stimulus, its subsidies, its uneconomic pet projects, its unfunded pensions, its affordable this and that.

Look, I get it. We the people want free stuff. Politicians get elected by offering us the free stuff. Governments have to game the credit system in their efforts to keep the votes coming and the free stuff flowing. But when the river overflows its banks it turns out that the politicians used the bureaucrats to spend the maintenance budget on their cronies. Think Hurricane Katrina and New Orleans.

But we are conservatives. We believe in free-dom, not free stuff. We believe in a responsible individualism in which people do the right thing, just because. It's our job to persuade our neighbors and friends and beyond them the American people that all our lives would be better if we eased off on the free stuff and the political lies and hypocrisy.

Then we wouldn't need politicians gaming the credit system and we wouldn't need regulatory bureaucrats from unelected international debating clubs pretending to make the financial system safe from the bad actors.

Then we'd have an honest credit system that rewarded fair dealing and winkled out the bad operators. No clueless financial regulatory bureaucrats needed.

Christopher Chantrill @chrischantrill runs the go-to site on US government finances, usgovernmentspending.com. Also see his American Manifesto and get his Road to the Middle Class.