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With a hat tip to Will Ferrell, I propose a new word that is to "regulation" what "strategery" is to "strategy": "regularation."  

Domestic financial regularation involves five federal agencies for which it is a primary purpose: the FDIC, Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision and the National Credit Union Administration.  (This doesn't even count some agencies who are more tangentially involved in the process, such as the IRS and FTC.)  Global financial regularation involves an array of agencies that would need more coherence to earn the description of "hodgepodge."

Why worry about regularation?  Because proposals from foxes on how to reorganize the henhouse are coming out right now, especially in the wake of the G-20, and it's time to think them through and knock some down.

I am alerted to this, once again, by columnist Alain Sherter of BNET, who is not only an experienced observer of the business community but is also, to remain a little vague about it, part of my mispukhah.  I don't port in his columns every time he writes one, but I do when I think that they're of interest to people here.  His latest column is of serious interest.  (Give it a click!)

What got my immediate undivided attention was this, from Sherter:

If all this [mish-mosh of regularators] sounds like a recipe for agita, it is. And keep in mind this is only within the U.S. So when someone like Morgan Stanley’s John Mack comes along and proposes an “uber-regulator” to police all financial institutions everywhere, all one can do is try not to giggle (or suspect ulterior motives).

Indeed.  Morgan Stanely's John Mack has proposed a pretty substantial revision to the world financial regulation system: essentially, a single global czar.  One regularator to rule them all.

Now I don't know what to think of this proposal, although I have some immediate reflexive reactions.  I don't like that it comes from John Fund as opposed to, say, Joe Stiglitz.  But what's important from my perspective is not the specifics of the proposal -- it's that the financials are thinking seriously about regularatory reform, and they are clearly thinking big.

“I think the crisis is over,” Mack said in yesterday’s interview. “What I worry about is that we lose momentum with some of the regulatory changes that we need to go through.”


Sherter concludes with some of his own thoughts on the issue (links in the original article):

As finance envelops the earth, the shifting economic, political and legal plates have left regulatory chasms. U.S. officials want to bridge them by simplifying things, perhaps by forming a noble Round Table of regulators and a separate consumer protection agency. That’s a start. Yet they could do more.

Instead of merely combining the sieve-like OCC and OTS into a single banking and thrift supervisor, as has been proposed, it could consolidate all five agencies that oversee depository institutions. When everyone’s accountable, no one is. That might also ease the turf fights that hobble regulation. Another worthy cause would be to end the practice of financial institutions funding the very agencies charged with watching them, an invitation to “regulatory capture.” Most important, our political class should banish the thoroughly bebunked notion that markets can groom themselves.

That's worth thinking about.  Whatever you conclude about the proposal, you should conclude this: change is in the air, and it is time to educate ourselves about regularation before others who claim to know it all impose their proposals on us.

Originally posted to Doane Spills on Fri Oct 02, 2009 at 09:15 AM PDT.


If you could be any domestic financial regulatory agency

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