My Turn: Real regulatory review takes hard work

For the Monitor
Published: 2/3/2017 12:09:59 AM

To borrow from a childhood fairy tale, government regulation is a lot like “Goldilocks and the Three Bears” – too much, too little or just right.

Since their respective inaugurations, President Donald Trump and Gov. Chris Sununu have issued directives to executive departments and agencies to freeze regulations, and in the case of Sununu, “repeal or suspend the adoption of all existing or proposed regulations the agency finds are neither mandated by law nor essential to the public health, safety or welfare” for 90 days.

Can one point to redundant, burdensome government directives past their shelf life? Absolutely. But we’ve been down this road before. For example, during the 1980s, Ronald Reagan’s administration gutted bank regulations, resulting in the multibillion-dollar bailout of the savings and loan industry.

Then, a decade later, we experienced the near economic meltdown of the hedge fund, Long-Term Capital Management, which operated under almost no regulation.

At the turn of the century, we witnessed the implosion of Enron, probably the biggest Ponzi scheme in history.

Shortly thereafter came the blowup of WorldCom, HealthSouth, Tyco – the list is long.

Then, during the first decade of this century, the administration of George W. Bush, as well as Washington lobbyists, effectively held back meaningful financial oversight, leading America to almost tank the entire world economy.

Here in New Hampshire, for years the so-called Local Government Center inappropriately used funds to subsidize various insurance and administrative activities without any government check. Then there’s FRM, which operated as a fraud in large part because existing state law does not require commercial mortgage oversight.

Is there too much regulation? Yes, in some areas, like requiring smaller banks – which did not cause the last banking crisis – to currently deal with burdensome regulations.

Too often government overreaches, meaning enacting unnecessary regulations when the economy turns down, only to then roll them back during the next economic up-cycle, thus leading to yet another crisis.

Taking a broader view, the Citizens United Supreme Court decision of 2010 – whereby outside, “unregulated” money now dominates our nation’s politics – we have institutionalized the blowback of effective regulation. Every year, corporate lobbyists spend billions in Washington and state house corridors on important public matters, such as drug safety, bank trading practices, utility expansion and the like.

Talk to people who’ve lost their life savings and see how they feel about regulation when things go wrong and they lose their savings – and jobs.

When it comes to New Hampshire, do we have a bloated government with too many regulations? Generally speaking, no. Actually, we have a state workforce less in number per capita than was the case during the 1970s. And comparing New Hampshire to other states, we rank near the bottom in per capita employee number and expenditure.

Does it make sense for a newly sworn-in, two-year-term governor to direct by memorandum to stop regulations? Not only is such an action an overreach of executive authority, but also it doesn’t even mesh with current law – the Legislature oversees agency regulatory rulemaking.

Yes, regulatory oversight in New Hampshire should be restructured. Any meaningful review of New Hampshire state government indicates a need for reorganization. For example, currently some 76 state agencies and departments report to the governor. This just doesn’t make sense.

Regulation by memo shouldn’t be the law of the nation or the state. That’s just more feel-good politics. Real regulatory review and getting it “just right” takes hard work and actual analysis.

We’ve been down this road before: cut back regulation to the point where industry overreaches and Goldilocks’ bears are like average Americans who too often get hurt.

The cycle goes round and round. Almost every seven to 10 years this nation witnesses a regulatory implosion because of a lack of effective regulation.

The clock is now ticking since the last financial mess. If we continue down this path, the next implosion could be catastrophic. We need real leadership, not feel-good memorandums.

(Mark Connolly is the former director of securities regulation for New Hampshire and a former Democratic candidate for governor. He is the principal for New Castle Investment Advisors, located in Portsmouth.)




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