Privatize Regulations of Financial Companies

Numerous federal, state, and international agencies regulate banks and investment companies. Altogether, they’re not worth a bucket of warm spit.

Despite warnings, they didn’t catch Bernie Madoff’s Ponzi scheme ($65 billion). They didn’t catch Allen Stanford’s Ponzi scheme ($8 billion). Recently, they didn’t catch MF Global Holdings ($1.6 billion) or Peregrine Financial ($100 million). Now, they’re investigating the purposeful misreporting of a key global interest rate (“Libor”) which a U.S. agency was first warned about four years ago and did nothing about.

Instead, banks and investment should be audited and regulated by the people who have the most to lose when a bank or investment company goes bad – depositors or investors.

With bank-deposit guarantees in effect, depositors couldn’t care less about safety. “That’s the government’s job,” they say. Yeah, sure. Federal and state governments should terminate bank-deposit guarantees.

To privatize the regulations, bank associations would get together with depositor associations and iron out who can do audits and when. Likewise for investment companies and investors. Insurance companies would probably become involved.

Almost everything big government touches turns out badly. The regulation of financial companies is a fine candidate for privatization.