Financial Regulation: The Reality Show

Back in March -- under the influence of several bars of Valrhona chocolate -- I subtitled this blog "fixing financial regulation” (which has a cheery "yes, we can" implication) instead of “can financial regulation ever be fixed?"

But I reserve the right to turn the subtitle into a question anytime things look really bleak in Washington, or when I run out of sugar, whichever comes first.

Today on The Hearing (the Simon Johnson/James Kwak Washington Post blog), Mr. Kwak lists six good reasons why, out there in the real world, financial regulation might not get fixed –- things like turf battles among regulators and “the American instinct to complain that regulation inhibits the freedom of companies to do as they wish.”

Not to mention, as Mr. Kwak delicately puts it: “the strong and lasting influence that the financial institutions being regulated hold over Congress itself.”

I'll add a few more reasons not to be cheerful:

• regulators who seem, increasingly, to fall short on competence and resources.
• past failures of pessimistic imagination by those who draft and enforce the rules for Wall Street (as in, “whaddya mean the housing market could go down?”)
• complexity, and the way we all hate to look stupid by admitting to Mr. Financial Mastermind that we don’t have a clue how his zany new product works (does no one watch The Wizard of Oz anymore?)
• the fact that, like Bob Barker and Dick Clark, regulatory gaps and loopholes will forever be with us.
• the general “shit happens” principle of the universe.
• lawyers.
• politicians.
• lawyers.

On a lighter note, I am 100% confident that if over the next four years we solve all our problems with the banking industry, the budget deficit, global warming, health care, education, terrorism, nuclear proliferation, our physical infrastructure, infectious diseases, the Middle East, Pakistan/Afghanistan, the transportation system, and the auto industry - and if they can get those crazy American Idol judges to behave - financial re-regulation will be a smashing success.