Right Thinking From The Left Coast
The price of anything is the amount of life you exchange for it - Henry David Thoreau

Wednesday, January 19, 2011

The Revolving Door Swings Both Ways

Remember all that talk from Obama about ending the revolving door between industry and government?  That’s OK.  He doesn’t either:

Stand by for more fuming about the revolving door between regulatory agencies, and those they regulate: Eileen Rominger, who announced this fall that she was leaving Goldman Sachs, has landed as the new Director of the Division of Investment Management at the SEC. It’s an interesting appointment, because it’s the first time in a long time--maybe ever--that the position has gone to an actual practitioner of investment management, rather than a lawyer who specializes in the relevant law. Rominger was the Chief Investment Officer of the portfolio management businesses in Goldman Sachs Asset Management.

The Obama Administration is using the usual defense—you have to hire an investor to regulate investors.  But if Bush had done this, Obama would have been the first to complain.

And this is not unique:

In recent months, officials have quietly left the White House, the Federal Communications Commission, the Federal Highway Administration and the Departments of the Treasury, Commerce and Homeland Security for high-paying gigs on K Street and Wall Street, for top PR firms including the Glover Park Group and VOX Global and to work or lobby for powerful media and telecom companies including Facebook, Comcast, Bloomberg L.P., DirecTV, Sprint Nextel and T-Mobile.

The most notable of these was Orzag, who walked out of the White House and into a high-paying job at Citigroup, a corporation that the government has helped bail out to tune of $45 billion in cash and $301 billion in asset guarantees.

And it’s very hard to argue that this isn’t affecting policy.  Russ Roberts has a rundown of the more disgusting deals coming out of the unwinding of the mortgage mess, specifically with Fannie and Freddie.  Bank of America paid a mere $1.3 billion to get out of $127 billion in mortgages.  GMAC paid $460 million to free themselves of $84 billion in obligations.  And recent investigations of Citigroup—you know, those guys that just hired the President’s Head of OMB—have shown problem mortgages at three times the maximum acceptable rate.

People—especially media people—tend to confuse being “pro free market” with being “pro big business”.  Favoring the free market means favoring open competition.  Being pro big-business means doing special favors for business that make big campaign contributions, hire ex-Administration members and provide a steady supply of industry insiders to regulate themselves.

Obama is claiming he likes the free market.  He ran an op-ed in the WSJ recently talking about the need to change our regulatory structure.  But as Harsanyi notes:

Right now the EPA is drafting carbon rules to force on states, even though a similarly torturous 2,000 pages on a cap-and-trade scheme intending to make power more expensive was rejected. Maybe there’s something in that pile of paper to mine?

Right now, the FCC is shoving net neutrality in the pipeline — again, bypassing Congress — so government can regulate the Internet for the first time in history, though the commissioners themselves admit that, as of now, any need for rules are based on the what-ifs of their imaginations.

There exists no legislation more burdensome and expensive than the “job-crushing” (not “job-killing,” because, naturally, we can’t stand for that kind of imagery) “Patient Protection and Affordable Health Care Act,” formerly known as Obamacare and presently being symbolically repealed by House Republicans.

That’s for starters.

He notes there are $1.75 trillion in regulatory costs on the economy—costs which heavily shift the playing field toward businesses than can afford big regulator costs.  The last year has added $100 billion to that tab and Net Neutrality, not to mention carbon regulation, will add even more.  The sudden interest in the free market sounds awfully strange from someone with that track record.  And it’s even stranger talk for someone who’s playing the revolving door game as well or even better than the Bush Administration.

Posted by Hal_10000 on 01/19/11 at 03:48 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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