Rachel Marsden

PARIS -- On the occasion of President Obama's State of the Union address this week, marking five years since he was sworn into office with the stated primary objective of turning around the post-crisis domestic economy, it's worth asking: Is America safe from another economic crisis?

Despite the regulatory efforts hustled in as a result of public panic and a political class desperate to be seen doing something, the initial problems remain, and the next crisis could be even worse. Among the major problems: risky loans to those who can't repay them. Liberal advocacy groups such as Association of Community Organizations for Reform Now (ACORN), pushed lenders such as Fannie Mae and Freddie Mac to grant loans to borrowers who couldn't afford repayment.

The underlying problem still exists, and the new regulations are pure political theater.

"You can't repeal the laws of supply and demand or prevent financial crisis," says regulatory expert Donald Lamson, a partner at the law firm Shearman & Sterling. "Thus you'll always be tempted to save large institutions to prevent pain on a large scale."

The U.S. government continues its bureaucratic empire-building, venturing down the slippery slope of regulating everything from banks and insurers to, most recently, asset managers. And who's to say that it will stop there?

So what are the actual regulations to be imposed by the U.S. Federal Reserve on financial entities designated as systemically important and "too big to fail"? The Financial Stability Board (FSB), the international entity based in Basel, Switzerland, tasked by the leaders of G20 nations with establishing global post-crisis guidelines, is still trying to figure it out. Meanwhile, each (G20) country is supposed to diligently designate inmates for this regulatory gulag without knowing exactly what they'll be faced with, let alone whether any proposed regulations can pass a stress test. Just as we saw with the Kyoto Protocol climate-change provisions (before the U.S. came to its senses), America has been quick off the mark to voluntarily straitjacket its home team on the global playing field.

But if there are going to be useless regulations, it's only fair that everyone be subjected to the same uselessness -- and for the public to be able to see this riveting exercise in sadism and masochism. Sadly, that's not happening. At least the Federal Reserve's 2008 Troubled Asset Relief Program bailout process was transparently debated in Congress. That process has now been moved into the shadows.

Rachel Marsden

Rachel Marsden is a columnist with Human Events Magazine, and Editor-In-Chief of GrandCentralPolitical News Syndicate.
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