The purpose of regulation is to crime prevention.
Businesses have spent the last generation either ignoring or pretending to ignore this.
Businesses must, by their very nature, skate close to the edge of the law. Those who skate closest without crossing over have a big advantage.
So regulation exists to prevent this competition from sending ordinary businessmen to jail. It is filled with civil penalties which say, "whoa," and whose effect is to level the playing field between those who are skating close to the edge and those trying to stay well away from it.
It's an important lesson we need to become clear about as we enter a new era. How do we best teach the lesson?
It's a two step process. Part of it is putting those who erased the line and broke the law in jail for life. What is left of Bernard Madoff's (above) life is likely to be brief. But the lesson of his crime and punishment is all we have to guarantee that some young punk doesn't decide, "just don't get caught." We need to "send a message" about suite crime.
Of course, that's only step one. Step two is creating new regulations and structures to enforce this law. You can't just trust a company with the word "trust" in its name. This must be verified, through reports and audits, through giving government the right to come down hard on things that seem trifling.
Regulators are cops on the market beat. We can argue about how they're doing their job, about whether they are doing it efficiently, about whether they can do it more efficiently. But we should never, ever again, argue about the need for cops on the corporate streets, any more than we argue about the need for real cops on real streets.
It's ironic. The need for proper business regulation was actually made two decades ago. By Rudy Giuliani. He called it the "broken windows" theory.
Continue reading "Broken Windows on Wall Street and Main Street" »






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