Whether you look at the primitive societies that still
inhabit the jungles of this planet, or you study the primitive societies of the
Stone Age and those that came after them, you'll find that they all had some
kind of code of behavior, some way to enforce the rules of the code, and a
process by which an individual or a group could, for whatever reason, petition
the enforcer to amend or rescind one or more of the rules.
In fact, all human societies have had rules and regulations,
and had a process that has allowed for change to be introduced. Absent such
process, those societies suffered a revolt that brought about a reformation of
the existing order either peacefully or violently. What we take from all this is
that having rules and regulations is the natural order of our species without
which we could not function as a society. And because it is also in our nature
to evolve, those regulations are allowed to match the evolution when a petition
is duly submitted and processed.
But is there someone in that maze of individuals and groups
who might challenge the need to make regulations of any kind at all? That is,
could there be someone on this planet who wants to live their life absolutely
free of any restriction – not while living alone on some deserted island but
living in society and continuing to maintain the relationships and interactions
they have with everyone else? The answer is yes, children under the age of six
or thereabout want to live that kind of life.
That is not a problem, however, because the parents take
care of this situation for a few years. They teach the children all about the
rules and regulations that make civilized life possible. Good. But is that it,
or is there a real problem somewhere? In fact yes, there is a problem or at
least a potential for one. And the latest individual to advocate for a
situation of no rules and no regulations is Peter J. Wallison who wrote about
the idea in an article titled: “If You're Big and Move Money, Watch Out” and
subtitled: “Unless Congress acts, the feds will say that all large financial
firms pose a 'systemic' risk and need bank-like regulation.” It was published
in the Wall Street Journal on April 14, 2014.
Wallison tells of the 2008 financial crisis that prompted
the world bankers to ask for the regulation of what has come to be called
shadow banking. These are institutions that operate like banks but are not
subject to any banking regulation. And so, the author of the article objects to
the call by the bankers to regulate them – and he does so on the grounds that
to do it will stifle risk-taking, dynamism, innovativeness and flexibility. And
he predicts that in any case, such move will not make the economy safer.
He goes on to tell which institutions might fall into the
category of being shadow banks, then tells why they should not be regulated by
explaining what has transpired during the past few years. But when you look at
his explanation, you realize that this is precisely why they should be regulated.
Look what he says and marvel at his logic: “Shadow banking consists of all
participants in the capital markets and the securities business not covered by
supervision of risk-taking and capital requirements that characterize bank
regulation.” And so you say to yourself: What's good for the goose should be
good for the gander.
But he goes on: “The capital markets and securities industry
… financing of business and governments has grown three times faster than bank
lending. By 2013, the capital markets' outstanding loans to these borrowers
were $10 trillion while those of banks were less than $4 trillion, and the gap
continues to widen.” In other words Peter Wallison says that the shadow banks
are killing the legitimate banks, and he sees this development as being a good
thing. And this is what prompts you, the readers, to interject: Hey, even my
six year old is beginning to understand that this could never be the case! What
kind of logic motivates that man Wallison?
Having failed to make a case as to why the unregulated
should remain unregulated, he goes on to tell the history of the developments
that brought the subject to the critical stage where it is now. And he ends
this way: “If nothing is done by Congress and soon, we can expect that these
institutions will disappear into the welcoming arms of the [regulating] Fed.”