Monday, May 31, 2010

Deregulation? -- Are You Kidding Me?

Now the latest blame game maneuver is to argue the BP Oil Spill is the result of "de-regulation." What a joke? There has been no deregulation .... not one little bit regarding offshore oil exploration. In fact, what the BP Oil Spill shows, which we already knew, is that regulation is damaging, except when it's irrelevant. It didn't stop the spill and it won't stop future spills. Regulation doesn't work.

The reason BP was drilling for oil 5,000 below the surface was precisely because of regulation, forbidding oil exploration in shallower water. Somehow the regulators thought it would be safer if they moved the drilling further out. So much for the regulators. If this drilling had been down where it should been done, in the forbidden shallower waters, then the spill would be a relatively easy fix. But, the regulators won out, Congress won out, the President won out....and now we have an unfixable leak 5,000 feet down. Where is the de-regulation?

This is similar to the nonsense about the rating agencies. The rating agencies only gained power when the SEC mandated their usage by the debt markets. Why did the SEC do that? Is that de-regulation? It was an absurd thing to do. There are plenty of independent research operations to pass judgment on debt issuance, but the SEC put them all in limbo in favor of the rating agencies. Basically the SEC gave the rating agencies a monopoly and pushed the free market out of the way. Great move! Is that de-regulation?

Regulation doesn't work. The market works. BP will fix the leak because it is in their economic interest to do so. Politician will continue to spout nonsense, because that's what they do.