Regulation does nothing but cost money

Thomas G. Brown |

Regulatory agencies do nothing but cost the American taxpayer, consumers, and businesses time and money. In addition it creates a false sense of security, a moral hazard. Let’s take the example Doug Casey mentioned an interview with Howe Street that I listened to this weekend. The Securities and Exchange Commission (SEC) cost the American public two billion dollars a year to operate. This alone should be a reason to dissolve this useless Federal agency.
Then there is the cost in attorneys and administrative costs that are incurred by businesses to comply with the ridiculous regulations that are dreamed up by this agency and the Congress. In addition there is a cost that companies incur when they have to enter into litigation if regulations are violated. These violations are subjective and often hard to define as the regulations are broadly written and often tough to define even by those charged with enforcing them.
The Regulations also increase the cost that investors must pay to purchase a share of a company that trades on the various exchanges. This is due false sense of security that the average investor gains from having the SEC around. They are lead to believe that the stocks of the companies on the exchanges traded in the US have be scrutinized by the SEC so that most of the work in investigating a company has already been done. As we have seen in the past with Enron, World Com and many other example despite the SEC accounting scams have been perpetrated on the investing public. The SEC didn’t do much to prevent the 2010 Bernie Madoff scam in fact it could be argued that because this agency put it’s stamp of approval on Mr. Madoff’s business he was able to sustain his criminal behavior for so long.
Another big problem with all this regulations is that they keep out many small firms who could have offered investors better opportunities for the investment of their money if not for the costs attached to compliance. Right no many large businesses that are poorly run or that participate in dubious practices attract capital due to the lack of competition that these regulations prevent. In short all of use would be better off without regulations and the agencies that oversee them. If a company performs badly we have contract laws that would solve these problems and the competition offered by more firms would allow the best run to survive and those who don’t to fall by the wayside. The one thing we can be sure that these regulations does well is to keep competition out!


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