Vera Verba

In the current “Credit Crisis,” the news is once again talking about the “failures of deregulation.”

It makes me cringe whenever I hear this, and I hear it a lot. Whenever anything goes wrong with a controlled system, the people who want more control blame the problem on the last attempt at “deregulation” and hold this up as proof that more regulation is the answer to any given problem.

So why don’t I accept this explanation?

Because there never has been real deregulation - just a change in regulations that politicians have labeled as “deregulation.” Regulations may have been reduced in some sense, but you can bet that they were also simultaneously increased or changed in some substantial way as part of a political compromise, and that many many existing regulations still remain.

And there will always be a recent attempt at “deregulation” to blame for any problem. The people involved in any regulated industry will always be trying to reduce the restrictions on their free actions, and will be using the normal governmental channels to do this. Some of the time their efforts will succeed and sometime they will fail, but there will always be some recent reduction of regulations to point to. Of course there are always recent regulatory increases as well. Without a more in-depth analysis, it is impossible to tell whether recent increases or decreases in control are leading to a given problem.

You can’t just look at the order in which the new rules were imposed or removed, because changes in rules can take some time to have good or bad effects, and because the addition or removal of a rule may well only produce good or bad effects in an environment of existing rules, so it is often difficult to judge which rules get the credit or blame for a given set of results.

If you just go by what was the last change, when a problem occurs it is quite likely that the last change was indeed one removing a regulation rather than adding a regulation. But this does not justify the belief that removal of regulations is dangerous and adding them brings safety - rather it is a natural effect of the existence of this very same belief.

In an environment where problems are seen to be fixed by regulation, the standard cycle runs like this:

1.) If things are going smoothly, it is difficult to justify restricting people’s freedom, so regulations are likely to be slowly removed where some people perceive that greater good can be achieved without some existing regulation.

2.) If a problem occurs, it is unlikely that people will analyze the situation well enough to say, “Removal of regulation X did bad things because we did not also remove regulation Y which without X unbalanced the system. If we had removed both X and Y things would have worked fine.” So…

3.) Regulation X is re-instated and/or  a bunch more regulations are added in the ensuing panic because it is believed that a lack of regulation is the problem.

4.) If these new regulations cause additional problems, the removal of regulation X can still be blamed and changes can be made in a continued environment of distrusting “deregulation.”

5.) Eventually things stabilize and the cycle can start over.

This is how we can live in a world where government regulations are always increasing, yet somehow “deregulation” can still be blamed for any problems that happen to occur within a highly controlled system.

I see a lot of stuff on the news these days about the failure of capitalism and lack of regulation causing the current financial crisis. My take on this is a bit different.

I found a very clear explanation of the current wall street financial crisis and bailout plan that I can find no fault with, so rather than going over this ground again, I will just direct you to the words of this author (who apparently has the LJ handle of “boffo”and is named “Nifty McNiftington” - and with a name like that, he better be good!) .

It is medium long, but worth reading in its entirety here: http://boffo.livejournal.com/770495.html

A couple key points that the author illuminates, and that is worth reiterating, are:

1.)  Insolvent banks are still insolvent under the bailout plan, and only banks that are having problems because of a short turn failure of credit markets will be saved. SO this bailout, in its conception, is not just giving money away (even if politicians might tend to bend it that way in its execution.)

2.) That it is this same short term credit market failure hurting these banks that is impacting the economy seriously, but that the government stepping in and affecting a bailout may actual prolong this crisis by keeping the market on hold, waiting for government evaluation of instruments that should have a free market valuation.

There are also a couple things this author doesn’t mention that I think are relevant:

A.) The banks involved are already strongly controlled and regulated to the degree that if I tried to go into the same business as they are in without extensive schooling on the legal issues and knowing a couple senators or some such so I could get the proper licensing, then I will be arrested for violating many different laws.

A truly free market could respond to a credit crunch by offering new players an opportunity to enter the market and make loans. But because these people would be arrested for violating banking laws, this does not happen. Regulation prevents the market from responding properly to the problem.

This is very similar to the situation we find ourselves in with the gas shortage in the South East.

We have a very large country with a great highway system, so how come gas can’t be trucked in from areas where there is a surplus to areas where they need it? the answer is that it is illegal. Government regulation divides the country into zones with different regulations on gasoline refining standards and additives. Gasoline approved for one part of the country is illegal to sell in another area.

B.) One of the reasons this problem of evaluating old loans in a downturn credit market has caused a downward spiral, is that new accounting regulations were imposed during the previous government bailout during the savings and loan crisis and again after the Enron failure.

Before these new regulations, the loans would have maintained their initial book valuation until they defaulted, were paid off,  or were sold. The new regulations require constant revaluation of loans on the books. Long existing regulations restrict a banks lending ability to a set percentage of its assets. So a downturn in the loan resale market both causes the bank to lose stock value and puts additional restrictions on banks lending ability.

Less availability of credit means more entities selling off both mortgage backed securities and bank stock when they need cash - further reducing the book value of banks and further tightening the credit crunch. Lather, rinse, and repeat until you have a complete credit market failure.

C.) Given that this crisis is in some part a result of the regulation added in reaction to previous problems, it seems quite likely that the new regulations (that will no doubt be added during this bailout) will also have unforeseen consequences.

***

This crisis is not the failure of a free market, but a failure of a market that is anything but free, adjusting to changes in regulation and ongoing government moderation. All of this happened in conjunction with a housing bubble with artificially low government set interest rates causing real estate to look artificially attractive to speculating investors, and two of the biggest lending entities (Fannie Mae and Freddie Mac) being pseudo government corporations run by people who “knew” that the government would step in and guarantee their failures and thus acted incautiously.

A lot of factors caused the current problems, but the last thing that it can be fairly called is a product of lack of regulation or failure of the free market. The motto on Wall Street has long been “Government compliance is Job One!”

Although my name is Sean Hastings, and I am an Author, not a talk radio host, I regularly receive voice mail messages intended for Sean Hannity.

[Feel free to Skip to the bottom for the link to the audio files - but be sure to leave a comment with a link to your favorite message!]

Why this happens probably requires a little bit of explanation.

I have the phone number 1-800-WHY-SEAN which I acquired 15 years ago by flirting on the phone with the lady who was setting up my 800 service for a small business venture I was pursuing. She liked my jokes so much she decided to try to find me a really cool 800 number, rather than just giving me one “off the rack.”

That particular business only paid my bills for a couple years, but when it finally died, I kept the 800 number because I liked it so much.

A few years latter, someone left me several messages about buying the 800 number, but I never returned the calls. At the time I thought nothing of it, but then a while after that I began to get peculiar wrong numbers. Especially peculiar because my name is in fact Sean, so the messages seemed to be for me.

They would say things like,

“Sean, you are a great American, and I just wanted you to know that I agree with everything that you say.”

“Well that’s nice,” I would think to myself, “but who the hell was that?”

Other times these messages would be less flattering, and more just creepy right wing ranting like,

“Sean, I disagree with you when you say that gays should not be allowed into the military - I  think they should all be forced to join the military and sent on suicide missions!”

And since I was wearing my hair long back then and even had an earring, I found myself a little scared that whomever this was calling me had my number and seemingly knew my name…

But eventually I heard a couple messages along the lines of,

“Is this the Sean Hannity Show? Do I have the right number?”

And I realized what was happening. I didn’t even know who Sean Hannity was at the time, but I gathered that I was getting wrong numbers for some other “Sean” who was apparently some sort of talk radio DJ.

Latter I remembered that someone had wanted to buy the 800-WHY-SEAN number, and I assumed that they had settled on one that was close to it (off by only one digit it turns out) when I had failed to get back to them. You see, my 800-WHY-SEAN number is 800-949-7326, and it turns out that the call-in number for Sean Hannity’s radio talk show is 800-941-7326.

During the 2004 election year, I started to get more calls, so in August of that year I changed my voice mail message to say something like “Sean can’t take your calls right now, but he’d like to here what’s on your mind. You release the rights for anyone to publish or broadcast any message you leave here…”

At the time I thought that I might get around to doing something interesting with the messages. [I even tried to contact Al Franken, because I thought he might have an amusing idea, but he never got back to me.] But after the election, the messages came fewer and farther between and I stopped thinking about it, although I would still occasionally get into some trouble with my wife when a sexy voiced women would leave a message saying something like,

“Sean, you are a great American, and I have been a bad bad girl. I want to you to put me over your knee and spank me, then I want you to pull down my panties and…”

[Who knew that being a conservative pundit could get you laid?]

But now it is election season once again, and the messages have once again started pouring in. So I am asking you, dear reader, to help me out here with your suggestions. What should I do with these messages?

Should I make youtube videos where I field the calls and answer them as best I can?

Should I publish them all in a book?

Some of these people even leave their telephone numbers - should I call them back? Do you want to?

Below is a link to a directory of audio files for all the odd calls I have received ever since I included that disclaimer indicating that the voice messages would be published. I am making them available for humorous purposes, but also to hopefully inspire someone to come up with a really good idea about what I should do with them.

They are in order by date - so start at the end for the most currently politically relevant material:

http://www.veraverba.com/Hannity/

Please let me know which ones are your favorites, and how you think I should respond to them if I ever find the time to do so.