Regulations are often created to prevent unethical people from harming innocent Americans. However, these regulations can often cause an undue burden on the people the regulations were supposed to protect.
Before regulating an activity, we must think carefully regarding the following:
1. Is the threat real? Or is it just perceived?
2. What is the likelihood of the threat becoming reality?
3. How dangerous is the act if not prevented?
4. What is the burden on the millions of innocent Americans, those who play fair and who never pose a threat?
What usually happens is that one person was able to commit one very unusual crime or harmful act. Legislators and agencies get in the mentality of “much ado about nothing”, which results in a new law or regulation. However, this regulation now puts a great burden on the people. Millions of innocent people are now required to pay the penalty. Americans are punished for the unusual act of one individual.
However, there are times when it is appropriate to regulate an activity. You can usually tell the difference by noticing how harmful the activity is, and how frequently it occurs. If the harmful activity is frequent then additional regulations are probably necessary.
Let us take look at some cases where regulation is necessary. Financial companies provide numerous examples.
The Financial Industry is famous for doing slight of hand, tricky accounting, and lying to its customers. From 1820 to 2010, unethical banks and unethical companies have found ways to steal money from true hard working Americans.
Pick any unethical banking procedure. In 1820 bankers influenced elections and refused to give loans based on personal views. This led to President Jackson’s war on the National Bank.
In the 1920s, preceding the Wall Street crash and the Depression, many companies falsified information about their securities. This led to the crash, then contributed to the Great Depression. This also led to the creation of the Security and Exchange Commission (SEC) so that investors would see honest reporting of securities.
In 1995-2000, several companies such as Enron played funny money with their accounting systems. This led to many major companies going bankrupt and investors losing their money. In response, the government created many new accounting laws to prevent this situation from occurring again.
For each of these activities, there was a harmful act, followed by appropriate regulation. Why was the regulation appropriate in these cases? Let’s look at the factors:
1) The threat was real, because several companies have behaved in this manner.
2) These acts were pervasive throughout financial industries. Therefore, the likelihood of the damage to innocent people was great.
3) The danger was significant, because one company can cause thousands of Americans to loose all their money and their home.
4) Regulating these activities was a burden on the executives, not on the people, so the factor of burden on the innocent Americans is minimal.
Therefore, in these cases it is acceptable to regulate the financial industries.
Remember that just because a harmful act has been committed, this does not necessarily mean that new laws or new regulations must be created. If the act is unusual then the regulation may be punishing the people more than the criminals.
However, there are times when it is appropriate to enact laws and regulations to prevent significant harm to innocent people.
Each harmful act and each proposed regulation must be evaluated on its own. When evaluating regulations, remember to use these criteria:
1. Is the threat real? Or is it just perceived?
2. What is the likelihood of the threat becoming reality?
3. How dangerous is the threat if not prevented?
4. What is the burden innocent Americans, who play fair and who never pose a threat?
