Small Town News

When and when not to regulate

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Summary: Beneficiaries of the taxpayer-funded bailouts still want to make their own rules.

It's hard to be a big fan of government intervention into the private business world.

On a comprehensive standpoint, such a move would be an affront to our very society, at least on its basic written principles.

The rules, however, have shifted after the near-collapse of the country's financial system just one year ago. Those largely against government intervention not only approved of it, they begged for it.

Arguably, the biggest beneficiaries of the bailout were the banks and Wall Street firms that played fast and loose with the trading of bad loans. It got so bad that the old conservative curmudgeon who oversaw it all, former chairman of the Federal Reserve, Alan Greenspan, said it best in front of a U.S. Senate Panel a month after the financial tsunami. He admitted that he, along with many others, misjudged people's ability to self-regulate.

Clearly that's still the case despite reports that the country's recession is "over."

Last week, major financial institutions which benefited greatly from taxpayer bailouts announced new policies at curbing excessive interest rates hidden in the pages and pages of small print which accompany credit applications.

That this issue has lingered a year should be testimony enough that these large financial institutions are doing nothing more than going through the motions, acting upon uproars.

The new policies are similar to the game plan which helped bring down the system - fast and loose with rules that could change daily.

For example, a decade ago, most banks simply denied transactions, without a fee, when a customer's account was empty. In recent times, however, most major banks have adopted a euphemistically labeled "overdraft protection" system, under which unsuspecting customers are charged as much as $35 for overdrawing an account by the price of a cup of coffee or a bottle of aspirin. Under this scenario, a series of small, incidental purchases totaling less than $20 can rack up $300 in fees.

While the banks are addressing such issues, it's no substitute for federal legislation that would make fair overdraft fees a permanent part of the regulatory landscape.

Given the amount of money flowing on Wall Street again, however, it seems highly likely that the large financial institutions will be able to lobby Congress back toward the status quo and ever-so quietly begin pumping up the bubble yet again.

These firms were bailed out by taxpayer dollars when in dire straits and still don't want to be hindered by "rules and regulations" aimed at making life safer for the very people who were dragged into the fray.

It's true government regulations can wield a heavy hand and should be excluded from many parts of our lives. In this case, however, it's needed.



Copyright 2009 Turtle Mountain Star, Rolla, North Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2010 Turtle Mountain Star Rolla, North Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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