Nanny State… The Best Regulator? That's Easy. It's the Market. … As the Goldman Sachs tapes show, regulators almost always fail. In other cases, they cheat consumers out of choices. Leave it to the market. – The Daily Beast
Dominant Social Theme: Regulation … what good is it?
Free-Market Analysis: Remarkably, we continue to see articles about regulatory capture. The latest one is here, appearing in The Daily Beast.
It would seem that the departure of uber-editor Tina Brown has provided The Daily Beast with the opportunity to expand its coverage. The idea of an anti-regulatory rant appearing under Brown´s watch was probably … nil.
We confess we haven't followed The Daily Beast much once Brown left because her removal effectively ended a big left-wing media experiment that was going to merge Newsweek with The Daily Beast and create a new Washington Post-style media conglomerate, only with a digital spin.
That didn't work out so well. Tina Brown, who had a kind of tin ear when it came to US journalism, drove the combined publications toward viewership irrelevance and eventually her services were required no longer.
The Daily Beast, however, seems on the upswing now, and Politico recently posted an update on the digital pub's progress:
One year after Tina Brown exit, Daily Beast traffic surges … In a memo to staff on Wednesday, Editor-in-Chief John Avlon said internal numbers on all platforms showed 21.3 million unique visitors in September, a 60 percent increase in traffic compared to the same month last year. ComScore data for September, which is often lower than internal numbers, is not yet available.
"This year alone, we've grown our audience more than 30%, our social media community is up 300%, and our Facebook audience has grown from 320,000 to 1.7 million since last summer. Over the course of 2014, our advertising deal size has increased 30%, with our largest campaigns ever secured in the past quarter. Bottom line: we're driving record traffic and record revenue at The Daily Beast," Avlon wrote. "[I]t's the creative combination of tech innovation and killer journalism that's really driving our success. Millennials, Gen Xers — and frankly, anyone with a sense of perspective — can see through the predictable partisan spin and the content-farming that's too often pedaled as news today."
The Daily Beast has had a rocky history, from the unsuccessful marriage and eventual split from Newsweek to the departure of Brown last year. Executive Editor Noah Shachtman said in an email the numbers prove the skeptics were wrong.
We looked over the articles on The Daily Beast and did find one or two that seemed to deviate from the standard leftist/socialist perspective. "Our Lame Cult of the Presidency," for instance, is one that might not have made it into the old Daily Beast under Brown, a nearly compulsive admirer of authority.
Here's more from the article:
Consider the recent revelation that the regulators at the Federal Reserve in New York were cozying up with one of the nation's biggest financial institutions it was supposed to oversee. Secret recordings made by Carmen Segarra, a bank examiner for the Fed in New York—parked at Goldman Sachs—exposes the degree to which Fed regulators were actually failing the taxpayers they allegedly protect against the "too big to fail" corporations that the government created. For instance, in the recording, one can hear Fed officials explain how they suspect a Goldman deal with Banco Santander to be "legal but shady"—and then fail to challenge the firm. One can even hear both the regulators and Goldman executives acknowledge that the deal should have required Fed approval.
But then the regulators cave to the firm's opinion that it is above the rules. This is not a unique event, Segarra reports. In fact, according to her, it was common belief among Goldman employees that, depending on the client, they could choose which consumer rules to follow—or not follow—without any fear of consequences from the Fed.
… When considered objectively, it is hard to imagine a scenario where regulatory policies are not commonly captured by a country's most powerful interests. The assumptions of the "regulation as public interest" crowd undermine their stated conclusions. If industrial concerns are indeed as powerful, unaccountable, and ruthlessly-profit-seeking as the naïve view of regulation claims, why should we expect them to play fairly—by the rules of the game?
Even if a regulatory body is initially staffed by upright public servants, there are few (if any) ways to maintain a pure commitment to the agency mission. Over time, wealthy and powerful industry representatives sometimes buddy up to regulators and offer them employment after their service concludes. Instead of dousing the wild blazes of unregulated capitalism, regulatory policy can pour fuel on the fire. Meanwhile, left and right are largely none the wiser.
This excerpt above mentions the Fed's apparent regulatory capture: We wrote about the Fed's unmasking at the end of September. You can see the article here: Sad Tale of the New York Fed and Goldman Sachs Has a Simple Solution.
We were surprised by the article at the time, and this one in The Daily Beast is surprising as well. Our sense was that the Fed expose was intended to create agitation for yet more rather than less regulation – at a federal level. But we can't figure out how this latest article in The Daily Beast can be seen as calling for greater regulation.
And then there is this from "Occupy" of all places – an article just posted and entitled, "Price Gouging, Regulatory Capture and Scandal in America's Markets."
The article is quite critical of the regulatory state, which seems odd given Occupy's initial stance on regulation, which involved MORE of it rather than less. But here's how the article concludes:
The way to a faster recovery with robust benefits for everyone requires no new economic theory, only that we pay respect to the benefits of competitive markets that Smith articulated in the same year the Declaration of Independence was signed.
George Stigler later built on these insights in his classic 1971 paper explaining regulatory capture —two words that, like Voldemort's name in the "Harry Potter" books, should not be spoken, according to some bank regulators.
Our choice is between applying time-tested insights about the benefits of competitive markets or looking the other way as our democratic government helps the oligarchs pick our pockets.
Startling, eh? However … on closer examination, the last line gives us a clue that the positioning probably hasn't changed. We are, in fact, informed that a "democratic government helps the oligarchs pick our pockets."
Unfortunately, this isn't true. Modern democracy is the fruit of globalist elites that intend to guide the West toward internationalism without revealing their true agendas. The emphasis on a democratic government in league with oligarchs implies that if corruption is stripped out government regulatory capture can be reduced or eliminated.
And this brings us back to our original conclusion that mainstream media attacks on regulation are likely designed to create an environment where political redress is sought – solutions that will inevitably expand regulatory excesses in a different and even more uncompromising direction.
Of course, Wall Street continues to be the arch culprit. One scenario we can still foresee is a tremendous equity crash that triggers calls for a neo-Pecora Commission of the kind that gave us the current dreadful regulatory structure back in the 1930s and 1940s.
We're on record that such a crash may not occur this year; chances are next year is far more likely. In any event, some sort of market event does seem inevitable and even though this recent, strange anti-regulatory meme is now more regularly on view, we figure it will end up producing agitation for more and "better" regulation, not less.
We could be wrong. The rhetoric in The Daily Beast article is strong, even uncompromising, and shows how much ground has been lost by those interested in further expansion of the regulatory state. In order to preserve what's left of a controlled dialectic, the argument has been extended to the point where it actually grants exactly what elite globalists wished to expunge. Thanks, Internet!
Time will tell where this emergent meme is headed. We'll follow it with interest.
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