America needs smart, limited, enforceable regulations

With all the campaign rhetoric flying around as Congress scrambles to rescue its biggest campaign contributors, it is easy to lose focus on the underlying problem: how did we reach a point where Wall Street fat cats determine the stability of our country and the economic prosperity of regular Americans?

When the stability of Wall Street becomes intertwined with the stability of our country, we cannot afford an unregulated financial industry. The failure to regulate, or the failure to enforce regulations, are sure routes to the wanton bad banking that has our country teetering on the brink of recession.

The free market is an illusion. It is an illusion because there is always cheating, which causes the kind of artificially-inflated values that led to the current economic crisis. In order to have a truly free and fair market, there must be at least one rule: no cheating.

To say “no cheating” is one thing. Defining cheating is quite another, and enforcing it another thing again.

The government has defined cheating, albeit with complicated and often-ineffective regulations. For example, it is illegal for mortgage brokers to coerce or trick consumers into lying on loan applications, to omit important disclosures, or to target minorities for different loan terms. Yet that is exactly what happened with millions of now-failing loans.

Why have attorneys general done nothing, even though this was common knowledge? The FTC? The OCC? State prosecutors and the FBI? Congress? Fear of being seen as party crashers? Possibly

Lack of enforcement is just as bad as lack of regulation when it is needed. We need smart, limited regulations with serious enforcement provisions. Since Americans obviously cannot trust those in power to enforce regulations against powerful businesses, every regulation must be enforceable by private citizens, with or without lawyers.

We have too many complicated regulations now, and a complete lack of regulation in some areas. Smart, limited regulations means the minimum regulation necessary to bring fairness to the market. It means clear, concise laws and administrative guidelines so the market can follow the rules easily and to minimize the possibility of loopholes.

Serious enforcement provisions means including a private right of action in every regulation that includes mandatory attorney fees and costs for consumers who win enforcement lawsuits. To satisfy business interests, regulations could also include a reverse-fee-shifting provision for plaintiffs who bring groundless lawsuits.