CT Blue

Paul Krugman makes the valid point today that Treasury Secretary Paulson’s proposed “reforms” amount to little more than rearranging the deck chairs on the Titanic:

Anyone who has worked in a large organization — or, for that matter, reads the comic strip “Dilbert” — is familiar with the “org chart” strategy. To hide their lack of any actual ideas about what to do, managers sometimes make a big show of rearranging the boxes and lines that say who reports to whom.

You now understand the principle behind the Bush administration’s new proposal for financial reform, which will be formally announced today: it’s all about creating the appearance of responding to the current crisis, without actually doing anything substantive.

…

So the Treasury has, with great fanfare, announced — you know what’s coming — its support for a rearrangement of the boxes on the org chart. OCC, OTS, and CFTC are out; PFRA and CBRA are in. Whatever.

Krugman makes the case that new regulations are in order, but the fact is that even those won’t help unless we also get new regulators. Regulatory policy issues rarely if ever intrude on a presidential campaign, but an administration’s approach to regulation has far reaching consequences. Perhaps only its Supreme Court choices are more important It’s too late to prevent the unfolding disaster, but not too late to prevent the next one. But that requires two things, good regulations and good people to enforce them. We will never get the former as long as there is a Republican (of the 21st century variety, in any event) in the White House, and even if Congress legislated in detail, we would never get the enforcement such regulations will require. Krugman probably recognizes this, for as he notes, the mindset of our current regulators is hardly encouraging:

For example, there was a 2003 photo-op in which officials from multiple agencies used pruning shears and chainsaws to chop up stacks of banking regulations. The occasion symbolized the shared determination of Bush appointees to suspend adult supervision just as the financial industry was starting to run wild.

McCain has surrounded himself with people who promise more of the same. These folks are true believers, who will stick to their ideological preconceptions in the teeth of all historical evidence. They are the people who will tell you that the market will take care of people who peddle tainted drugs or the people who peddle fraudulent financial instruments. And it does take care of them. They walk away from the wreckage with big bucks, while the rest of us pick up the pieces.

[From Good regulations can’t trump bad regulators]