Putting Out Fires, Starting New Ones

The failure of government regulators to anticipate the financial crisis and their continued failure to deal with its fall-out has been a noted flashpoint for partisans on both sides of the aisle. The dominant narrative assumes that most observers were content to stand idly by and reap the benefits of corporate largesse while the “getting was good”. It’s true, some saw the signs and did their best to sound the alarm, but in the great tradition of American politics, these Cassandras went unheeded. And if the developments of the last year and a half are any indication, we’re no closer to fixing the problem than we were at the start of the crisis, because as of yet our leaders have been unwilling to make the hard decisions required of them. In the meantime, we suffer from record levels of unemployment, saddled by mounting debt, and with little hope that the culprits will actually be held accountable. All this begs the question, what lessons if any have we learned from this crisis? Former Governor Eliot Spitzer does just that in this month’s issue of the Review, in his piece for the New Democracy Forum, “The Rules.”

Spitzer’s formulation is nothing we haven’t heard before. The government intervenes because it has to. It intervenes because it remains the only actor capable of ensuring “integrity, transparency, and fair dealing” among and within companies. Businesses are not governments – and therefore, should not be expected to act like them; the only principle to which they are bound is the bottom line. Governments must act to circumscribe corporations where their actions negatively impact other competitors or the market generally. If these are the premises we hold to be true, then obviously our existing regulatory framework falls short of the mark. But not in the conventional sense. According to Spitzer, our regulatory bodies already have sufficient powers to do the work necessary to punish offenders and prevent systemic failure. The problem, as he sees it, lies not with the framework but with the regulators themselves. And the costs have been dear. While we continue to undergird an unrepentant Wall Street, we have neglected to invest in recovery projects that would employ thousands of Americans in building a 21^st-century economy. With the loss of its 60^th vote in the Senate and midterms fast approaching, one only wonders how much longer the Obama administration can afford to keep taking this middle road, pleasing no one and arguably displeasing more.