No Rules Means No Cheaters

This week, the Supreme Court dismissed a lawsuit that sought to hold Wall Street bankers liable for losses stemming from the collapse of Enron.

The plaintiff's contended that said bankers conspired to conceal Enron's vulnerabilities from investors. But the court ruled in this instance, as in several others recently, that responsibility should rest exclusively with the liars at companies like Enron, not with the nice people in the financial services industry (is there any other industry left? Oh, right--I always forget about pharmaceuticals and pornography...) who so cheerfully delivered those lies to you and I.

And isn't that only fair? Don't investment bankers put on the pants of their $5,000 Armani suits one leg at a time like the rest of us? Or have their valets do it one leg at a time for them? Aren't they struggling to put food on the table for their families, just like any feedlot salesman in rural Texas. Except with different food. On a nicer table. In a bigger house. And with a staff to handle the dishes. What I'm trying to say is, aren't we all the same mortal clay, trying to make ends meet? And isn't that all the harder when one end is at a beach house in Maui and the other is with the children at their prep school in Connecticut?

After the case was dismissed, Antonin Scalia was emotionally overcome with sympathy for the heroes of high finance. Later, that most soft-hearted of Supreme Court Justices sought to blot out the tormenting images of suffering bankers by making himself a cup of hot cocoa and flicking lit matches at orphans soaked in gasoline.

So the financial services industry will emerge unscathed from the Enron disaster. And after a weekend of celebratory high-fiving, meth binges and raucous circle jerks, they will buckle down on Monday morning and find new pyramid schemes to misrepresent.

Yes, they are abhorrent. Yes, they should be ashamed, and probably would be if they hadn't had their sense of honor surgically extracted to create for themselves the same sort of career advantage possessed by prostitutes with removable dentures. But does the ultimate responsibility lie with the bankers or with the regulations under which they operate? If the rules of boxing awarded extra points for blows to the kidneys and testicles, who would be a dirty fighter?

I'm sure this notion will offend the mechanical flag-wavers, were it possible for opposing viewpoints to pierce the Fox News-hardened protective bubble of their obliviousness. This is America, they'll shout, the land of fair play! Regulation is the great enemy of prosperity! If you knee-cap our entrepreneurial enthusiasm with your schoolmarmish delicacy regarding con games and loansharking, how will we be able to afford the Hard Rock Cafe t-shirts we need to look our best when Jesus returns?

Fair play? America may believe in a level playing field, but fair is anything you can get away with. And if you can get away with tilting the playing field, that's OK too.

Law has always been more important in this country than in the old world. In Romania they have thousands of years of custom--most of which relates to proper ways for killing Jews--to serve in law's stead. But America is basically one giant trailer park. The only customs dictate quiet time after 10 pm on weeknights and who has dibs on the sceptic hookups. Without rules and regulation, we'd be living in... well, exactly the kind of chaos we have today.

So make no mistake, we have both a people problem and a rule problem. The people problem is profoundly intractable. People are just awful, and if God made them, he has a crappy sense of humor.

But the rules problem is correctable. If we can get the people to make the necessary corrections. Wherein it is possible that even a small degree of optimism is misplaced.

For today, "regulation" is as dirty a word as it has been at any time in our brief and tawdry history. The perceived causal relationship between the scuttling of so many structural constraints over the last 25 years and the false sense of general prosperity over that same time frame has reinforced the negative image of regulation in any form. There is no question that each President since Carter has wiped his ass with the pages torn from our country's regulatory rulebook, and that G.W. Bush is a man that uses a lot of toilet paper. The authenticity of the affluence generated in that interval is debatable, however. First, like all compulsive gamblers, we tend to retain clearer impressions of our wins than our losses. Second, much of the residue of success that persists after the bursting of the technology and real estate bubbles reflects money borrowed from countries that build their wealth by producing actual things of value, rather than simply delivering pizzas to each other. Payback will be a bitch, as our children will discover soon enough.

But the perception of regulation as an evil persists. And if a free market is good, than isn't a free-er market even better? Shouldn't we make the market so fucking free that the Chicago commodities exchange will grow wings and soar away westward over Minnesota? The answer of course, is no. And not just because of the dangers that an aviating financial center would pose to the good people of Rotchester and St. Paul.

You see, balance is good. Every empirical faculty we possess tells us this is so. In an engine we need just so much fuel and so much air. Creatures in the ocean need just so much salinity and no more. And our financial system needs just the right mix of constraints and flexibility.

The problem is that our culture holds nothing but contempt for moderation and balance. We are the land of 80-hour work weeks, of obesity and anorexia, of multitasking so frenetic that we are developing a new generation of personal music devices designed to respond to contractions of the sphincter, so that we won't have to stop text messaging when we want to skip to the next song. We demand that everyone give 110%, though it leads not only to insurmountable paradox, but pulled hamstrings as well.

Admittedly, our unfettered aversion to fetters has spurred our tremendous material advancement over the years. There are eastern cultures, Hindu and Buddhist, that in contrast to us aspire to optimal balance in all things. And in case you hadn't noticed, an inordinate number of those people are at this moment covered with flies and sitting in a pool of raw sewage. Yet our pedal-to-the-metal economy delivers plenty of volatility and uneven distribution of wealth as it lurches from bubble to bust. And the ratio of good times to bad is likely to deteriorate as we hurl ourselves kamikaze-style against the business end of a hockey-stick curve of debt, energy costs, and a living standard unsustainably out of level with the rest of the planet.

Don't look for any populist groundswell in support of regulation, however. Ironically, no constituency is more protective of our wild west marketplace than those who suffer most egregiously from its fallout: the poor. While the wealthy may welcome the security reasonable regulation provides for gains already accrued, those without are terrified to think that the paths to quick riches might be closed before they get their own millions. It is the simplest of propaganda parlor tricks to convince them that affluence is just around the corner, and to provoke a feral response with the canard that regulators want to take it away. Advocates of preserving and extending the most brutally Darwinian and unalloyed form of free enterprise can feel confident that the unwashed masses are behind them. And hopefully downwind as well.

The Enron fiasco is only one of the smaller calamities precipitated by a lack of regulation in recent years. Remember when all those savings and loan institutions went belly up? That was the result of a regulation failure. And the current mortgage credit crisis is entirely the result of fabulously ill-conceived lending instruments, deceptive selling practices and dishonest risk representation of just the sort that regulation could have prevented. Dr. Moreau himself would only genuflect to the mad financial wizards who created these taxonomy-defying devices. It's no surprise that average home buyers didn't know what they were getting into, but Fed Chairman Bernard Bernanke, a certified genius who is keenly aware that any display of uncertainty on his part can have devastating consequences confessed that he did not have a clue as to how these financial instruments worked. Perhaps it was all a practical joke gone awry. If so, somebody needs to get canned.

There is a moment in a tragedy-bound joyride when the car teeters on the verge of control, and the riders are still shouting with glee, even as their overtaxed synapses begin to furiously fire messages of doom. That's where we are right now. Sadly though, no lesson will be learned unless we hit a tree.

Until then--Wheeeeee!!!!