I’m surprised I only stumbled on this article today, but Gary Becker had a great piece several weeks ago on future financial regulations. Here’s an excerpt:

The claim that the crisis was due to an insufficient level of regulation is not convincing. For example, commercial banks have been more regulated than most other financial institutions, yet commercial banks performed no better than other classes of financial institutions. At the other extreme, hedge funds have been the least regulated, and on the whole they did better than most others in the financial sector. One major problem with regulations is the regulators themselves. They get caught up in the same bubble mentality as private investors and consumers. For this and other reasons, they fail to use the regulatory authority available to them. This implies that as much as possible, new regulations should more or less operate automatically rather than requiring discretionary decisions by regulators.

Becker goes on to say that future regulations could include tighter restrictions on asset-capital ratios, which could include progressive restrictions (higher asset-capital ratios as the financial firm gets bigger). This last part would discourage extremely large financial institutions from emerging, since size would inhibit financial versatility, thus solving the “too big to fail” problem in some respects.

I think Becker would also agree with the points that I made in previous posts about how regulation needs to be about better enforcement of property rights (i.e., not allowing credit rating agencies to falsely rate bundled securities as highly rated financial packages).

Even Harvard Law Professor Laurence Tribe seems to think that the recent congressional action to tax away the AIG bonuses is unconstitutional:

Tribe’s assertion could spell big trouble for the measure, because it could harden opposition within the Obama administration against the proposal at a time when Obama and his advisers are already expressing doubts about it.

Tribe had previously said that he thought the measure — which would slap a 90% tax on bonuses for executives whose family incomes exceed $250,000 — would pass constitutional muster. But now, after taking a closer look, he’s not so sure.

Tribe says the problem with the bill is that the Constitution forbids Congress from enacting a “bill of attainder,” which would essentially “legislate punishment of an identifiable class,” as he put it. Tribe noted that the Supreme Court had used that clause to slap down other laws.

Tribe says the main problem is that it’s hard to make the case that the law isn’t “punitive.”

Tribe argued for Gore in 2000 and advised Obama during his campaign.

Geithner to push legislation for more involved gov’t regulation
[UPDATE]: The Washington Post today published an article about new legislation soon to be presented to Congress that seems to have some potentially scary implications. Tim Geithner spoke yesterday about a proposal that would allow Washington to seize non-banking financial institutions when the companies show sign of decline and threaten to destabilize the American economy. Specifically, Geithner states that the new document gives the government authority to take partial ownership of the company and break existing contracts (i.e. AIG bonuses). Read the earlier portions of this post about misguided government regulation after the jump.

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In light of the warm, non-Ithacan weather I am experiencing down south in Virginia (45 and overcast), I thought it appropriate to get out a little bit of information regarding an issue that is surely going to consume more government time and money over the next four years – that of ‘global warming.’ A few new articles seem to continue to support my theory that climate change is a much more complex issue (or ironically, maybe a lot more simple) than Gore often leads us to believe. While it is clear that our earth has experienced a warming trend over the past 20 years or so, how much of this is applicable purely to humans and how much is part of a natural, inevitable pattern of our earth can, be and should be disputed.

My biggest problem with this topic, however, is the fear-mongering often instilled by ‘global warming’ activists and those who ultimately profit from such actions. Detrimental effects comparable to nuclear war (which I have actually heard) and the use of the over-hyped climate change analysis as a political platform is very irresponsible and deceptive, and deserves to be exposed. Also, the theory of man made ‘global warming’ should stay just that – a theory. Accepting the theory conventionally as being as good as a proven fact is dangerous in that it precludes further studies that would reveal opposing ideas, and more generally, goes against everything in science that produces progress and freedom of ideas.

Anyway, here are the articles that may be of interest to those wanting to learn some more about non-human factors which could be causing the warming trend, or studies in general which may contradict commonly held climate theories. One is a study at the University of Wisconsin – Milwaukee which applies a mathematical formula used in chaos theory and applies it to climate trends, and the other is a study from Florida State University which looks at hurricane and typhoon statistics.

[UPDATE] — This week’s The Economist has an article regarding the expenses involved in taking action against climate change. Although, of course, I don’t side with the author in his statements defending the global warming belief, he does cover one of the issues I touched on in my summarization above. Here’s an excerpt, and the full article here.

The president is right to want to cut emissions. The alternative, allowing climate change to take its course, would be far more damaging to America and the world. The economic impact of rising sea levels, reduced crop yields, fiercer storms and many other doleful consequences would be devastating.

But fighting climate change will be costly. It will involve swapping cheap but dirty fuels for cleaner but dearer ones, as Congress intends, as well as building lots of expensive new power plants to replace older, more polluting ones. That in turn will lead to higher electricity and fuel prices. Despite the president’s airy talk of green jobs, cutting emissions, by almost all calculations, will increase costs for most businesses and families. Those extra costs must be kept to a minimum.