Drowning in a Sea of Over-Regulation

Drowning in a Sea of Over-Regulation

© David Burton 2013

We are Overregulated

     So, you think the housing market collapsed in 2007-2008 because of a lack of government oversight. We learned our lesson and the government has fixed the problem. No more buying houses without the ability to pay the mortgage; no more buying homes with 5% of less in down payments. From now on, a home buyer has to put 20% down, right? Think again! We’re right back where we started from. We’ve created more rules, regulations, red tape and overseers to guard the hen-house after the fox has taken the chickens. What we’ve done is given the false impression of fixing the problem. We have hired a bunch of busy-bees to stamp papers and create reams of documents to show that they are doing something – whether what they are doing is productive or not is irrelevant – they just have to give the appearance of doing useful work. Let’s see if we have corrected the problem of unqualified mortgage applicants getting housing loans with insufficient down payments.

     Today, mortgages insured by the FHA “require a minimum down payment of 3.5% for new purchase loans.
     “According to FHA.gov, "Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan.” (Ref. 1)

     Now that home prices are down and mortgage rates are low, home buyers with little or no money can again get mortgages that they may be unable to afford if the market again turns around – just like it did when the housing bubble burst in 2007. We’ve added oodles of new rules, regulations, and administrators to oversee the housing purchase industry, but it’s all a Potempkin Village – appearances and reality are vastly different. Down payment requirements should have been set much higher – as much as 20%, not 3.5%.

     We are all being engulfed by a nightmare of incomprehensible and legalese regulations that keep lawyers and bureaucratic government hacks employed at our expense while we end up drowning in a sea of totally meaningless regulations.

     My wife and I recently downsized and purchased a condominium. We began the process through a real estate agent. In making our offer to purchase, we had to sign a few documents. Then, we had to deal with a mortgage originator and a lawyer. The mortgage originator gave us a package of documents for our perusal and signatures. The package contained 100 pages and required some 56 signatures (28 by my wife and 28 more by me), 6 sets of initials (3 each, by my wife and myself) and some 56 insertions of the dates of signing.

     Then the company servicing my mortgage application and the underwriter had to verify that I wasn’t lying, cheating, stealing or misrepresenting the information that I was obligated to provide. They had me send duplicates of nearly every record related to my depositing money into my checking account to cover the down payment. One reason for the mind-numbing submission of useless information was supposedly to ensure that I wasn’t a terrorist transferring money to some terror cell or that I wasn’t a member of a drug cartel laundering illegally obtained money.

     Contained in this flood of paperwork were more than 27 documents, which included the following:

  1. HUD’s Settlement Cost Booklet (48 pages long)
  2. Uniform Residential Loan Application
  3. Patriot Act Information Disclosure
  4. Rate Lock Commitment Disclosure
  5. Privacy Forms
  6. Credit Score Information
  7. Credit Score Information Disclosure
  8. Potential Score Improvement
  9. Federal Truth-in-Lending Disclosure Statement
  10. Good Faith Estimate
  11. Itemization of Amount Financed
  12. Notice of Intent to Proceed with Loan Application
  13. Acknowledge of Receipt of Good Faith Estimate
  14. Request for Transcript of Tax Return
  15. Borrower’s Certification and Authorization
  16. Appraisal Acknowledgement
  17. Appraisal Disclosure
  18. Borrower Appraisal Disclosure
  19. Federal Equal Opportunity Act Notice
  20. Flood Notice . . .
  21. US Patriot Act Important Information . . .
  22. Massachusetts License Disclosure
  23. Servicing Disclosure Statement
  24. Social Security Administration Authorization . . .
  25. Massachusetts Lead Poisoning . . .
  26. Lead Inspectors List
  27. Evidence of Joint Application
  28. Acknowledgement of Receipt of HUD Settlement Cost Booklet
     From the time that we signed an offer sheet to the time when the sale was completed, I had to repeatedly provide numerous documents to the mortgage originator to prove that a) I was who I claimed to be, b) the funds that I was putting into my checking account to cover the down payment on the new residence hadn’t come from some terrorist organization, c) the funds that I was putting into my checking account to cover the down payment on the new residence wasn’t organized crime money being laundered, and e) that my bank was not lying on the receipt it gave me when I cashed a CD and transferred the proceeds to my checking account. The process continued interminably - even after the sale was completed. Some 2 weeks after passing papers on the condominium, I was still being hounded by the mortgage agent to provide more backup to the underwriter aqnd lender to prove that my down payment was made with my own money – not with funds provided by Al-Quaeda or some Columbian drug cartel. The fact that my credit rating placed me in the top 10% of credit worthiness and that my net worth and liquid assets were more than adequate to pay for the new home with cash were irrelevant. The documents had to be provided and someone had to stamp them as being genuine.

     Consider the stupidity and useless of all of this paper shuffling. To fund my down payment, I cashed in a number of U.S. savings bonds at one bank and deposited the cash proceeds into my checking account at a second bank. I provided the mortgage originator with a copy of the receipt from the first bank for the cash I received and a copy of the deposit slip from the second bank for the money I deposited into my checking account. These receipts were judged to be inadequate. Weeks after closing, I was still being asked to request that the bank provide documentation that U.S. savings bonds that I cashed were actually mine. Questions: 1) Don't you think that the bank that cashed my bonds required proof that the bonds were mine before they cashed them for me? 2) How do any of the pieces of paper being requested prove that I didn't take the money from the cashed bonds, buy myself some expensive bling, and then turn around and take terrorist money to deposit into my checking account for later laundering? All this documentation collection does is give the appearance of preventing some criminal or terrorist activity, but, in reality it does nothing of the sort.

     In my previous life, I held a top secret security clearance. The paperwork and government scrutiny involved in obtaining the clearance then were nowhere near what was involved in purchasing a new residence today. I suspect the information that was obtained and reviewed for my security clearance decades ago was infinitely more thorough and relevant than what is being passed off as necessary today. Today, we have an army of nameless faces going through the motions of collecting and reviewing information in order to give the public the false impression that they are protecting us or performing some useful function. The truth is otherwise.

     Following this exercise in futility, the day finally came to pass papers and take ownership of a condominium. This required an hour in the lawyer’s office, with my wife and I again signing our names some fifty or more times to another 130 pages of mostly useless and mind-numbing documentation.

     Exactly what did all this wasted time, energy and paper achieve? It did nothing but perpetuate the fallacy that the government was protecting someone – you, me, the banks, the government, and motherhood. What it did do was to provide employment for a number of pencil-pushing bureaucrats employed in overseeing meaningless work; it let politicians take credit for creating more laws and regulations that gave the appearance of protecting the public from fraud while, in reality, doing nothing of the sort; and it provided the legal profession with another means of earning a living by giving the false impression that they were performing a useful function. What a total waste of paper, trees, legal and bureaucratic time, and postage. We have allowed our lawyers, lawmakers and bureaucrats to get completely out of control. All of this ultimately costs time and money. You and I pay for this unneeded and unnecessary blizzard of useless papers.

     Can’t afford a large down payment and maybe can’t keep up with the mortgage payments? No problem, Uncle Sam will guarantee your mortgage with only 3.5% down. All you have to do is complete mountains of useless paperwork to keep the drones busy. Have the cash for a 20% down payment and the ability to keep up with the monthly mortgage payments? Great! All you have to do is complete mountains of useless paperwork to keep the drones busy. Isn’t this a great system?

     In Greece, there were railroad crossing attendants who raised and lowered the crossing gates whenever a train came through. Several years ago, Greece installed automatic gates at its railroad crossings. But Greece is a European-style socialistic nation. So, the crossing attendants kept their now-superfluous jobs and continued to collect their pay and their pensions while the crossing gates were automatically raised and lowered. Here in America, we would never stomach such blatant feather-bedding. Instead, we create rules, regulations and mandates which require oversight and administration by a growing cadre of government workers. It’s irrelevant if the work they perform is useful. They just have to do whatever is called for by the rules, regulations and mandates. Thinking for oneself is highly discouraged.

     The TSA employees at our nation’s airports are a perfect example of this process – they follow the rules and protocols specified. What they are not permitted to do is to use their common sense and their intelligence to foil a would-be terrorist while causing the least inconvenience to the other 99.999% of the air travelers – one size fits all. Heaven forbid that the TSA worker look for traits and tipoffs that might identify the would-be bomber – that would require that the TSA worker utilize personal initiative and that just might be interpreted as profiling, i.e., the TSA worker must ignore those characteristics that have been found to be most indicative of a potential threat.

     “We are so eager, as a body politic, to eliminate the possibility that public servants will do anything wrong that we make it virtually impossible for them to do anything right.
     – Lisbeth Shorr [2].

     “When people in the private sector complain of federal government-imposed red tape, they should count themselves lucky: Nothing the government does to businesses compares to what it does to itself. Civil servants are subjected to ever-mounting procedural guidelines, audits, oversight and rules that make it increasingly difficult for them to do their jobs. The younger ones had hoped that the Obama Administration would make it easier for the federal government to function, but the older ones knew that the march of rising paperwork and oversight has gone on nearly unbroken across administrations for decades.
      - - -
     “Much of the U.S. public now sees the federal government as a malign, dreaded influence in their lives. Some conservative politicians share this perspective and work hard to fan such popular fears. Meanwhile some liberal politicians see any allowance of discretion and autonomy by civil servants as an invitation to disparate treatment based on race, sex, class, disability etc. These two camps make common cause to tie down the federal government with as many rules as possible. Each group thereby gets something it wants: The government becomes ineffectual, validating the public service haters, and it is non-discriminatory in its operations (because it’s barely operating at all) which pleases those striving for equal treatment under the law. - - -
     “Of course the federal government and its employees have done and will always do some wrong and stupid things, making oversight essential for democracy. But there should be some sense of proportion rather than the current situation, in which behind a $100 million anti-theft compliance program may be a federal employee who walked off with a number 2 pencil and a box of paperclips in the Eisenhower Administration.
      - - -
     The other type of fear that produces a process-encumbered government exists within the civil service itself. Some federal workers fear being punished for doing the right thing, some for doing the wrong thing, and some for, well, doing anything.
      - - -
     “Some civil servants cope with the fear by simply immersing themselves in process. Ensuring (and double-checking) that every process in ye olde regulatory handbook is followed to the letter can literally fill up their days. They will not get anything substantive done, but neither will they get into trouble. [Emphasis mine]
      - - -
     “The easiest way for a fearful government manager not to make a ‘mistake’ is not to do anything new. Put your head down, don’t ask questions and do your paperwork and compliance trainings. [Emphasis mine]“ (Ref. 2).

     “Cutting government waste and stimulating jobs involve ‘hard choices,’ if President Obama is to be believed. The choices are not so hard, however, when one is less concerned about preserving the status quo. Take the federal government’s obsession with paperwork, surveys and forms. The Office of Management and Budget has 8,871 of these certified federal ‘collection instruments.’ As a result, we’re stuck wasting 9,824,120,791 hours each year filling them out. [Emphasis mine]
     “This busywork is the equivalent of a full-time work force 4.9 million strong doing nothing but filling out government paperwork - not to mention the millions of career civil servants required to process the information. All told, it sucks an estimated $60 billion in annual productivity out of the economy [Emphasis mine], but how much of this is actually necessary?
     “The Government Accountability Office last week took a closer look at the reporting burdens that the Federal Communications Commission imposes on the private companies it regulates. Excluding consumer complaint forms, the FCC used 385 collection instruments that required an estimated 18,236,785 hours to complete. That’s the equivalent of dedicating 9,118 full-time workers to serving the information needs of one comparably tiny government agency.
     “FCC form 396, for example, asks every broadcast television and radio station manager to submit a detailed account of the company’s equal employment opportunity program. The report must discuss how, with the ‘cooperation of labor unions,’ the EEO policy will be disseminated to employees. Each station also must explain how it intends to ‘attract qualified job applicants’ under the EEO policy. The FCC says this form will take an hour to complete.
     “Internet service providers wish they had it so easy. They must fill out form 477, which collects data on how many customers have high-speed internet connections, how many are still on dial-up, average download speeds and so many other questions that a 64-page explanatory tutorial is provided along with the form. The FCC insists it takes just 72 hours to fill in the required answers. The company employees who actually have to fill it out suggest it’s more like 720 hours.
     “There is an alternative. While it’s nice and maybe interesting to nail down the exact number of individuals who chose not to have a wire-line telephone, collecting data of this sort is hardly an essential federal mission. Let’s get the government out of the survey business and save ourselves the billions of dollars wasted on generating reports that do little more than gather dust on bureaucratic shelves. [Emphasis mine]
     “Of course, when speaking of forms, we cannot fail to mention the worst culprit of all: the Internal Revenue Service. Our incomprehensible tax code has spawned 907 forms that shackle Americans to 7.5 billion hours of form-filling drudgery each year. The economy loses an estimated $29 billion in productivity as a result. Fundamental tax reform, such as a flat tax, would ditch the hated 1040 in favor of a postcard-sized form that would require a fraction of the time and aggravation to complete. [Emphasis mine]
     “Members of Congress are quick to legislate the reports and tax loopholes that are responsible for creating the current paperwork mess, but the reports never go away - even after they have lost their usefulness. Ditching the useless forms would not just pay off in economic benefits, it would save some forests as well.” (Ref. 3)

     “Even with all of the massive economic problems that the United States is facing, if the government would just get off our backs most of us would do okay. In America today, it is rapidly getting to the point where it is nearly impossible to start or to operate a small business.
     “The federal government, the state governments and local governments are cramming thousands upon thousands of new ridiculous regulations down our throats each year. It would take a full team of lawyers just to even try to stay informed about all of these new regulations.
     “Small business in the United States is literally being suffocated by red tape. We like to think that we live in ‘the land of the free’, but the truth is that our lives and our businesses are actually tightly constrained by millions of rules and regulations. Today there is a ‘license’ for just about every business activity. In fact, in some areas of the country today you need a ‘degree’ and multiple ‘licenses’ before you can even submit an application for permission to start certain businesses. And if you want to actually hire some people for your business, the paperwork nightmare gets far worse. It is a wonder that anyone in America is still willing to start a business from scratch and hire employees. The truth is that the business environment in the United States is now so incredibly toxic that millions of Americans have simply given up and don't even try to work within the system anymore.
     “Today, the U.S. government has an ‘alphabet agency’ for just about everything. The nanny state feels like it has to watch, track and tightly control virtually everything that we do. The Federal Register is the main source of regulations for U.S. government agencies. In 1936, the number of pages in the Federal Register was about 2,600. Today, the Federal Register is over 80,000 pages long. That is just one example of how bad things have gotten.
     “But it is not just the federal government that is ramming thousands of ridiculous regulations down our throats. The truth is that in many cases state and local governments are far worse. We have become a nation that is run and dominated by bureaucrats. Yes, there always must be rules in a society, but we have gotten to the point where there are so many millions of rules that the game has become unplayable.” (Ref. 4).

     Governmental rules, regulations, and bureaucracy have been growing exponentially over the past decades, and that was before the passage of ObamaCare. ObamaCare has carried this fiasco to an entirely new level. Many Americans are finding out just what government rules, regulations, red tape and bureaucracy mean when they try to sign up for the mandated ObamaCare. As one frustrated applicant wrote: “. . . the whole process is a joke. The automatons who know nothing are just collecting a government check and getting health care paid for by me, with my tax dollars, when I cannot even get my own.” (Ref. 5). This was written after a fruitless week of trying to sign up for health care on a system that was broken before it even began.

     “If you thought the size of the original Obamacare legislation was excessive at nearly 2,700 pages, you ain't seen nothing yet. When all of the law's new regulations and rules are written and finalized, it will take a national forest's worth of trees to make all the paper on which to print them. [Emphasis mine]

     “According to an analysis of the rules so far, CNSNews.com reports:

     “Bureaucracies in the Obama Administration have thus far published approximately 11,588,500 words of final Obamacare regulations, while there are only 381,517 words in the Obamacare law itself. That means unelected federal officials have now written 30 words of regulations for each word in the law. [Emphasis mine]
     “And they're essentially just getting started. It could be years before all of the initial rules are written - and that doesn't include all of the subsequent regulations this massive new bureaucracy will churn out in coming years. [Emphasis mine]

"Expect more of this bureaucracy in the future

     “As CNSNews.com reports, the general Obamacare law is actually a combination of two pieces of legislation - the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act. These bills were signed into law by President Obama in March 2010; since then, ‘various agencies in the administration have published 109 final regulations spelling out how they are to be implemented,’ the website reported.
     “In sum, these final 109 regulations account for a combined 10,535 pages in the Federal Register, where they must be officially published by law. And yet, expecting the average citizen (or any lawmaker) to read (and then understand) these excessive, complex rules is laughable - or it would be, if they didn't so seriously impact our lives. [Emphasis mine]

As noted by CNSNews.com:

     “The Federal Register presents the regulations in relatively small type with three columns of text on each page. CNSNews.com calculated that there is an average of 1,100 words on each of these pages by counting the actual words in one 78-page Obamacare regulation and then dividing by 78.
     “At an average of 1,100 words per page, the 10,535 pages of Obamacare regulations consist of approximately 11,588,500 words.
     “By contrast, as officially published by the Government Printing Office, PPACA is 906 pages long and HCERA is 55 pages long. These pages include an average of only 397 words. That means PPACA and HCERA's combined {are} 961 pages {and} consist of approximately 381,517 words.

     “In the end, for every word that is actually contained in the Obamacare law, the Executive Branch's bureaucracies have written 30 more in regulations detailing how the law is to be enforced.

”With regulations come – costs

     “In an analysis of the regulations thus far, Frontpage Magazine wrote that, in order to read the more than 11 million words of regulations thus far, you'd have to sit down and read 24 hours a day for a month, without pause.
     "’I imagine this is exactly what the Founders had in mind,’ the magazine's Daniel Greenfield wrote, sarcastically. ‘If there were a new liberal Constitution written today, it have ten million pages and be completely indecipherable to the layman and would contradict itself on every other pages and assign all final powers to unelected bureaucrats.’
     “The thing to keep in mind is that all of this ridiculously complex regulation will not only have consequences in terms of how healthcare will be delivered and ‘managed,’ but they carry huge compliance costs as well - costs that will, like all mandated regulatory costs, necessarily be transferred to patients or taxpayers - or more likely both.
     “On the third anniversary of the law's passage, Andrew Stiles of National Review tallied some figures: Citing a study by the American Action Forum, Obamacare had already amassed ‘$31.3 billion in regulatory costs and liabilities, as well as 71.5 million hours of paperwork.’
     “Remember when Obama said his signature health reform law was going to reduce healthcare expenditures?” (Ref. 6).

     One of the largest job killers facing American industry is over-regulation. One of the most regulated industries in the United States is over-the-road trucking. Nearly anything you have in your house was delivered to where you bought it by truck – indeed, 70% of all goods travel by truck. And every year, more and more regulations are piled on top of this key industry.[7].

     Regulations are keeping new drivers off the roads — and if fewer big rigs on the road sounds like a good thing to you as a private driver, keep in mind there already are far fewer truck drivers than are currently needed to sustain the volume of goods being transported. It’s reported that the trucking industry is around 200,000 drivers short of need, and government regulations are making it to where a prospective trucker has to be a jail house lawyer to qualify for a job. It’s turning a lot of people off from being a driver.[7].

     One trucking safety director reported that he spent two weeks dealing with a paperwork foul-up between different government regulatory agencies in Washington. “The extra paperwork and nearly $10,500-per-employee compliance costs are far from the only regulatory hurdles {the trucking safety director} and other companies have to overcome in order to compete. Regulations which are often written by people with no idea of the realities of the road . . . are often impractical at best. At worst, they are impossible to follow. - - -
     “The Department of Transportation’s Hours of Service regulation, written to prevent accidents caused by driver fatigue, is one example. The rule says CMV {Commercial Motor Vehicle} drivers may only work 14 hours a day — 11 actually driving — and the driver must keep a logbook of the total hours spent driving and resting. It sounds sensible, but the regulation doesn’t account for the reality of the road.” (Ref. 7).

     In some cases, drivers sit and rest for 8 to 10 hours while their trucks are being loaded. They “are on the clock” during this period of time. If they sit there 8 hours, they can then only drive 3 hours. Once the 14 hours are up, the driver is through for the day.[7]. Never mind common sense – it’s blind adherence to the rules and regulations that the law requires and that the bureaucrats enforce.

     Just where are all these government rules, regulations and bureaucracies leading us? “Ayn Rand once said that the purpose of her novel Atlas Shrugged--which tells the story of a U.S. economy crumbling under the weight of increasing government control--was "to keep itself from becoming prophetic." She may not have succeeded. As a number of commentators have noted, the parallels between today's events and those dramatized in Rand's 1957 novel are striking.
     “In a recent Wall Street Journal column, for instance, Stephen Moore observed that ‘our current politicians are committing the very acts of economic lunacy’ that Atlas Shrugged depicted 52 years ago. In the novel, he points out, politicians respond to crises ‘that in most cases they created themselves’ with more controls and regulations. These, in turn ‘generate more havoc and poverty,’ which spawn more controls, ‘until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.’
     “This certainly seems like an apt description of, say, the housing crisis. For decades, Washington promoted homeownership by people who couldn't afford it: think Fannie Mae and Freddie Mac, the Community Reinvestment Act, tax incentives to buy homes, housing subsidies for the needy, among other programs. And when people started to default on their mortgages by the truckload? The government didn't scrap its controls, but instead promised to bail out delinquent homeowners and irresponsible bankers and impose more regulations on all lenders (responsible or not).
     “But what commentators miss is that Rand's novel provides the explanation for why this is happening--and the cause is not some inexplicable ‘lunacy’ on the part of politicians. The cause is our very conception of fairness, equality, and the good. ‘Why,' states the hero of Atlas Shrugged to the people of a crumbling world, 'do you shrink in horror from the sight of the world around you? That world is not the product of your sins, it is the product and the image of your virtues.’
     “In Rand's novel, government puts the needs of the meek and less fortunate first. For instance, the Anti-dog-eat-dog Rule is passed to protect some long established, less-efficient railroads from better-run competitors. Why? Because it was deemed that those ‘established railroad systems were essential to the public welfare.’ What about the superior railroad destroyed in the process? Its owner needs to be less selfish and more selfless. The Rule fails to stem the crisis, and the country sinks deeper into depression. But, wedded to the ideal that each must be his brother's keeper, government imposes more burdens and regulatory shackles on productive companies in the name of bailing out the struggling ones--only to drive the country further toward disaster.
     “Sound familiar? These are the same slogans invoked and implemented today. We must be ‘unified in service to the greater good,’ President Obama tells a cheering nation. We must heed the ‘call to sacrifice’ and ‘reaffirm that fundamental belief--I am my brother's keeper, I am my sister's keeper....’
     “In 2002, pushing for extensive new government programs to ‘expand home ownership,’ President Bush reminded us of our selfless ‘responsibility…to promote something greater than ourselves.’
     “To implement this goal, Washington allowed Fannie and Freddie to pile up dangerous levels of debt. It used the Community Reinvestment Act to coerce banks into relaxing their lending standards. It used our tax dollars to dole out housing subsidies to otherwise unqualified borrowers. And when it turned out that home buyers who couldn't afford homes without government help, also couldn't afford them with government help, we still do not abandon these failed policies. Clinging to the notion that we are our brother's keeper, everyone today proposes new policies to bail out the ‘unfortunate.’
     “While the details of these policies have been debated, no one challenges their goal. No one questions whether it is morally right to be selfless and to sacrifice to ‘promote something greater than ourselves.’
     “This is what Atlas Shrugged challenges. Why, it asks, is it morally right to regard some individuals as servants of those in need, rather than as independent beings with their own lives and goals? What is noble about a morality that turns men into beggars and victims--the bailed out and the bailers out?
     “Atlas Shrugged presents instead a new conception of morality that upholds the right of the individual to exist for his own sake. This, Rand tells us, is the only possible basis for a free country. It's freedom or service--the pursuit of happiness or of the ‘public good’--the Declaration of Independence or the endless crises of the welfare state--self-interest or self-sacrifice. (Ref. 8).

     So just what has this blizzard of government regulation and oversight bought us? Apparently very little. Consider what all the Washington bureaucrats, all the government agencies charged with overseeing the financial and housing markets, all the government rules and regulations that were in place, did, or more accurately, didn’t do to prevent the 2008 financial collapse:

     “The 2008 financial crisis was an ‘avoidable’ disaster caused by widespread failures in government regulation - - - The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans. - - - Regulators ‘lacked the political will’ to scrutinize and hold accountable the institutions they were supposed to oversee. - - - The Securities and Exchange Commission failed to require big banks to hold more capital to cushion potential losses and halt risky practices, and . . . the Fed ‘neglected its mission.’ - - - The Office of the Comptroller of the Currency, which regulates some banks, and the Office of Thrift Supervision, which oversees savings and loans, blocked states from curbing abuses because they were ‘caught up in turf wars.’ - - - ‘The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,’ . . . ‘The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble.’“ (Ref. 9).

     The growing burden of regulation is galling and frustrating to individuals and businesses alike. But, over and above the inconvenience and frustration with having to put up with the inane paper-work, just how really significant is the increasing amount of government regulation? Here are some remarkable numbers on the cost of this over-regulation.

- Americans spend 8.8 billion hours every year filling out government forms;

- The economy-wide cost of regulation is now $1.75 trillion;

- For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.[10]

     The long-run damage may be even worse than any of this suggests.

     “The growth of federal regulations over the past six decades has cut U.S. economic growth by an average of 2 percentage points per year, according to a new study in the Journal of Economic Growth. As a result, the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now.
     The researchers . . . constructed an index of federal regulations by tracking the growth in the number of pages in the Code of Federal Regulations since 1949. . . . Annual output in 2005, they conclude, ‘is 28 percent of what it would have been had regulation remained at its 1949 level.’
     “The proliferation of federal regulations especially affects the rate of improvement in total factor productivity, a measure of technological dynamism and increasing efficiency. …Overall, they calculate, if regulation had remained at the same level as in 1949, current GDP would have been $53.9 trillion instead of $15.1 in 2011. In other words, current U.S. GDP in 2011 was $38.8 trillion less than it might have been.” (Ref. 10).

     Even if the numbers in this study are off by a factor of 2, these are still staggering numbers. America is fast replicating the failures that have exemplified old fashioned Communism and European Socialism with their misguided attempts to governmentally micro-manage the economies and the lives of their citizens.

     The Sarbanes-Oxley is another example of the government causing more problems than it solves by generating regulation upon regulation. The Sarbanes-Oxley act was passed after the Enron scandal in an attempt prevent a repeat of this debacle. This act required “that most members of a corporation’s board of directors be ‘independent’ (meaning in practice, that they have no knowledge of the company) {and, as a consequence,} the act mired board meetings in accounting trivia. . . . It forced executives to sign piles of documents, full of legal and accounting jargon too time consuming to read, even if they wanted to, while continuing their actual jobs. In essence, the act forced everyone in authority in a U.S. company to constantly lie about his knowledge of accounting details.” (Ref. 11 – page 144).

     In reviewing the factors leading to the financial crisis of 2008-2009, we find the following comments:

     “On March 3, . . . the chairman of the Federal Reserve Board discovered a ‘huge gap in the Regulatory System.’
     “this was astonishing. How could any gap have remained in regulatory coverage after several decades of expanding the Federal Register by more than ten regulations per day and by hundreds of thousands of pages?
     “The problem was that regulators, like most regulators, lacked relevant information. - - - America ‘is being suffocated by excessive and badly written regulation,’ including ‘flaws in the confused, bloated law (Dodd-Frank) passed in the aftermath of America’s financial crisis.’ - - - regulation is mainly an effort to replace knowledge with power. In general, the more regulation, the less information. - - - A great deal of energy is spent on technical rules compliance, often at the expense of a rational economic evaluation or full disclosure of more important considerations. - - - throughout the epoch of systemic collapse, every large institution was thronged with examiners, overseers, supervisors, inspectors, monitors, compliance officers, and a menagerie of other regulatory constabulary. In every case, regulators confidently reported that all was well, ‘sound,’ and ‘stable,’ or solvent until days or even minutes before their subjects announced the need for billions of dollars in bailouts to prevent catastrophe . . . “ (Ref. 11 – pages 135-140). So much for the claim that government regulation and government overregulation will solve all our problems!

     The tentacles of regulation now encompass all levels of government, from federal, to state, to county, to municipality. Take Massachusetts, the original home of ObamaCare. As part of the process to legalize casino gambling in the state, a commission of "overseers" was appointed to scrutinize applicants for licenses. The overall legalization process has dragged on for years, rendering the likelihood of financial success and the creation of new jobs cum added tax benefits to the commonwealth questionable. One veteran casino operator called the state's gaming board, "'freshmen' with an 'unbelievable preoccupation that maybe a gangster is going to get in’ The gaming titan went on to say that one of his directors was pressed for proof of car ownership, while a member of his board who was married for 56 years was forced to provide the board a marriage license." (Ref. 12). Sounds like the gaming board is same entity that has been processing my mortgage papers.

     Here in Massachusetts, the motto is "When in doubt, hold a hearing and pass a new law with more regulations, reporting and oversight.[13]. To bolster it's apparently ineffective bullying law passed in 2010, the state's legislature is proposing to add to the existing law which "requires that schools adopt an anti-bullying plan. School personnel are now required by law to report bullying incidents to their principal. Now there's a campaign afoot to 'update' the 2010 law, with pending legislation that would require school districts to track data on bullying incidents and report it to the state." (Ref.13) In other words, still more regulation, more documentation, more oversight, and more bureaucrats to handle the added paperwork and reporting - as if that will solve the problem.

     Unfortunately, the well-intentioned proliferation of governmental rules, regulations and overseers has done more to create a problem than to solve one. Instead of improving efficiency, this excess of regulation has reduced efficiency by creating useless paperwork, emphasizing attention to meaningless minutia at the expense of seeing the important facts, and necessitating the employment of tens of thousands of bureaucrats to ensure that useless compliance is attained. At the same time, the mountains of paperwork created have generated the false impression the “all is well” while the real problems continue to persist undetected.

     America was once known as a nation of inventors, achievers, and doers. Today, under the growing mountain of government rules and regulations, we are fast becoming a nation of bureaucrats, pencil-pushers, litigants, and do-nothing drones.


  1. FHA Loan Articles, FHA.com, Accessed 16 October 2013.
  2. Our Feared, Scared and Strangled Bureaucracy, Keith Humphreys, The Reality-Based Community; SameFacts.com, 14 November 2011.
  3. Hug a tree, shred government forms, Editorial, The Washington Times, 9 March 2010.
  4. 12 Ridiculous Government Regulations That Are Almost Too Bizarre To Believe, Michael Snyder, Business Insider, 12 November 2010.
  5. Obamacare cancels on promises, Michelle Malkin, Boston Herald, Page 19, 15 October 2013.
  6. Bureaucrats create nearly 12 million words of regulations to enforce Obamacare, J. D. Heyes, Natural News.com, 18 October 2013.
  7. Driven Mad: Trucking Industry Collapsing Under Regulation, Patrick Richardson, PJ Media, 23 September 2011.
  8. Atlas Shrugged and the Housing Crisis that Government Built, Yaron Brook, Ayn Rand Center for Human Rights, Published in Fusion Magazine, Vol. 4, Issue 8, March 2009.
  9. Financial Crisis Was Avoidable, Inquiry Finds, Sewell Chan, The new York Times, 25 January 2011.
  10. The very high cost of government regulation and red tape, Daniel J. Mitchell, The Commentator, 24 June 2013.
  11. Knowlege and Power, George Gilder, Regnery Publishing, Inc., 2013.
  12. Wynn blasts commission's 'freshman' gaming regulators, Dave Wedge, Boston Herald, Page 5, 25 October 2013.
  13. A bully 'ban' falls short, OpEd, Boston Herald, Page 18, 29 October 2013.

  31 October 2013 {Article 182; Undecided_33}    
Go back to the top of the page