Former Washington Post business editor and investing columnist Fred Barbash has some strong opinions in the wake of Harvey Pitt's resignation. What do you think? Let us know on our Securities and Exchange Commission discussion board.
Mention "government regulation" to many, and by free association, we hear words such as "burdensome," "meddlesome," and "onerous." Yet mention "law and order," and we hear "tough," "aggressive," and "zero tolerance."
Let us now deploy this distinction as the president considers a new chairman for the Securities and Exchange Commission. Let's use it to change the terms of reference.
It's not about regulation, Mr. President. It's about law and order. Here's the argument.
The traditional grievance against government regulation is that it inhibits market forces and stifles innovation and enterprise. But securities policing is fundamentally different. It is the absence of enforcement, or the appearance of softness, that inhibits and stifles. While many securities law offenses are not classed as crimes in the statutes, the effect of violations is similar to the consequences of conventional crime.
The purpose of conventional law enforcement is to provide a level of order that permits the rest of us to go about our lives and our business with confidence. We get the thugs off the streets so law-abiding folks can walk them. When law and order breaks down, so does society. People stay inside. They flee the cities. Businesses close down. Everybody suffers, and we live in fear.
The flight from the markets by ordinary Americans is attributed to a "loss of confidence."
But it also is really about fear. We fear we'll be robbed. And the victims of corporate crimes are not only investors. Legitimate businesses can't raise money in a climate of fear. The well runs dry, and so does enterprise.
There's reason to think the president doesn't get this yet. The White House lost confidence in Harvey Pitt, not because he did something wrong, but because he did something wrong badly. That's classic Washington. Don't embarrass the president. But he'd really be embarrassed if voters thought he was soft on crime.
So Mr. President, before you name a new SEC chairman, ask yourself the following questions:
Would you tap the underworld for a new FBI director?
Would you choose a drug czar from among the ranks of former pushers, on the grounds that they "really understand" how the drug trade works?
What would you think if your drug czar sat down with his chums from the cartel in order to get their input on how to interpret the drug laws?
For that matter, would you have chosen as attorney general a lawyer who had made a career as a public defender or an American Civil Liberties Union advocate?
We know you don't want to lead "The Party of Regulation," Mr. President. So try "The Party of Law and Order."
Give us a cop, sir. A tough one.
Fred Barbash is the former investing columnist and business editor for The Washington Post. He can be reached at [email protected].
