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Category: Regulation


Eliminate the EPA: Stop Environment Thugs

The Environmental Protection Agency has been a disaster from the beginning.  It is anti-technology, anti-science and anti-reason, from its attack on DDT, to its attack on Nuclear Power, to its attack on carbon dioxide.   It pushed the disastrous ban on DDT that has resulted in the death of more people than Hitler, Stalin, and Moa combined.  It’s public relations department takes credit for reduced air pollution and improved water, but its actual record on these issues is mixed bag at best.  This would be bad enough, but now the EPA has been given the right to fine, imprison, and prosecute people without having to bother with pesky issues, such as due process, obtaining a warrant, or having a factual basis for their case.

Rand Paul’s book, Government Bullies, documents the brown shirt behavior of the EPA.  He documents the case of Mr. Pozsgai, who was thrown in jail for three years and fined $200,000 for cleaning up a dump with old tires and other trash.  The EPA argued it was a wetland despite overwhelming evidence to the contrary.  In another case the Sacketts were accosted by an EPA brown shirt for trying to build on a subdivision lot that had houses on the lots next to it.  The EPA brown shirt presented no credentials, nothing in writing, but demanded they stop work or face a $75,000 per day fine for placing fill dirt (no dirty chemicals, just dirt) on a wetland.  The EPA refused a hearing and denied that the Sacketts had any right to a hearing.  The EPA also argued they were not subject to due process, or the fourth Amendment, or the fifth Amendment – these would inhibit their ability to carry out their policy objectives.  The Sacketts demanded a review under the Administrative Procedure Act (this is the law that is suppose to make Administrative Agencies Constitutional) but the EPA essential said that would interfere with their mission and the fourth and Sixth circuits agreed.  These judges should be impeached and put in jail for HIGH CRIMES and MISDIMENORS.  The EPA administrators and the US Attorney Generals involved should be thrown in jail and the key thrown away for this abuse of power.  The Supreme Court sided with the Sacketts, but it was a narrow decision that also failed to uphold the Constitution.  In another EPA BROWN SHIRT case, the EPA could not prove that Wrigley, Lucas and Thompson actually violated any nonsense wetland legislation, so they prosecuted them for conspiracy to violate a wetlands and mail fraud.  This is nonsense.  You cannot be convicted for conspiracy to commit something you never did.  If you did not commit a crime, there can be no mail fraud.  This makes thought into a crime.

These are just three of many outrageous actions by the EPA.  The EPA is a disaster.  It is a thug, it has shortened human life, it is responsible for every death by West Nile in the US, it is responsible for at 300,000 deaths because of their policy of killing off Nuclear Power plants.  It is time we quit pretending the EPA and the Environmental movement are just misguided.  The former head, Al Armendariz, of the EPA summarized their Brown Shirt tactics, “it is kind of like how the Romans used to, you know, conquer villages in the Mediterranean. . . .  They’d go into a little Turkish town somewhere, they’d find the first five guys they saw, and they’d crucify them.”  See the video.

As I document in my post How the Environmental Movement is Killing Innovation and Destroying Our Environment, the environmental movement is responsible for more deaths that Hitler, Stalin and Moa combined.  The Environmental movement is anti-human and evil and the EPA is the BROWN SHIRTs of the Environmental movement.  TIME TO ELIMINATE THE EPA and throw the administrators in jail.

 
10th Anniversary of Sarbanes Oxley

SOX was designed to stop the accounting fraud that occurred at WorldCom, Enron, etc.  Its proponents said it would increase investor confidence in the stock market, eliminated accounting fraud, and decrease the cost of raising capital.  I doubt that anyone would say they have more confidence in the stock market today than they had ten years ago.  It clearly did not stop accounting fraud.  For instance, it did not stop the Lehman Brother, AIG, or LIBOR scandals.  Perhaps, Timothy Geithner will be prosecuting under SOX for his part in the LIBOR scandal.  Instead of decreasing the cost of capital it has made it impossible for startups to access the public market.  Sarbanes Oxley is a complete FAILURE and should be Repeal Immediately.  But the answer of statists is going to be that we need more laws and more regulations, since SOX failed to achieve its objectives.

What SOX has done is destroy the US public markets. In 1996 60% of worldwide IPOs went public in the US.  In 2005 only 20% of worldwide IPOs were in theUS.  TheUSis the only major country to have fewer public companies today than a decade ago.  It costs $3-$4 million in SOX compliance cost a year to be a public company.  This has killed the startup market and severely damaged the US economy.  It has also resulted in a concentration in power among a few firms on Wall Street.  The only people who have benefited from this law are accounting firms and they have done so at the expense of the rest of the country.

There is no way to “fix” this law – the JOBS Act is based on the idea that a little less poison will make the patient healthy. Every academic study that has looked at securities regulation has shown that it best it had no effect on the market and in most cases made outcomes for investors worse.

 

For More information see Sarbanes Oxley – Is the Medicine Worse Than the Disease – 1 and Sarbanes Oxley – Is the Medicine Worse Than the Disease – 2

 
Financial Regulation Does Not Work

In an article entitled “Sheila Bair: Two Years After Dodd-Frank, Why Isn’t Anything Fixed? , it points out that the LIBOR scandal, the MF Global’s bankruptcy, JP Morgan Chase’s “London Whale” and his trading losses, Barclays’ rate fixing, Peregrine Financial’s fraud have all happened despite the 2,319 page Dodd Frank Act has not stopped.  A decade earlier we passed Sarbanes Oxley, which according to its sponsors was going to stop financial fraud, increase investor confidence in the market and in the accounting statements of public companies, and lower the cost to raise capital.  But SOX did not accomplish any of this.  It did not stop Lehman Brothers, AIG or any of the other financial problems uncovered in the 2008 meltdown.  Even more ironic is that no one has gone to jail from these scandals, despite the CEO and others executive officers having to swear that their financial statements were accurate.  So what is Ms. Bair, the 19th Chairman of the FDIC, solution – MORE REGULATION.  Has Ms. Bair ever heard of the definition of insanity?

Ms. Bair argues that this proves that markets are not “self correcting.”  But she fails to note that the US Government always bails out big Banks and Wall Street.  Since the crisis of 2008, we have bailed on the banks with TARP, with zero interest rate loans from the Federal Reserve, and with QE1-3.  Pat Choate has shown that we bailed on banks and Wall Street at least eight times in the thirty years before that.  The markets are not self correcting because the Government does not allow them to work.  The Federal Reserve is nothing more than a Bank bailout protection mechanism.  Wall Street got special provisions in the America Invents Act to exempt them from competition from innovative startups.  Wall Street is acting rationally, because it knows there are no consequences to for failure, but huge upsides if they succeed.  That is not how the MARKET works Ms. BAIR – but it is how government works.

Every academic study has shown that Financial Regulation fails to achieve its goals and in fact hurts investors.  For instance, see Liu, Tung, Santoni, Gary J., Stone, Courtenay C., Federal Securities Regulations and Stock Market Returns. This paper surveys several papers that all show securities regulation has been a failure.  Here are some of the effects of SOX.  In 1996 60% of worldwide IPOs went public in theUS.  In 2005 only 20% of worldwide IPOs were in theUS.  TheUS is the only major country to have fewer public companies today than a decade ago.  There has been more than a 90% decline in the number of IPOs.  This particularly hurts the technology startup market.  It costs around $3 Million a year to comply with SOX as a publicly traded company.

What financial regulation does is increases the cost of obtaining funding for startup and eliminates competition among financial companies.

 
JOBS Act a Small Step in Right Direction

The Senate passed the JOBS (Jumpstart Our Business Startups) Act, H.R. 3606 and President Obama is likely to sign it.  The goal of the legislation is to reduce some of the regulatory burdens in raising capital for startups.  The Act exempts small firms from Section 404 of the Sarbanes-Oxley Act for up to five years according to Wikipedia.  It also includes some of the crowdfunding ideas of HR 2930.  This legislation is a positive step in the right direction.  Unfortunately, it is a pebble in Sea of laws, regulations, and taxes strangling technology startups in the US.  My guess is that the reason this legislation is passing has little to do with what is good for the country, but what is good for Wall Street banks.

In my book The Decline and Fall of the American Entrepreneur I show that every academic study of the effectiveness of our Securities Laws shows that they have been either totally ineffective at protecting investors or worse counterproductive. The real answer to the lack of funding for start-ups would be to repeal all Securities Laws and Regulations except the common law requirements under contract and tort law.

 
H.R.2930 Crowdfunding Passes House

According to an article, entitled House Passes First Crowdfunding Legislation the House has passed a bill modifying the securities law to allow “crowdfunding.”  The proposed legislation appears to be a fairly well crafted piece of legislation, which is quite unique for Congress lately.  The bill is less than 2000 words and does not appear to have any special interest provisions.  The Bill would allow companies to raise up to $1M online within a year without audited financial statements and up to $2M online with audited financial statements.  Another positive of the Bill is that it does not require investors to be accredited to invest.  However, it requires that no one investor contribute more than $10k or 10% of their income, whichever is less.  The Bill appears to require a number of statutory warnings about how risky it is invest in the company.  It makes it difficult for an investor to sell their stake in the company within a year of the purchase.  It also does not require a broker to be licensed with the SEC to sell shares in the company.  However, it does require someone acting as a broker to provide information to the SEC.  The SEC could expand these requirements under its rule making authority.  In general, I consider this good news for start-ups.

The downside of this legislation is that it is a band aid to fix the problems with our Securities Laws.  Every academic study of the effectiveness of our Securities Laws shows that they have been either totally ineffective at protecting investors or worse counterproductive.  The real answer to the lack of funding for start-ups would be to repeal all Securities Laws and Regulations except the common law requirements under contract and tort law. 

 
Repeal of Sarbanes Oxley and Dodd Frank Proposed

According to US News.  Newt Gingrich is proposing to repeal Sarbanes Oxley and Dodd Frank on his inaugural day.  SOX has killed innovation by making it impossible for technology startups to get funding.

At his speech at the Republican Jewish Coalition’s 2012 Republican Presidential Candidates Forum this afternoon, Gingrich urged attendees to help vote a large Republican majority into the House and Senate in 2012 so Congress could immediately pass repeals of the Affordable Care Act and the financial regulations Sarbanes-Oxley and Dodd-Frank.

This would be an excellent start, now we just need him to repeal the America Invents Act and roll back spending to 2007 levels.

 

 
Washington Post Suggest Producers and Parasites are Interchangeable

Do Government Regulations Really Kill Jobs? opinion November 14,2011 Washington Post by  Jia Lynn Lang, explores the concept that one industry’s losses on overbearing regulations are another industry’s  boon.  Leaving aside the Broken Window Fallacy introduced by Bastiat that’s been around over 160 years for the moment, let’s look into the brilliant mind of Roger Noll, an economics professor at Stanford and co-director of the university’s program on regulatory policy. “Some people identify with the beneficiaries, others identify with those who bear the cost, and no amount of argument is ever going to change their minds.”  This is a leading economist paid by a major university to come up with this explanation to downplay the absolute economic wreck the US regulation and tax policies have had on our country.  You cannot make this stuff up.  By “some people” identifying with the beneficiaries, is the esteemed professor suggesting parasites are interchangeable with producers?  Some will identify with thieves, others with the victims, according to the Stanford professor.  Since the author of this article has only plumbed the depths of a few “economists, ”  I’d like to introduce her to some basic facts in from a relatively short snapshot in History.

From 1998-2000, the US saw 4470 IPOs or Initial Public Offerings.  From 2001-2010, that number fell almost 4/5th in ONE DECADE.  What the heck happened??  A little beauty  of a regulatory law, just under 60 pages, sponsored by legislators Sarbanes and Oxley in 2002.  What about that horrible tech bubble that caused the stock market to tumble in 2000?  That “bubble” was the strongest contributor to the U.S.’s position as the undisputed economic and technological leader of the world.  It resulted in disruptive technologies that changed the world and every one of our lives and is still doing so today.  Then we passed SOX.  This was supposed to stop bubbles from occurring.  Fast forward to 2008.  Well, there weren’t many IPOs for your money to invest in-which left real estate all by its lonesome.  Hmmm, that SOX sure did work on real estate.

Today, we are getting ready to face the regulatory tsunami of Dodd-Frank.  This nifty law is over 2300 pages.  What sane US company wants to stay on this island?

Well, it’s possible Sarbanes, Oxley, Dodd and Frank might cook up a new law to force them to stay here.  Slavery, 2012 style.

 

 

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