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Kai Ryssdal: I don’t know that James Lentz did himself any favors on Capitol Hill today. Mr. Lentz is the president of Toyota USA. And he spent this Tuesday at the witness table in front of the House Energy and Commerce Committee, at one point saying he’s not sure all of Toyota’s recalls will “totally solve” the problem its cars are having.
But while that item makes its way through the news cycle, let me ask you this: Have you noticed any similarities between the financial crisis and Toyota’s current problems? In both cases, we’ve been told that government regulators didn’t fully understand the systems and industries that they were supposed to be regulating. How come?
Well that’s where we call our senior business correspondent Bob Moon.
BOB MOON: In the words of that great philosopher Stevie Wonder, “When you believe in things that you don’t understand, then you suffer.” When Mary Schapiro led the self-regulatory arm of NASDAQ a decade ago, she vowed not to accept things at face value.
MARY SCHAPIRO: This is about enabling the regulators in particular to have the tools that they need to keep up with the rapidly growing marketplace.
Today, Schapiro heads the Securities and Exchange Commission, and she’s lamented that regulators didn’t keep up with financial innovation.
Which sounds a lot like complaints lawmakers have been leveling at the National Highway Traffic Safety Administration. Never mind that cars have gone computerized — the agency concedes it doesn’t employ any electrical or software engineers. And one investigator’s e-mail revealed he didn’t really understand Toyota’s high-tech braking system.
As Wake Forest University law professor Sid Shapiro sees it, the watchdogs — financial or automotive — ought to be pointing right back at Congress.
SID SHAPIRO: These agencies don’t have that much money. In absolute terms, of course, they have millions of dollars, and it looks pretty big to the average person. But compared to their responsibilities, they’re underfunded, because Congress has been nickel and diming them.
Shapiro says the same argument that followed the financial meltdown applies to the auto regulators. The government was penny wise and pound foolish.
SHAPIRO: When we total up the amount of financial carnage this is going to cost consumers, Toyota, to say nothing of the poor people who have been injured and killed, it’s hundreds of millions of dollars. And a small investment to make sure that they have the top scientists and the engineers they need strikes me as a pretty good investment.
Some experts say regulators can’t be expected to predict every innovation. So, they say, it’s understandable they often find themselves playing catch up.
I’m Bob Moon for Marketplace.
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