TEXT OF INTERVIEW
Steve Chiotakis: Congress gets back together next week after a holiday recess. One of the top agenda items will be financial regulatory reform. Regulation has been in the news a lot lately. Not only with Wall Street, but with offshore drilling. Former Labor Secretary Robert Reich says over the years, deregulating certain industries has had its benefits and drawbacks. Good morning, Bob.
Robert Reich: Good morning, Steve.
Chiotakis: For decades we’ve heard about deregulation, but with excesses on Wall Street and then we’ve had this mining disaster and the worst spill in history in the Gulf of Mexico — Are we heading for a new era of regulation?
Reich: Well, not exactly. Deregulation, starting in the 1970s, targeted government monopolies — airlines, trucking, utilities. Its goal was more competition and lower prices for consumers. Basically, it succeeded. Deregulation was never intended to create more health, safety or environmental risk, or allow Wall Street to go haywire.
Chiotakis: But is more regulation the answer, Bob? I mean the SEC already had the power to prevent many Wall Street abuses. Same with the Minerals Management Service and BP.
Reich: Well, it’s not the entire answer. The SEC’s main problem was it didn’t have the staff it needed to enforce the laws. At the Minerals Management Service, it was a cozy relationship with the oil industry. And even when laws are fully enforced, penalties may be so low that getting caught is just a cost of doing business. That’s what happened at the Mine Safety [and Health] Administration. It repeatedly sited Massey Energy before that terrible accident.
Chiotakis: So is Congress and the White House going to fix this?
Reich: Well, I’m skeptical. These aspects of regulation are invisible to the public. After a new law is passed, business lobbyists inevitably try to de-fang it by getting Congress to keep penalties low and cut the budgets of enforcement agencies. The problem is none of this becomes evident until there’s a disaster.
Chiotakis: So what’s the answer then? What do we do?
Reich: One proposal, Steve, is to create a kind of super regulator in the White House or rely on the U.S. Inspector General to make sure all regulations are fully enforced. Another is to strengthen whistleblower laws, so insiders can easily alert authorities when they’re not being enforced. And still others want to rely more on civil litigation, you know, liability suits to police business. I expect all of these are going to be in the mix in the future.
Chiotakis: A lot of ideas. Former Labor Secretary Robert Reich, now professor of public policy at the University of California at Berkeley. Bob, thanks.
Reich: Thanks, Steve.
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