Regulatory insufficiency

In the Bush administration’s ongoing war on regulation, an insidious tactic has emerged. Weaken the regulatory agencies so badly through funding cuts and political appointments that their ability to properly protect the public from defective and dangerous items becomes seriously compromised. Then use that very incompetence as a lawsuit shield for corporations by claiming that regulatory decisions should not be second-guessed by the courts.

As the New York Times has reported. drug companies may find legal protection from lawsuits as a result of the FDA’s inability to properly regulate pharmaceuticals. Cases brought against Johnson & Johnson for deaths and injuries caused by its birth control patch Ortho Evra are now winding their way through the courts, in civil suits around the country where plaintiffs are seeking damages for injury and deaths attributed to blood clots and other conditions brought about by the excessive amounts of estrogen in the Ortho Evra patch. Meanwhile the Bush administration is taking the position that courts should not second guess the decisions of “the only agency with enough expertise to regulate drug makers.”

By now we are all aware that the Bush administration’s regulatory structure is incapable of protecting the public from tainted food and medicine, dangerous toys, poorly maintained airplanes among many other products and services, but who knew that that very uselessness would prove so, well, useful, in court. Thus, in another middle finger salute to the American public, the administration has changed the focus of regulatory agencies, turning them into protectors of the very companies that have sold harmful and/or deadly products to the public. There’s even a catchy name for this legal strategy, one that fits our current rulers to a tee – pre-emption.

Regulation anyone?

The Bush administration, finally buckling to that pesky focus group the American public, has created a regulatory structure to police Wall Street investment firms and prevent any future financial crises. Well, not exactly…

True, the public outcry over the Bear Stearns rescue at a time when many Americans are suffering and losing their homes as a result of unconscionable lending practices may have forced the administration to appear concerned about financial industry malfeasance. But the solution – which allows the Federal Reserve to examine the workings of investment banks – does not allow for any regulation unless a crisis is imminent, this despite the fact that the Fed has guaranteed the failing mortgage-backed securities that JP Morgan Chase has taken on in its buyout of Bear. Paul Krugman aptly terms this toothless reorganization the Dilbert strategy.

The plan to protect us from future financial crises has been in the works for at least one year, and is actually an attempt to lighten the regulatory load on Wall Street. As the New York Times report noted in its lead paragraph: “the plan has its genesis in a yearlong effort to limit Washington’s role in the market.” It should surprise nobody that the Bush administration would use a national crisis to trot out a long-standing plan of dubious benefit to the country. This time, though, Congress and the press are somewhat less inclined to give Mr. Bush and his gang a free ride. Perhaps we can thank the five years of war and resultant carnage for their willingness to scrutinize the administration’s pronouncements a little more closely.

Or maybe it’s that string of regulatory failures that continues to this day. Under the Bush policy of less regulation is better, we have seen lead paint and phthalates in children’s toys imported from overseas, the meat from sick cows entering the food supply, tainted pet food and toothpaste from China, unscrupulous mortgage dealers targeting home buyers and then sending high-interest mortgages up the financial food chain in the mother of all backfiring multi-level marketing schemes, mining disasters, and now improperly inspected airplanes flying the friendly skies. The airline maintenance issue clearly illustrates what happens when the free market is left in charge of industry regulation – problems are left to fester unless whistleblowers and investigations force corporations to take action. This is the result of industry self-regulation – business as usual until a crisis occurs. Just what the Treasury Secretary ordered.

Seen from this angle it’s clear that the administration’s plan for the financial markets is more of the same shrink-the-federal-government-to-uselessness drivel. It’s time to acknowledge the importance of and need for a strong regulatory structure as a necessary part of our government’s functioning.

Of meat and mortgages

The current recall of 143 million pounds of meat has caused an uproar over the abuse of sick animals at a California slaughterhouse. Local and national news outlets have shown videos of cows unable to walk being kicked, pushed and otherwise coerced to move through the slaughter process. The abuse of sickly animals is naturally repugnant, but amidst all of the outrage we hear not a word about the cruelty inherent in the factory feedlot process, where cows are crammed together and fed an unnatural diet of corn, hormones and antibiotics, followed by a torturous end on a slaughterhouse killing floor. Whether the animal is sick or not, the life of the factory cow is one of continuous abuse.

Of course the fact that the animals in the video were “downer cows” brings up the issue of food safety and the ability and/or willingness of our regulatory agencies to police the industries before an emergency occurs. Of the beef under recall, 40 % has been consumed, and 30% has not yet been found. A February 21st report on NPR notes that much of the beef in question was shipped to wholesalers, who then bundled it with other meat to produce sausages, burritos, meatballs, and other meat byproducts. So far there have been no reports of illness, but prion diseases like mad cow disease can take months or years to show up. The Agriculture Secretary noted that he did not think any increase in inspection regimens was necessary at this point. But what can we expect from an administration so antithetical to regulation of industry.

This bundling reminds me of that other bundling fiasco, also aided by regulatory indifference – wherein subprime mortgages were bundled with prime ones into mortgage backed securities, now causing so much havoc with the US economy. The downer cows of the mortgage world cannot be traced back to their origins either, and just like mad cow disease, their full impact could take years to ascertain. I don’t expect the gang in Washington to start regulating the very same financial services conglomerates they so abundantly gifted with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Let’s hope that the next administration takes protection of the public more seriously than phony color coded alerts that divert our attention from real safety issues.