Regulation

Toyota vindication

Jul 142010

We bought a low-mileage Corolla this spring to replace our 1998 one. I had no reason to believe any of the hysteria about safety defects. There may be some actual problems, but the people who were peddling (heh) that story had a huge conflict of interest.

And I remembered one of the previous rounds of hysteria about spontaneous acceleration, back in the late 70s or early 80s. I wondered why they couldn’t come up with something a little more original this time.

Now arrives the vindication. It’s from an article in The Atlantic by Megan McArdle: “NHTSA: No, Toyotas Do Not Suddenly Accelerate Unless You Press the Accelerator“

I did an actual LOL on this paragraph:

Now the NHTSA, which is in charge of investigating this sort of thing, has released its report data on this round of SAIs. And while history may not repeat itself, it seems to stutter like hell:

And this was the best quote from the P.J. O’Rourke article that is reproduced in the article:

This was the most disheartening thing I ever heard in Washington. This was much worse than hearing about government malfeasance, incompetence and corruption. When it’s better for enthusiastic and ambitious professionals to go to work for a country’s government than it is for them to go to work, the country is in trouble . . .

Escrow account

Bash the Messenger, Environment, Hammurabi-Handedness, Regulation, Rule of law No Responses »

Jun 152010

WSJ headline: “U.S. to Demand BP Fund”

That is an inaccurate headline, of course. It’s the Obama administration that’s asking for it, not the U.S. The U.S. has laws against extortion. A better headline is a small blurb on the same page on which the misleading one appeared: “The White House plans to ask BP for a damage fund.”

If there is such an escrow account, though, who would keep the money for safekeeping and administer it? The Obama administration is not eligible, because its policy of nationalizing any industry within reach creates a conflict of interest.

The British government also has a conflict of interest.

The United Nations? The money would be gone in a day if deposited there.

Here are my three nominees:

The government of Ireland. The Irish have no great love for the Brits or for America, but get along reasonably well with both.
The government of the Czech Republic. Václav Klaus can be trusted not to be easily intimidated.
The government of Georgia. This would help focus more attention on a country that needs it. And Georgia would have great motivation not to mess up.

With liberty for some and regulation for others

Regulation No Responses »

Jun 142010

It wasn’t so long ago that we were told we had had enough laissez faire and that it was time for more regulation. Now Nancy Pelosi is telling us that we need more laissez faire and less regulation.

At least for some people. Maybe not for everybody.

WSJ article: “Pelosi: Ethics Are Overrated — House Speaker Nancy Pelosi is sending private signals that she is willing to support watering down the powers of the Office of Congressional Ethics.“

Armanda Galarraga and Joe the Plumber

Regulation No Responses »

Jun 052010

The cries for the Baseball Commissioner to award Armando Galarraga his perfect game remind me a bit of the outcry about Joe the Plumber: “But he isn’t a licensed plumber.”

Some people get too hung up on the official categories. Joe is a plumber, licensed or not, and Armando Galarraga pitched a perfect game, whether or not it goes into the official record books that way.

Russ Roberts helped me understand by writing the following:

Galarraga threw a perfect game. The blown call wasn’t in the seventh. It was the last out of the game. The replay is incontrovertible. He got the guy. He threw a perfect game. Everybody knows it. The other team knows it. The ump admits it. He threw a perfect game.

In any discussion of perfect games over the next 20 years, Galarraga’s name will be mentioned. So essentially his achievement is a perfect game with an asterisk or an un-asterisk because presumably his name will not be on the list. But I could see that happening.

The other irony is that there have been no-hitters that were preserved by bad scoring that changed a hit to an error. Those were not “really” no hitters but they go into the pantheon of great pitching performances. Galarraga is in the pantheon in everyone’s mind other than the official list and box score of the game.

Lack of unified rules

Bash the Messenger, Hammurabi-Handedness, Regulation No Responses »

May 122010

Amazing lead paragraph by Kara Scannell and Fawn Johnson at the WSJ. It’s in an article titled, “Schapiro: Web of Rules Aided Fall.”

Regulators haven’t found evidence of a single cause for the May 6 stock-market plunge, but the lack of unified rules among stock exchanges played a role, Securities and Exchange Commission Chairman Mary Schapiro said Tuesday.

There is not a single sentence in the entire article to explain how a “lack of unified rules among stock exchanges” could have played a role. I suppose mere reporters don’t get to ask questions at a congressional hearing, but surely they should have reported on how the congressional committee members let that comment go by without a word of explanation. Or perhaps there was an explanation, in which case Scannel and Johnson should have told us about it.

Why make a big deal out of this? Well, I am skeptical that a lack of unified rules could have caused a lack of stability. It’s just not the way large, complex systems usually work. Usually there is stability in diversity, not in uniformity.

I tend to think of the parallels between economic systems and biological ecosystems. Note how the headline used the word “web.” Webs are usually good for stability. If this is a rare exception, it would be worth knowing about it.

The Urge to Regulate (or Not)

Regulation No Responses »

May 112010

If you suffer from The Urge to Regulate, don’t watch the above video of San Francisco’s Market Street, taken a few days before the earthquake in 1906. Watch the one below, instead, taken in 2005. It will be easier on you. (If you suffer from the opposite malady, think about the unregulated buildings that were damaged in the earthquake.)

O.J. Senate

Hammurabi-Handedness, Regulation No Responses »

Apr 292010

We could call it the O.J. Senate. Just as O.J. Simpson combed the Florida golfcourses looking for the real killer of Nicole Brown Simpson, Carl Levin has hauled Goldman Sachs into a Senate hearing room so he can look for the real villains in the financial meltdown. (His office can’t be that far away from Chris Dodd’s and Barney Frank’s, can it?)

Health care derivatives

Hammurabi-Handedness, Health care reform, Regulation No Responses »

Apr 182010

President Obama says he will veto any financial reform bill that doesn’t bring the derivatives market under control. If he really meant that, he would have vetoed the recent health bill.

Derivatives are a problem in that they obscure what it is a purchaser owns. It’s hard to know how to value them, which makes it difficult for buyer, seller, and regulator. They create opportunities for market distortions.

The same is true of the health care bill. Supposedly there is some pie in the sky that’s going to repay the investment of higher taxes that we’ll be making. But it’s all so vague — it’s hard to connect value and payments in any accountable way. The health care plan should have been subject to the same scrutiny and controls (and perhaps prohibitions) that are needed in the securities market.

Where those risky loans came from

Hammurabi-Handedness, Regulation No Responses »

Feb 082010

It wasn’t just the Community Reinvestment Act that got us into this mess.

The problem wasn’t merely that HUD under Mr. Cuomo was raising the volume of risky loans for which taxpayers were guaranteeing. HUD was also encouraging a dangerous decline in underwriting standards at these government-sponsored enterprises (GSEs). Says former Fannie Mae chief credit officer Edward Pinto, “HUD commissioned much research aimed at forcing the adoption of more flexible lending standards by the GSEs.”

WSJ article, “Prosecutor, Charge Thyself : Andrew Cuomo has more to answer for than does Bank of America.”

Auto safety regulation has come to an end

Hammurabi-Handedness, Regulation No Responses »

Feb 052010

This is corruption. No possible good can come from a meeting between the chief regulator and the CEO of one of the companies being regulated. This is not how regulation is supposed to work. This is just an opportunity for political pressure and political concessions.

Either the cars have defects or they don’t. A meeting behind closed doors between the CEO of Toyota and a representative of Public Motors is not going to establish any facts. It’s not going to make cars any safer. The regulatory process needs to be transparent and objective, and not dependent on two guys talking nice to each other or tough to each other.

Does a public prosecutor want to meet one on one with the mafia godfather before deciding whether or not to prosecute? Does a public prosecutor want to meet one on one with the local representative of Angels of Mercy before deciding whether or not to prosecute There are proper ways of conducting interrogations. What LaHood is doing is not one of them.

Transportation Secretary Ray LaHood said Wednesday his agency is widening its probe of sudden acceleration complaints in Toyota Motor Corp. vehicles to look at the possibility of electromagnetic interference with electronic throttle systems, and said he wants to talk directly with company Chief Executive Akio Toyoda.

URL here.

What if a company like Toyota actually develops a safety problem with its cars someday, and somebody gets killed? The blood will be on the hands of the Obama administration. The government is supposed to be an honest regulator and is supposed to provide information on such things to the public, and to keep unsafe cars to go uncorrected. But now that it has a huge conflict of interest, there is no basis for the public to believe anything it says or does in the way of safety regulation. We still have the usual workings of the market to help us, but we’re deprived of a source of information we used to have. Obama took it away when he instituted the public automotive option.

What LaHood is doing is tearing down any residual shreds of confidence we may still have had that the government could be an honest regulator in spite of its huge conflict of interest.

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