Madoff Scandal Exposes Government Failure
My op-ed, “Madoff Scandal Exposes Government Failure,” is being distributed by The Future of Freedom Foundation. Here’s a taste:
[A] false sense of security is worse than none at all. When people believe government is protecting them from bad financial services, they are more vulnerable to scams than if they knew they had to protect themselves. The government’s huge regulatory apparatus broadcasts one unmistakable subliminal message: Have no fear because Big Brother is watching over you. Is it any wonder that people are less wary than they would be if they did not believe that?As long as government plays a regulatory role — or people believe it does — they will assume that key activities are being monitored. And even when an activity is known to be unregulated, the implication is that if regulation were needed, government would be doing it. Why else did worldly investors fall for Madoff’s self-described “giant Ponzi scheme”?The call for regulation assumes — without grounds — that government can protect investors from con men. But government regulators have never been able to make good on that promise. Con men prosper no matter how much the government regulates. They often understand the system better than the people running it. (Madoff was an insider!)
Comment by Carl Clegg on 24 December 2008:
Mr. Madoff was a mastermind criminal. He began his great Ponzi scheme actually back in the 1970′s and was able to fool a lot of people for a long time. Some of course would call for more regulation to prevent this type of abuse. They should watch the movie “Catch Me If You Can”. Frank Abagnale is a Mr. Madoff, slick, trusting, and able to fool a lot of people. More regulation doesn’t stop the Abagnale’s and Madoff’s of the world — it makes the game more challenging for them. They adapt. Increased regulation does not increase the honesty and integrity of the cons among us — but it does increase the false sense of security for the honest. And the cost of compliance is another tax on everyone.