Devaluation
The currency of bureaucracy is credible, expert impartiality. That's too juicy not to exploit.
How Partisan Bureaucrats Weaponized Financial Regulation
Show me the man and I’ll show you the crime.
‘One of the Obama administration’s biggest scandals was “Operation Choke Point,” a coordinated effort of multiple federal agencies to drive companies active in politically disfavored sectors out of business by pressuring banks to cancel their accounts and service contracts. Businesses as diverse as payday lenders, pawn shops, gun stores, and coin shops were targeted. The government implicitly threatened regulated banks if they didn’t manage their “reputational risk” in a way that aligned with the preferences of officials at Treasury and the FDIC.’
Bureaucracy should support primary functions, not disrupt them
Red tape is a cancer. Academic descries the increasing fix on bureaucracy at the expense of academic quality.
The go-to move for the bureaucrat when they’re caught pushing the envelope is to say something like “it’s a legal requirement” or “it’s policy.” They rely on the presumed laziness of the person pushing back. It gets weird when the resister checks the policy and finds that the thing the bureaucrat is trying to do doesn’t exist in the policy or the requirements. Here’s an example from a Dutch university.
‘Unfortunately, I’ve observed a troubling shift in academia: the increasing prioritization of bureaucratic processes over academic substance. Bureaucracy should support primary functions, not disrupt them or become an end in itself. Currently, it wastes time, undermines quality, causes frustration and demotivation, and achieves little more than satisfying external bodies with superficial solutions. To illustrate, I’ll provide two examples, which I will later relate to Dutch law.’
Bureaucracy should not be a bad word
The people who want to defend bureaucracy always return to Weber whose tautological ideal (bureaucracy is best because it is the best system implemented by the best people) has never been seen in real life.
‘Bureaucracy was a centralized form of management that Weber considered competent and rule-based. It was mandatory that no one was above the bureaucracy as the first instance of no one being above the law. Weber believed that a rule-based, competent bureaucracy was the first line of defense against abuse of power.’
Federal Reserve unveils toned-down banking regulations in victory for Wall Street
There are limits to regulation. We can think of this as the regulatory room.
Constrict too much and you kill off the Golden Goose. Or, at least, you render it impotent. US large banks have been pulling back their lending businesses since the Global Financial Crisis. The space has been taken up by non-bank entities. Witness the explosive rise of the private credit market, for example.
One of the reasons for the substantial change in capital requirements is that the banks made it clear they would pull back even further from lending and trading, moving even more activity into the lightly regulated shadow banking sector.
The regulators have made the financial system more dangerous.
To save the village, they had to destroy it.
‘A top Federal Reserve official on Tuesday unveiled changes to a proposed set of U.S. banking regulations that roughly cuts in half the extra capital that the largest institutions will be forced to hold.
‘Introduced in July 2023, the regulatory overhaul known as the Basel Endgame would have boosted capital requirements for the world's largest banks by roughly 19%.
‘Instead, officials at the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have agreed to resubmit the massive proposal with a more modest 9% increase to big bank capital, according to prepared remarks from Fed Vice Chair for Supervision Michael Barr.’
Big bank regulations get a makeover
Bureaucracy favors the large, banking edition.
‘The revisions are a relief for Wall Street lobbying groups that went as far as paying for primetime TV commercials to argue that banks were well-capitalized and the proposal was too draconian.’