The Necessary Regulation

Thomas Jefferson, one of America’s most widely read forefathers wrote, “The best government is the government that governs least.” What Jefferson intended was for a system of self-regulating government. The financial crises on Wall Street and Main Street in late 2008 exposed the fissures of this political philosophy. The abject lack of oversight by the Securities and Exchange Commission, the Bush administration, and Wall Street executives resulted in a full-blown recession and difficult financial times for all Americans.

But rather than accepting the blame, on Wall Street today; it is President Obama who is public enemy number one. Quite a few executives and high-ranking government officials have targeted the Obama administration’s involvement in the banking industry and in the auto industry as hurting, rather than helping, the economy’s recovery. According to them, the markets should self-regulate à la Adam Smith’s “invisible hand.” President Obama, owing mostly to his modest roots and his adoption of the philosophy that government has a place in preventing people from exploiting each other has been the visible hand that is regulating the excesses of Wall Street. However, far from decrying this, both Wall Street and the American people should be grateful for Obama’s expansive view of the government’s responsibilities.

In 2001, the collapse of Enron should have been a trigger to those involved in business in America, the American government, and the American populace that there ought to be fundamental changes in the general practices of American industries, such as how liabilities and assets are calculated. It wasn’t—and those who have benefited from the Enron-led train of unscrupulous practices of the market—such as short-selling, betting against the market or hoping it will fail so that you can make money selling for high to buy at very low. or profiting from a fall in stock prices, insider trading, and mark-to-market accounting, or pricing assets at a higher value than they are actually worth—now unfairly criticize the president and his administration for being an interventionist one. Those on Main Street should realize this and rise up and defend this government which is only looking out for the people’s interests, a rarity these days.

A healthy dose of guarded capitalism is what America needs. Obama’s proposals, one of which is a $33 billion-dollar business tax credit, will shore up many failing small businesses in America’s heartland by providing a tax credit for each net hire by a small business. That, in addition to good labor incentivization practices, innovative ideas by talented workers, and moderate compensation packages for top executives and employees, promise to be the remedies for this ill economy. Unless middle-class Americans fight back against the excesses of Wall Street executives who make more in a day than some of their employees make in a year (for much harder work), they will continue to be exploited by irresponsible financial practices.

President Obama has always claimed to be a student of history and Malcolm X, one of past America’s most aggressive advocate for justice and fairness once said that history is best qualified to reward our research. In this case, unless we learn from history and do an about-face when it comes to regulating our banking industry and start trusting our government to fight for our basic interests, then both our generation and posterity will suffer.

Patrick J. Baptiste ’10, a Crimson editorial writer, is a biochemical sciences concentrator in Cabot House.