NEW YORK (Fortune) -- The AIG bailout isn't going away, much as Treasury Secretary Tim Geithner might like it to.The article notes a couple of other cases where government regulators gave businesses assistance - and in some cases orders - to not disclose information, to not follow the law, to not tell the truth. But it fails to draw the correct conclusion: this is not a system problem, but what the system is designed to do.
The $180 billion fiasco was back in the news Thursday, after Bloomberg reported that the Federal Reserve Bank of New York prodded the troubled insurer at the end of 2008 to withhold some gory details of its bailout deal from the public.
The instructions came at a time when Geithner, who is now the Treasury secretary, led the New York Fed...
Regulation is not designed to protect the public, nor is it designed to make industries more competitive. Regulation is a system whereby industries publish rules for themselves** but rely on the government to free them from following them if it would be expensive or embarrassing. In exchange, government agents gain power to "manage" the economy, jobs for underling regulators and bureaucrats, and board seats at large companies when their term in office expires. The result is a system which uses taxpayer money to protect large companies and politically-connected industries from failure.
In the rare case such companies manage to lose money anyway, you can expect 2 things: bailouts and more regulation:
"A lack of governance was responsible for the US housing bubble and not monetary policy, Federal Reserve Chairman Ben Bernanke declared as he addressed the American Economic Association yesterday in Atlanta."
The rule is that it's never government power or decisions that causes crises. It's a lack of government power. And taxpayer money.
* and yes, this includes Geithner and Bernanke.
** rules that by their very design make it nearly impossible to enter a "regulated" industry, and thus protect the current players from competition. If you don't believe me (or don't believe banks are regulated) just open a bank and start taking a few deposits.