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Shilling: Added Market Regulation Useless

By Julie Crawshaw   |   Friday, 20 Mar 2009 11:33 AM

It's natural for people to call for more regulation in times of crisis, says investing guru Gary Shilling.

Natural, but useless, because increased the number of rules won't solve anything, Shilling says.

Regulation, he says, frequently amounts to no more than fighting battles that have already been lost.

"It's a reaction to crises and, therefore, comes too late to prevent them," Shilling writes in his latest investor newsletter.

“That's almost guaranteed to be the case since fixed rules only invite all those well-paid bright guys and gals on Wall Street and elsewhere to figure ways around them,” he says.

Shilling adds that government regulators have never, as far as he knows, stopped big bubbles or caught big crooks. He adds that Enron, WorldCom, and Bernie Madoff all went on their merry ways until their self-induced collapses, completely free of regulatory interference.

Most importantly, Shilling points out, government regulation and involvement in the economy is almost certain to prove inefficient.

“Risk-taking has been excessive, but government bureaucrats are likely to eliminate much of it, to the detriment of entrepreneurial activity, financial innovation, and economic growth,” he says.

Still, more regs are a given, note financial observers

"We will see a major shift in regulation in the next year or so," Wharton finance professor Richard Marston told the Web site of The Wharton School of business.

"I don't really care if the rich in Palm Beach are fleeced,” Marston commented. “I care whether businesses in Philadelphia suffer because hedge funds have set off a panic in financial markets.”

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It's natural for people to call for more regulation in times of crisis, says investing guru Gary Shilling.Natural, but useless, because increased the number of rules won't solve anything, Shilling says. Regulation, he says, frequently amounts to no more than fighting...
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