This week, we will end the drama of whether the Federal Reserve will taper its quantitative easing (QE) or not. Also this week, former Treasury Secretary Larry Summers withdrew his name as a candidate for replacing Ben Bernanke as chairman of the Fed. I have ambivalent feelings about Summers as a candidate. He has the social skills of a bull in a china shop, but his stand on QE was something I have always advocated. We as a nation need to get off the free money drug and help cure our economic woes. Instead, the kick the can ritual will play out time and time again now.
Frankly, I am past all this melodrama and want to focus on what should really be bothering us.
The plethora of regulations that have been unleashed upon us since the financial meltdown have been nothing short of astounding. We have seen massive dosages of new rules and laws whose intent has always been to protect and save us from harm. Instead, the poor sucker, the average Joe on the street, has been subject to radiation by the TSA, been spied upon by the NSA and has had the IRS profile and persecute them, to name a few.
Take Obamacare. It is so large that that it is "too big to fail." The political rancor around this ill-conceived regulation has allowed the nation to be distracted from growth strategies. The actual banking-based too big to fail regulation, Dodd-Frank, has been a complete disaster. The top 10 banks in the United States have become much larger in all respects (revenue, assets, loans and most other metrics) since the regulations. The too big to fail regulation has failed completely.
In any case, the big and mighty breach laws with impunity and if they are ever caught, they pay a small fine, claim no wrongdoing and then walk away to design other schemes to enrich themselves at the expense of the poor Joe again.
One of the most draconian laws is the Foreign Account Tax Compliance Act (FATCA). Under this legislation, the U.S. government demands that all the financial institutions around the world (they have intentionally not defined what constitutes financial institution so that they can include all) obey U.S. laws and file reports to them as if they were U.S. institutions operating in America.
So let's say a small cooperative (may or may not be a bank) in the village of Cebu in the Philippines is sending or receiving funds on behalf of its customer whose relative lives in America. This small community cooperative has to start filing reports to the financial regulators in the United States or risk 33 percent of the funds be withheld as taxes.
Imagine this bank officer in Cebu who can barely speak English has to know and comply with the U.S. banking laws!
As a consequence of such laws, Americans who live overseas are being persecuted like smugglers and drug dealers. I am not talking about rich Americans who are hiding millions in Switzerland. I am talking about schoolteachers teaching English in Korea or software programmers (who cannot find jobs here) in Bangalore or Shenzhen, China.
Average Americans who want to rent apartments and buy clothes and food. Banks are refusing to deal with them and asking them to close accounts. Banks around the globe are asking Americans to take stop dealing with them.
The only saving grace in this insane, regulations-belching government is that many of the regulations are running into stiff headwinds and are getting delayed.
Some Obamacare provisions have been postponed by a year. FATCA implementation itself has been delayed from Jan. 1, 2014, to July 1, 2014.
It is high time we stop issuing new rules just to look busy or harass the free-market world. I am not saying we move to a deregulation environment again. We all know how that ended. But we have to apply common sense and allow the businesses and people to breath in order to have a flourishing economy.
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