Beneath the Radar

Most of what I have written has discussed well known local and national issues. This time I will look at two developments presently “beneath the radar”.  First is Statement No. 67 issued by the Governmental Accounting Standards Board (appropriately referred to by the acronym GASB).  This does not change how pension funds calculate their finances or obligations, but it does change how they publicly report their financial situation.  So within the next year or so, while nothing significant will have changed with pension stability, the media will alarm the public based solely on the changed reporting requirements. 

This will sow more distrust and provide another excuse for more government regulations with proposals for higher taxes for public pensions. Businesses will be asked to delay investments and/or reduce dividends to make greater pension contributions. It will also require more people sitting at desks crunching numbers instead of doing productive work that builds a future. Score another one for those destroying the United States.

The Securities and Exchange Commission, the Food and Drug Administration, The Environmental Protection Agency and countless other regulatory agencies have for many years now engaged in what is essentially an extortion scheme. They charge a company with wrongdoing and then have that company pay the agency money without legally admitting any wrongdoing. Companies such as Facebook, Merck, Goldman Sachs and others have been involved. Some consider this efficient government since the money helps support the agency without additional tax monies. Of course, it also helps them to expand with minimal outside approval. Federal and state agencies received $1.92 billion from HSBC, the former Hong Kong and Shanghai Banking Corp, for agreeing not to indict them for money transfers which included Mexican drug cartels and the Iranian government.

But the agencies’ prosecution of corporate wrong doing looks good in the media and the public seems to accept that they are doing their job.  And while some cases are probably simple extortion, many clearly are not.  But without an admission or legal ruling of guilt, it is extremely difficult for an ordinary person or group of ordinary people to sue and collect damages if they have been injured.  You would have to prove, for example, that a pharmaceutical company lied about a drug that disabled you rather than be

able to just sue based upon the regulatory agency’s court sanctioned legal finding of guilt. No matter what the merits of your case your adversary can file appeals until long after your death. Cynical Charles Dickens said “People are born into the case and people die into the case,” in Bleak House, his novel about the legal system.

While I am opposed to legislating from the bench, I am pleased to hear dissension from several judges. In one instance U.S. District Judge Emmett Sullivan called the $298 million arrangement between the U.S. Department of Justice and Barclays Bank, which included dropping of charges for trading with hostile foreign powers, a “sweetheart deal”.  Going a bit further, U.S. District Judge Jed Rakoff refused to approve a payment of $285 million for likely securities fraud from Citibank to the Securities and Exchange Commission (SEC) and demanded a trial with a conclusion of guilt or innocence.  Both the SEC and Citibank said that Judge Rakoff made a “clear error of law”. But Rakoff’s decision has brought forth support which spans the political spectrum from small business conservatives to left wing Senator Bernie Sanders.

The new SEC head, Mary Jo White, said that she would like more admissions of guilt. Attorney General Eric Holder stated that the Department of Justice would pursue more cases and that making billons and then paying fines in the millions is hardly a disincentive to crime. Time will tell if anything changes the status quo.  Will they decide if these laws are to protect we the people or just to enrich government?

How long can we endure the government in itself, by itself and for itself?

Copyright 2013, Mark L. Bennett