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Pay no attention to the people behind the curtain

Friday, January 16, 2009

FAA and the Economy

By Keith R. Schmitz

As spectacular and potentially tragic as the breakdown of the US Airways plane flying over New York City and its brilliant landing in the Hudson River, the next thought is we have not seen a fatal crash of a major aircraft in years.

In no small part this is due to having the watchful of eyes of a regulatory agency -- the FAA.

My wife used to work for Midwest Airlines and from time to time I got to go back into the hangar. For anyone who flies this is a reassuring opportunity because you get to see first hand how strict and closely followed the maintenance procedures are.

On the other hand, look at the regulation of the financial industry. Here we literally have planes falling out of the sky just about every day.

We can point fingers about the cause and of course there is the GOP belief in delayed response, nailing the meltdown to Clinton or all the way back to Carter.

Whatever. The point is we need not only strong financial regulation but regulation that morphs as the best the brightest on Wall Street come up with new ways to game the system.

One thing that should be noted is that many of the people who work for the FAA are formerly from the airlines. The relationship is cozier than that. At every major airline there is an FAA office on site.

Though there is some bristling by the airlines from time to time of the regulations, there seems to be the recognition that having someone looking over their shoulder is keeping the planes up in the air.

Why? The penalties of an air crash can be harsh and swift for an airline. People will be leery about taking a plane with a line that has had one of their fleet go down. Market share suffers.

No such effect exists on Wall Street. For a crowd that worships "personal responsibility" and "consequences," none of this exists in the world of finance. Failure is dealt with severely, with severely high salaries and bonuses no matter how much the company tanks.

Nothing gets learned because why learn anything if none of the captains of these firms suffer. Someone sticks up a convenience store for a hundred bucks and they get whisked off to the county jug instantly. Bernie Madoff made off with billions and he whiles away his time in his luxury roost.

It is befuddling that conservatives who are so worried about THEIR MONEY and cry to high heaven when a dollar of tax increase gets proposed don't want to see something done to prevent their money from magically disappearing every 15 years. The excuse is that regulation would gum up the engine of capitalism, but why should byzantine financial instruments or using sex to up sell NINJA mortgage packages be part of the equation?

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