Voice For Liberty

Category: Regulation

  • Internet regulation, or net neutrality, would harm investment, says former official

    At a luncheon event in Wichita, Bruce Mehlman of the Internet Innovation Alliance told an audience that increased regulation of the internet — the principle known as “net neutrality” — would harm capital investment in broadband internet service.

    Mehlman was formerly Assistant Secretary of Commerce for Technology Policy and now serves as co-chairman of the Internet Innovation Alliance and as partner in a Washington lobbying firm.

    Mehlman laid out some of the facts of broadband internet: all the varied things businesses and people do with the high-speed transmission of data, the fact that broadband internet has been rapidly adopted, and the rapid growth of digital content.

    Today, 66 percent of American adults have a broadband internet connection at home. 95 percent have access to at least one broadband service offering, if they chose to subscribe.

    He cited a just-released Pew Internet & American Life project which found that 21 percent of American adults do not use the internet. Of these non-users, 48 percent indicated lack of relevance, 21 percent cited price as the reason, 18 percent said it was usability that kept them offline, and only six percent said access was the reason why they don’t use the internet.

    Mehlman said that these measurements are an indicator of the success of broadband internet adoption.

    The big policy battle for 2010, Mehlman said, is net neutrality. The basic principle of net neutrality is that “companies providing Internet service should treat all sources of data equally,” according to the New York Times. Internet Service Providers (ISPs) would not be able to manage their networks in terms of providing faster service to those who agree to pay, and they would not be able to block any content.

    Some of the things that net neutrality would do, Mehlman said, include the following: ISPs would have to be transparent with rules and policies, they would not block or degrade certain types of internet traffic, there would be government-defined “reasonable” network management, there would be no “express lanes,” and there would be limits on service tiers and pricing plans. These concepts would also be applied to wireless broadband service.

    Advocates of net neutrality are particularly concerned that ISPs may block or slow service for some types of traffic. Mehlman provided three examples of attempts at this. In each case customers objected, and the ISP quickly reversed course.

    He noted the irony of Google — a company that has been a leading advocate of net neutrality — objecting to the creation of preferred classes of internet traffic, when a major component of Google’s business model is customers paying for preferential treatment of their advertisements placed on Google.

    Mehlman asked the audience to note the contrast between two heavily-regulated industries — telecommunications and cable TV — and a lightly regulated industry — information technology, which is the category that broadband internet and most information services fall into. Telecommunications and cable TV, throughout their history, have evolved slowly, and had exhibited little of the innovation that is characterized the internet and other information services.

    A recent court decision ruled that the FCC had no authority to regulate information services. So the FCC now has two choices. One would be to persuade Congress to let the FCC regulate the internet. The other would be to redefine the internet from an information service to a telecommunication service, reclassifying it as a “Title II” service.

    This last option has been described by industry analyst Craig Moffett as the “nuclear option.” The additional regulation that Title II designation brings would fuel investor uncertainty, and probably lead to a dramatic reduction in capital investment in broadband internet. Innovation would likely suffer.

    The event was sponsored by Americans for Prosperity-Kansas, Mid-American Communications Alliance, Wichita Independent Business Association, and Kansas Policy Institute.

  • Wichita event: The future of innovation and investment in broadband

    The FCC has proposed reclassifying the Internet as a public utility to get total regulatory control. How can you help stop the FCC Internet takeover?

    Learn about the efforts to keep the Internet in the free market during a free lunch seminar, “The Future of Innovation & Investment in Broadband” next Thursday at the Wichita Petroleum Club. Hear from Bruce Mehlman, co-chair of the Internet Innovation Alliance and former Assistant Secretary of Commerce for Technology Policy in the George W. Bush administration, on efforts to expand broadband access and how to keep the Internet in the free market.

    Registration is free when you RSVP, but seating is limited. Register by 5 p.m. Friday, Aug. 6, for a chance to win a $500 Apple Store gift card!

    The event is from 11:30 am to 1:00 pm on Thursday August 12, at the Wichita Petroleum Club, on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions)

    This luncheon is sponsored by Americans for Prosperity-Kansas, Mid-American Communications Alliance, Wichita Independent Business Association, and Kansas Policy Institute.

    Registration is free when you RSVP by clicking on action.mocomm.org/rsvp. Learn more by calling Susan Estes of AFP at 316-681-4415, or by email at sestes@afphq.org.

  • Financial reform passes Congress

    This afternoon the United States Senate passed sweeping financial services regulation, sending the bill to President Obama. As the President has championed this legislation, it is certain he will sign the bill.

    The Wall Street Journal reports “The measure, once implemented, will touch all areas of the financial markets, affecting how consumers obtain credit cards and mortgages, dictating how the government dismantles failing financial firms and directing federal regulators’ focus on potential flashpoints in the economy.”

    The Journal also issues a warning: “The work of remaking the financial-regulatory regime, however, remains far from finished. Thursday’s vote effectively opens a second phase of lobbying and policy making as financial regulators begin to shape the rules and framework laid out in the legislation. That rule-making process will determine how the new law affects those ranging from traders of complicated derivatives to consumers shopping for a mortgage or a credit card.”

    In an earlier story, the Journal reported on the broad reach of this bill: “Designed to fix problems that helped cause the financial crisis, the bill will touch storefront check cashiers, city governments, small manufacturers, home buyers and credit bureaus, attesting to the sweeping nature of the legislation, the broadest revamp of finance rules since the 1930s.”

    The Wall Street Journal’s collection of reporting on this topic is at Financial Regulation.

    ALG Condemns Financial Takeover as “One More Piece of Liberty Lost”

    July 15th, 2010, Fairfax, VA – Americans for Limited Government (ALG) President Bill Wilson today condemned the U.S. Senate for enacting the conference version of the Dodd-Frank financial takeover bill, sending the bill to the desk of Barack Obama to become law.

    “The American people have lost one more piece of their liberty, as the Senate has voted to create a hidden, permanent bailout that will enable faceless bureaucrats to levy taxes, bail out politically-privileged institutions and to seize and liquidate politically-unconnected ones, redistributing their assets to favored constituencies, like unions,” Wilson declared.

    “There will be no votes in Congress like TARP ever again, as Congress has abdicated the power to tax and spend elsewhere,” Wilson explained, adding, “Which solves a political problem for members of Congress, but is really just a con game so that they don’t have to take responsibility for unpopular bailouts and government takeovers.”

    Continue reading at Americans for Limited Government

  • Financial reform bill as bad as can be

    The United States financial reform legislation that just passed through conference committee is just about the worst possible bill that could emerge. In its analysis, The Wall Street Journal concluded “perhaps the best summary is to hail Dodd-Frank as the crowning achievement of the Obama ‘reform’ method. In the name of responding to a crisis, the bill greatly increases the power of politicians and regulators without addressing the real causes of that crisis. It makes credit more expensive and punishes business without reducing the chances of a future panic or bailouts.”

    Others are critical of the bill, too. The Cato Institute’s Mark A. Calabria wrote “That thin semblance of reform will let Congress and the Obama administration claim they brought Wall Street to heel. But by dodging all the hard issues, this ‘reform’ makes it likely that the next crisis will put the last one to shame.”

    Later Calabria wrote “Perhaps it should come as no surprise that Sen. Christopher Dodd and Rep. Barney Frank, the bill’s primary authors, would fail to end the numerous government distortions of our financial and mortgage markets that led to the crisis. Both have been either architects or supporters of those distortions. One might as well ask the fox to build the henhouse.”

    Investor’s Business Daily agrees: “The two sponsors, Rep. Barney Frank and Sen. Chris Dodd, are as much responsible for the financial crisis as any two people in America. Yet, we’re now supposed to believe that they, and their flailing party, which can’t even meet its legal obligation to produce a budget, have now fixed our financial system.”

    We ought to be wary of government — who many believed caused the crisis — claiming that it can fix the present crisis and prevent another. Liberals believe that the right regulations, when enforced by smart and dedicated federal regulators, can prevent the usual failure of government regulations. But writing earlier this year in The Wall Street Journal Allan H. Meltzer explained why this won’t happen: “This is because regulation is static, while markets are dynamic. If markets don’t circumvent costly regulation at first they will find a way later. … Regulation often fails either because regulators are better at announcing rules than at enforcing them, or because the regulated circumvent the regulations.”

    While some might proclaim that free markets produce perfection, Meltzer wrote: “Capitalists make errors, but left alone, markets punish such errors.”

    We’re not leaving markets alone. Instead, we’re stepping up the intervention.

    Triumph of the Regulators

    The Dodd-Frank financial reform bill doubles down on the same system that failed.

    President Obama hailed the financial bill that House-Senate negotiators finally vouchsafed at 5:40 a.m. Friday, and no wonder. The bill represents the triumph of the very regulators and Congressmen who did so much to foment the financial panic, giving them vast new discretion over every corner of American financial markets.

    Chris Dodd and Barney Frank, those Fannie Mae cheerleaders, played the largest role in writing the bill. Congressman Paul Kanjorski even offered a motion to memorialize it as the Dodd-Frank Act. It’s as if Tony Hayward of BP were allowed to write new rules on deep water drilling.

    The Federal Reserve, which promoted the housing mania and failed utterly in its core mission of monitoring Citigroup, will now have more power to regulate more financial institutions and more ability to dictate the allocation of credit.

    Continue reading at The Wall Street Journal.

  • Chemical security legislation update

    The United States Congress is considering legislation to improve the safety of chemical plants. While a noble goal, this regulation has the potential to actually decrease chemical plant safety while increasing costs and destroying jobs at the same time.

    Currently the proposed legislation is in a senate committee. The following summary of chemical security legislation reports that Senator Frank Lautenberg, a New Jersey Democrat, may introduce a new bill on this topic.

    Debate over Chemical Plant Security Moves to the Senate

    By Beveridge & Diamond, P.C., April 21, 2010

    Following the House’s passage of a chemical plant security bill last November, the Senate has begun to turn its attention to the issue, with subcommittee hearings held in March and multiple bills either proposed or in the works. As in the House, the focus of contention thus far in the Senate has been the possible addition of inherently safer technology (“IST”) requirements into a reauthorization of the existing Chemical Facility Anti-Terrorism Standards (“CFATS”) program.

    Background

    The security of chemical facilities has been a subject of increased concern since the September 11, 2001 attacks, when it became apparent that stores of hazardous chemicals are a logical target for terrorists. Members of Congress have agreed on the need for a federal chemical facility security program, but have disagreed sharply on the issue of making IST mandatory. IST refers to technological and procedural steps intended to reduce the potential for a hazardous chemical release, in contrast to security measures intended to deter sabotage of existing processes. IST measures typically involve modifying processes to reduce the quantity of hazardous chemicals used or stored, reducing temperatures or pressures, or replacing a hazardous chemical with a less hazardous one. While facilities are always free to reduce hazards in these ways, a mandatory IST approach would require facilities to examine their industrial processes to evaluate safer alternatives and would enable a government agency to compel facilities to adopt the changes that it concludes are justified.

    Click to continue reading at Beveridge & Diamond, P.C.

  • Kansas smoking ban discussed on Kansas Week

    On the KPTS public affairs television program Kansas Week, the recently-passed Kansas smoking ban was at issue. Bob Weeks is in the Wichita studio along with host Tim Brown. Stephen Koranda, Kansas Public Radio Statehouse Bureau Chief, is in the Topeka studio.

    Additional coverage of the meeting of smoking ban opponents is at Kansas smoking ban opponents meet in Wichita. More coverage of smoking bans is here.

  • Financial services reform consequences may not be unintended

    A financial services regulation bill could place many types of businesses under new regulations, even though they are nothing like banks or other companies typically considered to be in the financial services business.

    I had thought that this possibility might simply be an example of the unintended consequences of regulation. But after reading a Wall Street Journal article (Will Walmart Pay for the Next Bailout?), I’ve come to believe that these consequences — the spread of regulation to vast new sectors of industry — is, in fact, intended.

    Gregory Zerzan, the author, explains: “The current proposals for ‘financial’ reform are stalking horses allowing government intervention into virtually every facet of the U.S. Economy.” He explains that the Federal Reserve — if it believes a company poses a threat to the economy — could order the company to separate its businesses so that its financial dealings could be regulated as a bank holding company.

    Which companies could be subjected to this new regulation by the Federal Reserve? Zerzan explains:

    Despite non-binding staff explanations to the contrary, there is no mystery as to who is being targeted. Under the bill the Fed gets regulatory authority over bank holding companies with greater than $50 billion in assets, and “nonbank financial companies”. As the Fed already regulates bank holding companies the new twist is that non-banks become subject to Federal Reserve regulation for the first time. The language is unusually clear: if the new systemic risk regulator so chooses, any company engaged in routine business transactions can suddenly be deemed “financial” and subject to bank-like regulation. (emphasis added)

    In Wichita, several large companies could be impacted. The author mentions an “airplane manufacturer that holds customer down payments for future delivery” as an example of a company that could now be regulated by the Federal Reserve.

    Why is the legislation being considered? Zerzan explains that it’s partly based on the belief by some that the government can manage the economy, but there’s also an opportunity to generate new tax revenue:

    Why would the systemic risk regulator seek to make regular American businesses subject to bank-like regulation? No doubt in part it is the belief in some quarters that the government can stop financial crises from happening if only it has enough power and influence over the economy. Even among true believers the near-collapse of the highly regulated banking sector should call that article of faith into question. But there is a more practical reason to seek to turn Walmart, IBM, Boeing and other Fortune 500 companies into “financial” businesses. Under both the House bill and the Dodd legislation it is these companies that are to be taxed to pay for winding up a “too big to fail” firm. If a company gets deemed systemically risky it is on the hook for bailing out financial firms that took on too much risk. Such a regime is neither fair nor sensible from an economic perspective, but existing taxpayers’ money is already over-allocated; the Treasury needs the contents of new wallets to pay for the next crisis.

  • Financial services regulation could spread to non-financial industries

    Chairman of the Senate Banking Committee Christopher Dodd has introduced sweeping legislation to regulate the financial services industry. The bill, at 1,336 pages, would dramatically change the regulatory landscape for one of our most important industries and spread to other non-financial industries.

    The bill would create vast new regulatory powers for the Treasury Department. According to an interview with the Wall Street Journal, Senator Bob Corker says that “there’s no question that Treasury is pushing left,” indicating the Treasury’s Department’s desire for more regulatory power.

    In fact, Treasury Secretary Timothy Geithner is expected to deliver a speech today that calls for Congress to pass a bill with “real reforms.”

    Indication of interest in these regulations may be gauged by the fact that some 400 amendments to the bill have been offered.

    As with any regulation, especially a law designed to regulate a large and multi-faceted industry, unintended consequences are certain to arise. The Main Street Alliance, a coalition of leading U.S. manufacturers and business groups warned that many businesses that would not usually be considered financial institutions could fall under this regulation.

    The Dodd bill extends systemic risk regulation to “nonbank financial companies,” defined as any business substantially engaged in “financial activities.” Because the term “financial activities” is so broad and includes things like lending money and investing a company’s own assets, the bill could authorize the new systemic risk regulator to regulate manufacturers, retailers and other non-financial services businesses.

    Also: “We are concerned the new draft bill is so broad that larger manufacturers could be subjected to regulation by the Federal Reserve,” says Dorothy Coleman of the National Association of Manufacturers, a member of the Alliance.

    Dodd’s proposed regulation is a response to the financial crisis of 2008. Whether new regulation is needed in response to that crisis is one question. But as the Main Street Alliance wrote in a letter to the Senate Banking Committee: “We do not believe that it is the intent of Congress to impose a new regulatory regime on companies that had nothing to do with the financial crisis of 2008.”

    It should be noted that Dodd is not running for re-election this year. He faced declining poll numbers in his home state of Connecticut.

  • Chemical safety bill testimony heard

    This week the United States Senate Committee on Homeland Security and Governmental Affairs heard testimony on S.2996, titled “Continuing Chemical Facilities Antiterrorism Security Act of 2010.” This bill would extend the effective date of current chemical security regulations until 2015.

    In the House of Representatives, a bill has passed that contains provisions for Inherently Safer Technology (IST). The Senate bill does not contain these provisions.

    IST regulations seek to force companies to replace existing methods and raw materials with those deemed to be safer. But the legislation may not produce its intended effect. Stephen Poorman of the Society of Chemical Manufacturers and Affiliates stated in his written testimony: “Inherent safety is a superficially simple but truthfully very complex concept, and one that is inherently unsuited to regulation. Any IST mandate is bound to create situations that will actually increase or transfer overall risks.”

    His testimony gave three examples of where a change to a process mandated by IST would actually increase the overall risk. For example, a process might use a toxic catalyst. Eliminating the use of the catalyst would mean the company has to increase the temperature and pressure of the process, two factors that work to increase risk. The end result might be a process with more risk than the original process.

    In her opening remarks, Senator Susan M. Collins gave another example of how IST might force more hazardous trucks on highways:

    According to one water utility located in an isolated area of the Northwest, if Congress were to force it to replace its use of gaseous chlorine with sodium hypochlorite, then the utility would have to use as much as seven times the current quantity of treatment chemicals to achieve comparable water quality results. In turn, the utility would have to arrange for many more bulk chemical deliveries, by trucks, into the watershed. The greater quantities of chemicals and increased frequency of truck deliveries would heighten the risk of an accident resulting in a chemical spill into the watershed. In fact, the accidental release of sodium hypochlorite into the watershed would likely cause greater harm to soils, vegetation and streams than a gaseous chlorine release in this remote area.

    IST regulations and mandates would also be very expensive, forcing manufacturers and even local water utilities to increase their prices, all for something that may not reduce risk. Furthermore, as Sen. Collins remarked, “The increased cost of a mandatory IST program may force chemical companies to simply transfer their operations overseas, costing American workers thousands of jobs.”

    Testimony is available on the committee’s hearing page. More information on this topic is available on this site at Chemical facility anti-terrorism standards.