it provides better regulation of funds
How so? All you need is contract law and no government bailouts if things go wrong. Without a safety net banks won't take the risk the US banks did. If they did, they simply go under and the biggest losers are the shareholders as they get whats left after whats owed to bank customers. This is why most directors these days get paid a lot of shares or share options to put their goals in line with shareholder goals. If the bank loses they lose.
This important feedback mechanism is how we learn and how the free market weeds out the risk takers who make poor decisions and those who make the correct decisions stay in business. No government can magically overrule market principles. Even Sweden which tends to be regarded by most people as a "socialist" country, where government owns the means production have a more "unregulated" and "free'er" banking sector than the US and their banks aren't going under? The problem in the US is that the debt was guaranteed by government institutions such as Freddie Mae and Fannie Mac and by the Federal Reserve. "Too big to fail mentality" means you don't have to worry about failing.
So why bother putting safeguards in place to prevent failure when the natural feedback mechanism of the free market is good enough to do this in the first place?
"Regulation" only ever benefits some at the expense of others. If it is not voluntarily done then it cannot be proven to have any "net benefit" exceeding costs.
HOWEVER THE MOST IMPORTANT ARGUMENT AGAINST REGULATION:
Is the problem of the cost of compliance and how it affects competition especially the smaller players.
Think about the US. Lots of small banks have gone under or have been bought out by the big banks. Many big banks got bailouts from the government. So all in all, they have benefitted. Sure short term things might've looked bad but they knew they were "too big to fail" and their competition from smaller firms has been wiped out.
Also it costs a lot of money to comply with legislation. Larger firms have more resources at their disposal and find it easier to comply. Many small firms find compliance to be too expensive and thus will close down or won't start up in the first place.
I work in the auditing profession at one of the big four. The new Companies Act coming into effect soon places more "regulation" in place. We've been told that the burden on smaller firms is now even greater and if they cannot comply they cannot perform statutory audits. This means smaller firms won't be able to provide trainees with training contracts as they will perform less and less statutory audits due to the fact they do not have the resources to meet all the new regulatory requirements. This was told to us in honours to inform us what to expect when approaching firms for training contracts. Smaller firms will resort to more consultancy work and tax advice etc.
All this benefits the big firms as it means more work for us. More demand for our services and thus we can charge more and less competition, thus raising costs further. I can tell you now that we will benefit at the expense of smaller firms.
This applies to all sectors. More regulations = higher costs = increased difficulty in entering the market and competing with the big guys, resulting in higher costs and less value to the consumer.
How can this be justified in order to "benefit" the consumer. How less competition magically will result in better quality escapes me. Telkom anyone?
