Madoff Scandal Exposes Government Failure

My op-ed, “Madoff Scandal Exposes Government Failure,” is being distributed by The Future of Freedom Foundation.  Here’s a taste:

[A] false sense of security is worse than none at all. When people believe government is protecting them from bad financial services, they are more vulnerable to scams than if they knew they had to protect themselves. The government’s huge regulatory apparatus broadcasts one unmistakable subliminal message: Have no fear because Big Brother is watching over you. Is it any wonder that people are less wary than they would be if they did not believe that?

As long as government plays a regulatory role — or people believe it does — they will assume that key activities are being monitored. And even when an activity is known to be unregulated, the implication is that if regulation were needed, government would be doing it. Why else did worldly investors fall for Madoff’s self-described “giant Ponzi scheme”?

The call for regulation assumes — without grounds — that government can protect investors from con men. But government regulators have never been able to make good on that promise. Con men prosper no matter how much the government regulates. They often understand the system better than the people running it. (Madoff was an insider!)

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