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  January 31, 2017

Executive Order on Regulations Will Benefit Large Corporations, Not Small Businesses


The Trump administration is using small business as an excuse for wholesale assault on regulation, says former financial regulator Bill Black
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biography

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. Black was a central figure in exposing Congressional corruption during the Savings and Loan Crisis.


transcript

SHARMINI PERIES: It’s The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

Early Monday, President Donald Trump signed yet another Executive Order, this time to reduce the number of federal regulations. The order says that for every new regulation that government agencies pass, two old ones must be eliminated. Trump signed the order accompanied by representatives of small businesses who he said this order would particularly favor. Let's have a look.

DONALD TRUMP: If you have a regulation you want, number one, we're not going to approve it because it's already been approved probably in 17 different forms. But if we do, the only way you have a chance is we have to knock out two regulations for every new regulation. So if there's a new regulation, they have knock out two. But it goes far beyond that. We're cutting regulations massively for small business -- and for large business, but they're different -- but for small business, and that's what this is about today.

SHARMINI PERIES: Trump also said that up to 75% of all federal government regulations could be cut. One of the first major pieces of regulation to be on the chopping block, according to Trump, are the Dodd-Frank financial sector regulations that were passed following the financial crisis of 2008.

Joining us now to take a closer look at what he's cutting, and the effects of it, is Bill Black. Bill is Associate Professor of Economics and Law at the University of Missouri Kansas City. He's also a white-collar criminologist, a former financial regulator and the author of "The Best Way to Rob a Bank is to Own One." Thanks for joining us, Bill.

BILL BLACK: Good to be here.

SHARMINI PERIES: Bill, before we get into the financial regulations aspect of all of this, particularly how it affects small businesses, Trump made a point of emphasizing how difficult it is to start and run a small business in this country. So, you have regulated this sector and industries before. Give us a sense of what kind of regulations we are talking about, and are there excessive regulations in place at this time?

BILL BLACK: Well, let me take the last question first. Of course. I was in charge at the staff level of the re-regulation of the savings and loan industry, but I got rid of more regulations and interpretations and such than I created. There are many rules that had been built up over 50 or 60 years. They've been made exceedingly complex, typically at the behest of the industry, often at the behest of large corporations, and it can certainly be sensible to write rules in plain English, and to write them much more concisely, and to use judgment. You want to have regulatory discretion so that you are not required as a regulator to treat everything as if it were a capital offence.

But, of course, what Trump is doing is unlikely to do any of that. In fact, it reveals a whole series of areas in which we are gimmicking the system to make sure that the largest corporations can run riot -- what I've called the most criminogenic environment in U.S. history.

Let's start with small business. Regular viewers will recall that we talked about the appointee to the Small Business Administration, the World Wrestling [Entertainment executive], and the fact... you asked me what the key role was going to be, and I said it wasn't going to be substance at the Small Business Administration but that small business would be the excuse for a wholesale assault on regulation.

So, the logic is always going to be, "Hey, we have to give relief to small business," but when you look, what they're actually going to do will be to open the doors wide for the most rapacious practices of large businesses, many of which will be hostile to small business, as in her own career, where she has a record of destroying small businesses. So, that's one general act of where this is simply not honest.

The second thing is, these are the same people preaching, and in future weeks you're going to hear this phrase: "Hey, we have to have no rule ever adopted without cost/benefit analysis and proof that the benefits strongly exceed the costs." And you're going to see -- well, you're not going to see -- how many games that they play so that the true benefits get ignored and the costs get massively overstated.

But notice that they're not going to do any benefit/cost analysis before they destroy rules. So, it's completely asymmetrical, that's completely nonsensical, and I'm convinced they haven't even thought about that as a possibility.

SHARMINI PERIES: Bill, typically, business regulations cover health and safety, employee benefits, advertising and perhaps even privacy laws and environmental issues of what is immediately surrounding these small businesses. What is your sense of how these kinds of items are going to be affected by what Trump signed today?

BILL BLACK: It's really hard to predict what folks are going to do, because, again, this is going to create the discretion to simply destroy rules left, right and center. And each agency head, and many sub-heads of those agencies, are going to be listening to industry and getting rid of things.

Let me talk about small business for a moment. The first thing you want with small business -- and the United States actually does this moderately well compared to many places in the world -- but those of your viewers who are familiar with other parts of the world may know that in many countries it is close to impossible to start a small business legally.

And there's actually an economist, Hernando de Soto, who sends graduate students in and says, "Start a small business. Do everything honestly. No bribes. No end runs." And then they record how many approvals they need to start a small business, how long it took to get each one, how much you had to pay in fees. And what they frequently find is that it takes over a third of a year, sometimes it takes more than a year, sometimes it takes over 100 permits, and, of course, this creates what is called the grey markets, or the underground economy. It has different names in different places.

But the idea is you simply can't run your street business -- typically a street vendor – legally. And that means you're always at the mercy of corrupt cops who are always hassling you for free meals and services and bribes so that they don't shut you down, etcetera, etcetera, etcetera.

So, having a one-stop place where you pare down the number of requirements to start a business to the minimum required for protecting health and safety, which is typically pretty small, and where you could get all of that approved in a day -- where you cross-train people so they didn't have to go to 16 different desks to be able to do it, and a cross-training would teach you what was complex and what you needed to fix by improved deregulation, or improved regulation, and simply clearer instructions, and you put it online wherever possible, as well.

So, there are a host of things we can and should do, and which are being done in many places in the United States and abroad, that can make it much easier for small businesses to start a legal business.

Now, beyond that, it depends. You go into an area -- let's say that you're an automobile repair place. Well, we really do want those people to comply with the laws on disposal of toxic substances, and a lot of things they dispose -- of in liquid form in particular, but not entirely -- are really quite toxic. So that's where we want to put our emphasis, along with in the example of an auto repair, these are dangerous places, as well, where people can get injured if you're not really committed to safety. And we found that when business managers make safety a top priority, there is a remarkable reduction in injuries.

So those are the kinds of things -- and again, they vary by industry -- that we should really be emphasizing. And, you know, used cars, we should be emphasizing anti-fraud, obviously, because this is an area that there is considerable abuse.

So, it's not one size fits all. It's you should be doing these things where they make sense. You can often make the rules much shorter. You can often make the rules much more understandable -- that helps me as a regulator, because I spend way too much of my days back in the day explaining what some weird legalese meant that somebody had created 45 years ago, type of thing. And, you know, I had to go back in the equivalent of a legal research time machine to figure that out.

So, yeah, there are all kinds of rules that get in the way, and that we should cut through, but this isn't going to do it. By the way, this has been tried before in a slightly less aggressive form: the EU required you to get rid of rules if you adopted a new rule, and that led into the financial crisis where they were really good at getting rid of rules and really bad at creating any effective rules to govern in areas as criminogenic as big finance.

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END



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