Run Government Like Business

Drove the kids to school this morning and now, there are bite marks in the steering wheel—not on account of anything they did, but courtesy of my listening in on an NPR interview with outgoing SEC Chair Mary Shapiro. While gushing about the SEC’s fabulous post-Dodd-Frank rules (the handful that haven’t been gunned down by federal courts, and wouldn’t you know the SEC is now regulating hedge funds—the only outfits that had absolutely nothing, nada, zippo to do with the financial crisis and now, do you feel safe??) Madam Chair complained that the SEC, alone among federal financial agencies, is still not “self-funding.”

“Self-funding” is a Beltway euphemism for “not needing appropriations from Congress because we can help ourselves to someone else’s money”; and for better or (mostly) worse, Mary Shapiro is right. The Fed is self-funding in the pristine sense of being able to print its own money. The Public Company Accounting Oversight Board funds itself—as well as its nominal overseer, the SEC—by sending “Dear CEO, send more money” letters to the heads of corporations that it does not regulate (this is not a joke). The Consumer Financial Protection Bureau sends only one letter, to Ben Bernanke: fork over the dough. (On what authority? See Section 1017.) And so on. Actually, you don’t even have to be a financial agency to get into the game: the FCC rakes in money through spectrum auctions and the like. Nor do you have to be federal: state attorneys general make gobs of money by suing and settling.

If memory serves, we entrust government with enormous enforcement discretion on the theory that we can control the level of enforcement by means of appropriations. Those days are gone, though: regulatory agencies are mostly self-funding. Indeed, many are profit centers for government. Legislative oversight, in this environment, is poisonous: why can’t you make more money?

Barring an unlikely return to the old, constitutional system, we should (1) block agencies from turning their earnings over to the legislature; (2) turn them into private corporations, and list them on the stock exchanges; (3) allow them to pay cash dividends.

I’m short FERC today; neutral on CPSC; have a “Buy” on EPA at 25.