Journalism in the Public Interest

Financial Regulation Kills Jobs? Perhaps Not

With the presidential campaign in motion, and President Obama urging immediate passage of his new jobs bill, the attention in Washington has shifted almost exclusively to the economy and job creation.

And that means a shift away from regulation, right? Not necessarily.

Some regulators and financial industry experts are predicting the opposite—that new financial regulations will spur some growth. 

The New York Times’ DealBook blog cited derivatives regulation as one example. Dodd-Frank requires a substantial chunk of the $600-trillion derivatives market to trade on exchanges or on new electronic trading platforms. “I have no doubt that these new regulations, instituting new types of clearing, trading and reporting platforms, will foster a landslide of hiring in the financial sector,” Bart Chilton of the Commodity Futures Trading Commission said in a recent speech cited by the Times. As another New York Times piece noted, previous financial regulation laws have resulted in additional jobs for accountants and lawyers, at least. 

But separate from the jobs created to actually handle new regulation, others have pointed out that regulations can have a long-term, positive effect on overall economic growth by preventing the types of crises that put an industry on life-support.

Last year, two studies by central bankers and regulators found that the short-term impacts of stricter capital requirements were “significantly smaller” than the estimates published by banking groups, the Times reported. Rather, the studies said that stricter regulation would lead to more long-term growth by preventing future crises.

Banks see higher capital requirements

—which require them to have more financial cushion to balance out risk-taking

—as a damper on profits. They have repeatedly warned that tougher rules will hamper lending, reduce investment and slow economic growth.

But not everyone sees it that way. Swiss regulators, for instance, indicated last year that they would impose even tougher capital standards on their country’s banks on the premise that investors would rather put their trust—and their dollars—in safer banks.

Wow.  That’s a hard sell for employing useless people to perform busywork.

If we’re bringing the derivatives market into this, look at it this way:  At $600 trillion, a half-percent tax on all such fictional transactions brings us into the neighborhood of three trillion.  With a tenth of people unemployed (give or take some), we could take that money and distribute it across those thirty million people and pay them each a hundred thtousand dollar salary to do nothing.

That’s a silly result, of course, but it’s a much better result than making jobs, but only cushy jobs for lawyers, accountants, and other (no offense to any readers) leeches on society.  If I’m going to waste money paying people to not contribute to society, I’d rather it go to kids who can’t enter the workforce, experts at obsolete processes, and so forth, rather than more lawyers for Wall Street.

Bonus:  By taxing the derivatives market, increasing the amount over time, we can wean Goldman-Sachs off of “rolling” their food futures to inflate the price of food and other such shenanigans.  If we had taxed this crap five years ago, we wouldn’t have this idiotic mortgage mess.

Of course, nobody in Washington is interested in that.  I wonder why that might be…

An interesting idea.

And in fact, the unemployed could get even more.  There are not 30 million unemployed, but at 10% of the work force, only about 14 to 15 million.  Pre-recession employment numbers were at about 138 million.

Cuthbert Twillie

Sep. 12, 2011, 3:16 p.m.

Oops!  You guys had a wardrobe malfunction.

Gotta learn the hard way again? What did Einstein say about doing the same thing over and over again and expecting different results. Banks welcome regulation. It gives them a new business to develop and a new way to steal the money from the economy so that more and more people get laid off. Of course, Democrats don’t die easy. They just find a new way to take the money and spread it around to buy your vote.

Regulations create jobs, no matter the industry.
Need more inspectors to police implementation
Need more auditors to “keep them honest”
Need more accountants to keep the company books.
Need more innovators to create ways around the regulations.
Need more people to implement new circular policies and manuals.
It is a well known fact that the best thing this GOVT can do for an industry is to tell it NO. No you cannot steal, NO you cannot pollute, NO, you have to meet new operating standards.Because MANKIND has a natural instinct to get around NO, it all starts in childhood when kids attempt to outsmart their parents. There is no greater satisfaction than being able to get around a NO. If the car makers had been told they had to increase MPG back in ‘90’s they would have done so and jobs would have been created. If we had to switch to alternative fuels, the jobs would have been created. No cure for POLIO, not yet! No way to the moon, but soon! If de-regulation had not occurred our economy would not be in its current pathetic state. If american corps had been told they could NOT ship jobs overseas, they wouldn’t have, because no matter what, the US is the richest nation in the world and has the broadest consumer market. American business would have made it work because that is what americans do best “innovate around the NO’. American industry has taken short term paths for a quick profit taking. And the Congress/President have been their cohorts in their profiteering. It is time the CONGRESS said NO. It is time for the EPA to say No, NO more excuses.

John, interesting idea but you now sound like the government talking about gambling.  :)  Rather than just ban an economic activity that acts as a tax, gambling, they want to regulate it and tax it even further. 

Your idea won’t work because almost all derivatives expire worthless.  You can’t tax the derivation of a product with no intrinsic monetary value.  In reality the derivatives market should actually be banned.

Amen to that!  We’ve been getting so much negative spin by the wealthy puppet masters that we’ve been ignoring what common sense tells us.  We must regulate greed and a great place to grow jobs is to hire watchdogs and have citizen’s groups to watch them.  Big money causes big cheating.

Speaking of big money causing big cheating:

“...(subprime) undisclosed “lenders” were the debt buyer “investors” — from the onset — by which, the “pretend lenders” did their dirty work for.
But, the undisclosed lenders did not lend anything other than cash-out — did not have to — they purchased (unsecured) collection rights —for a steep bargain — and these debt buyer bank “investors” — funded very little – if anything. But, they leveraged the collection rights ANYWAY. Leveraged the collection rights over and over for derivative CDOs and squared CDOs — for — collection rights to unsecured charged off debt. Not a pretty picture — but– the truth.”


Massive cover-up of MASSIVE fraud—-including MASSIVE insurance fraud…whole reason economy is not recovering…Obama refuses to admit.

GrimReaper, that was more or less my point, vague though it might be.  They’re talking about adding regulation at that same casino to make life difficult so that we can hire…parasites, for lack of a better word.

That’s the worst possible case, in my eyes:  Teachers are out of luck.  Secretaries are out of luck.  Graphic artists, no dice.  People who do real work can’t find it, but we’ll demand useless work for lawyers, apparently, and support the derivatives casino while we’re at it.

Because the world needs more lawyers and Wall Streeters.  Throw in some telephone sanitizers, while we’re at it, and the ghost of Douglas Adams can celebrate.

I’m not actually advocating my plan, just pointing out that there’s any number of far better approaches, mine being the “toddler logic” option that’s still substantially better than what the brain trust in Washington is working on.

Besides, derivatives markets actually do serve a valid purpose (manufacturers bet long or short to smooth out price fluctuations, for example), so we shouldn’t stop it.  But the abuses, designed to be hard to detect, are killing us.  So, with so much imaginary money floating around, might as well add a “sin tax.”  If the government is going to tax, let them tax the activities that damage the economy, rather than starting a company or going out to dinner, which are beneficial.

And as Carmank points out, most of the jobs under the article’s suggested plan will be to circumvent regulation, which seems counterproductive at best.

Interesting comments

the only reason to protest financial overseers or controls,? it keeps bankers honest, if you cant figure this out after the latest debacle in 08 caused by general george and wimpy dick you deserve all the bad that happened if you are in agreement you would demand implement of overseers,regulators etc, because unlike in iraq the jobs would be complete, they would be on time, and best of all IN BUDGET!

Commenting is not available in this section entry.

Get Updates

Our Hottest Stories