There has been a lot of talk lately about loosening regulations and how that could be good for the economy. There has also been just as much talk about how loosening regulations could hurt consumers. There are well-meaning folks on both sides of the argument.
Those advocating for loosened regulations argue that fewer regulations would mean increased economic growth as there would be fewer roadblocks to business investment. Opponents of deregulation highlight the importance of regulation in keeping corporate interests from running amok at the expense of consumers and the environment. There are valid arguments on both sides.
Bad actors drive the development of regulation. Often, they go off and do something that hurts consumers, and the government steps in to try to protect against those bad actors. The problem is that when the government develops regulations, they are often written by individuals who don’t know how the industry they are regulating works. Often, those regulations end up being an extreme overreach with the unintended consequence of hurting the very consumers the regulations were intended to help.
As I wrote some months ago, the Dodd-Frank Act is a perfect example of government overreach harming local businesses and everyday Arkansans.
Regulations designed to keep big banks from taking risks that hurt our economy have actually ended up limiting the ability of community banks to provide much needed access to capital. Right now, one of the greatest obstacles to economic development is the way Dodd-Frank limits the ability of community banks to issue the loans small businesses need to get off the ground and expand over time.
One example of many Dodd-Frank rules and regulations that has caused an industry in banking and finance to downsize, consolidate or totally vacate is the TILA/RESPA Integrated Disclosure (TRID) rule. I will spare you the intricacies of TRID in the real estate arena; however, this burdensome rule is forcing title companies, local small businesses, across the nation to consider consolidation because they can’t sustain the increased compliance costs within their business model. From a rural perspective, some small businesses are forced to commute up to 150 miles to locate a title company to close a real estate transaction.
While you’ve likely heard much about Dodd-Frank, an emerging debate is the one over how much the federal government should regulate the internet. Supporters of regulation of the internet argue that it is critical that internet providers not treat certain types of data differently based on who is using the data. This principle is called “net neutrality.”
Supporters of net neutrality believe that internet service providers would eventually abuse their ability to charge users different fees and/or slow down internet speeds for particular users. Opponents of net neutrality argue that regulating the internet would block its free market benefits.
Whether it’s Dodd-Frank or the question of net neutrality, it is critical that businesses, government regulators, and consumers work together to reach a balanced solution in order to avoid regulating ourselves out of an economy. The key is doing the hard work of parsing both sides of regulatory arguments in order to arrive at a good decision for all.
Editor’s note: Frank Scott, Jr. is a banker, former Arkansas Highway Commissioner and a board member of the Little Rock Port Authority. Opinions, commentary and other essays posted in this space are wholly the view of the author(s).