Why we need corporate regulation

Ronald Reagan managed to convince a surprising number of people who should have known better that the federal government is the enemy and government regulation is the problem rather than a solution. The Savings & Loan crisis (with the Keating Five scandal) should have put an end to that nonsense, but some were slow to figure out that regulations typically exist for a reason. The corporate looting of America under George Bush finally is putting an end to that canard, however. Americans get it. Regulations are there to protect them. And even before the corporate scandals of the last few years, one trend was clear: The more an industry earns a reputation for being untrustworthy, the more Democrats, Republicans, and Independents favor increased regulation of it.

Three stories today on the front pages of three national newspapers tell the tale. These are the kinds of practices that should not be occuring under a government that takes regulation seriously. You know, under a Democratic administration. From Ellen Nakashima at WaPo we learn that insurers are snooping around in people's medicine cabinets:

Health and life insurance companies have access to a powerful new tool for evaluating whether to cover individual consumers: a health "credit report" drawn from databases containing prescription drug records on more than 200 million Americans.

Collecting and analyzing personal health information in commercial databases is a fledgling industry, but one poised to take off as the nation enters the age of electronic medical records. While lawmakers debate how best to oversee the shift to computerized records, some insurers have already begun testing systems that tap into not only prescription drug information, but also data about patients held by clinical and pathological laboratories...

The trend holds promise for improved health care and cost savings, but privacy and consumer advocates fear it is taking place largely outside the scrutiny of federal health regulators and lawmakers.

Meanwhile Vikas Bajaj of the NYT explains that the mortgage crisis is about to get much worse as gimmicky loan terms at prime rates begin to bite:

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.

Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

Predatory lending of all sorts has been allowed to go unchecked for years under Republicans. By contrast, Barack Obama has made abusive lending practices a signature issue, including the re-regulation of credit cards and payday lenders (PDF).

And from the front page of that leftist rag the WSJ, we learn that increasingly pension plans are being siphoned for executive perks. It's all done in secrecy and by sleight of hand:

At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay.

In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives' supplemental benefits and compensation.

The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy...

Generally, only the executives are aware this is being done. Benefits consultants have advised companies to keep quiet to avoid an employee backlash.

Ripping off pension plans to the point of crisis is one of the most vile legacies of Republican governance. Americans will be looking to Democrats to rein in corporate excesses.

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