There were sound business reasons to deregulate much of industry during the '70s, '80s and '90s, just as now there are great reasons to re-regulate business. But regulation is not a panacea that magically makes everything better just as waving the flag of socialism is not nearly enough to make a difference either. Flag-waving is a gesture at best.
During the 1950s you could not buy and hook up an answering machine to your telephone line because the regulatory laws from the FCC said that only the telephone company could do that and the telephone company at that time did not make answering machines, or voice mail or any of the products we have now. If you hooked something up to your telephone line, the telephone company would come out and disconnect it. You couldn't even buy your own phone and hook it up. It was a big problem. Manufacturing companies, the electronics industry and the computer industry were introducing new products that could not be used and the phone company was not having any of it; if it wasn't made by Western Electric, the phone company refused to use it or let anyone else use it either.
The Carterfone decision of 1968 set the precedent, and what followed was a brand new industry that previously did not exist--customer-owned equipment and, later, private networking. Interconnect telephone companies sprang up all over the place. I worked in this industry myself for many years.
Much of the telephone company itself remained tightly regulated and the Public Utilities Commission would act as an advocate for the consumer in every state.
Every service the telephone company sells is "tariffed" and must be approved by a very slow-moving public utilities commission. Rates are controlled by the PUC.
A customer who has issues with the telephone company such as billing problems or service issues can write to the public utilities commission and the telephone companies will bow to the PUC. I have written to the PUC myself and have received rate adjustments and rebates.
Therein lies the difference between the banking industry and the telecommunications industry. Where is the PUC-type function in the banking industry? Who is the hammer that the consumer, the borrower, can use as an advocate when the banking industry steps out of line? The credit card companies do whatever they want to. The banks make up the rules as they go along.
We need a PUC-type operation that can hold the feet of the banking industry to the fire and say, No, you are not going to make adjustable rate loans to borrowers. We are going to have public hearings and then we will tell you what kind of loans you can make. And this new function needs to have teeth in the form of prison terms for those laws that are violated.
lake Isabella, CA
Mar 10 2009 - 9:46pm