Problem is, all investors care about is the return on their investment. And we know what happens when pressure to deliver that return drowns out everything else -- Enron, anyone? Toxic asset financial crisis? The folks running the store stop paying attention to the quality of the goods they deliver and starting honing in on those quarterly earnings reports.
In other words, there's a big difference between product market discipline (regarding the quality of the goods landing in hands of consumers) and equity market discipline (regarding the value of the bonds and shares landing in the hands of investors).
The programs, therefore, are only as good as their supervisors and regulators are strong and smart. Given recent events, I'm not hopeful. Especially as we rely on the private sector (like ratings agencies and accounting firms) to do most of it for us. Lately, that portion of the private sector has been letting us down big time. And ironically, the reason that Obama et al. want to do this to begin with is because the public sector, allegedly, is lousy at oversight:
Programs that fail to make a difference — like many of those that train workers for new jobs — endure indefinitely. Often, policy makers don’t even know which work and which don’t, because rigorous evaluation is rare in government. And competition, which punishes laggards in the private sector, is typically absent in the public sector.So we're back to square one: we need better government regulation. So what's the point? Given the spectacular success of the defense-contractor industry, one can only suspect it's just another space for the pigs to feed at the government trough.
Meanwhile, instead of workers getting laid off and pensions biting the dust, it's the folks who most need government assistance that feel the pain.
