Vogel: Regulation Wisdom

Aug 15, 2017

In an ideal world, corporations would not need to be regulated. In fact, some companies, like Hypertherm, go far beyond what’s required. Hypertherm is well on its way to achieving its goal of sending zero materials to landfills from its 11 buildings in New Hampshire. But we don’t live in an ideal world, as the latest scandal from Wells Fargo Bank illustrates.

The New York Times alleges that by not refunding money it owes customers who purchased GAP insurance, Wells Fargo pushed 274,000 customers into delinquency and wrongly repossessed 25,000 cars. This is on top of its earlier scandal where it created and charged customers for two million fake accounts.

Yet, the current government seems intent on eliminating many of the regulatory rules for banks and other companies - and also reducing the number of people who enforce existing regulations.

In the debate about the appropriate amount and type of regulation, I’m reminded of the Code of Hammurabi that was carved on clay tablets and stone slabs almost 4000 years ago.

King Hammurabi of Babylon realized that commerce needed to be regulated and, for example, dealt with the problem of houses collapsing by imposing strict penalties on the builders. Some of the penalties set forth in the Hammurabi Code were truly barbaric, like cutting off a doctor’s hands if he killed a rich patient. And while businesses that misbehave today may not jeopardize the hands of their employees, it would be nice to do more than give those companies a collective slap on the wrist when they’re caught.

After 4000 years of experience, it’s clear that regulation is necessary but I believe that we currently operate under an ineffective system. If a company overcharges us, we may at best be able to recover the amount of money we were overcharged.

With incentives like that, I wasn’t surprised to read, that according to a spokesperson for Wells Fargo, the bank has known about this glitch in its system and its failure to reimburse some customers since 2014.

King Hammurabi provides some interesting guidance in this area with his decree that, "If a herdsman . . . be guilty of fraud and make false returns . . . then shall he be convicted and pay the owner ten times the loss.”

And for those times when companies double bill or overcharge us, that doesn’t seem so very excessive to me.