Plenty of others have used the Tiger Woods’ scandal as an excuse to discuss another topic, and I’d like jump on that bandwagon. In particular, I’d like to connect the dots between Woods’ mistakes and the need for a tightly regulated banking industry.

Remember the bailout? Supposedly, most of the money we gave to the banks is getting paid back in an effort to prevent government intervention in the day to day activities of banks. The markets have stabilized; we don’t need your money anymore, now lets forget this ever happened. One thing we expected after the bailouts was for the federal government to re-regulate banks to prevent future meltdowns. Most of the regulation is still in committee, but it sounds like what will get passed could give banks even bigger loopholes than the existing laws, and certainly won’t help prevent future meltdowns from occurring. But more on that later.

What if, before he started his crusade of serial infidelity, Tiger was told that his actions would result in a loss of friends, family, colleagues, and reputation? They would also cost him half of his existing fortune, and reduce his future earnings by 80% or more. Do you think he would have even started to engage in this behavior? If so, do you think he would have started thinking twice after 5 affairs? 10? 15?

The human default setting is to take absolutely everything you can get. The consequences of our actions may be evident ahead of time, but unless those actions are well defined, short term gains will always win out to possible long terms consequences.

This is true of Tiger Woods, and it’s just as true as the credit default swappers – banks, traders, and insurance companies. All of them knew what they were doing was wrong. None of them cared, because specific consequences weren’t spelled out ahead of time.

Looking back, you might think what the banks did was criminal, and it probably should have been. Fortunately for them, the Clinton administration, steered by the recommendations of then Treasury Secretary Robert Rubin, took away the consequences and said let the markets bare what they may. But just like Tiger, take away the specific penalties, and the markets will take until there is nothing left.

It only seems natural then, that we put restrictions back on financial institutions in an effort to prevent another meltdown. After all, the original Glass-Steagall Act kept markets relatively stable for 65 years. It only took the banks another 7 years to completely wipe out again after its repeal. It’s been about a year since the bailouts started, where is that regulation?

The problem is, the same folks that helped get the Glass Steagall Act repealed are advising the President now, and they all personally benefited from the repeal of that Act. There is a great article by Matt Taibbi in the December 10th issue of Rolling Stone that discusses the connection in greater detail.

I for one am more hopeful than Mr. Taibbi that we will see meaningful reform out of the Obama administration. The article admittedly can’t make the connection of why Obama would choose to fill his advisory roles with these sell-outs and jokers, and I think the President has plans that we haven’t seen yet. As a country, we just need to make sure it becomes his priority.

Speaking of which, this morning every major news outlet in the country has joined together to make sure I understand that Tiger Woods’ wife is no longer wearing a wedding ring. No mention of a financial regulation bill though.
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Joe Payne

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  1. As my friend's wife always says, "you have to spend money to make money".