Category Archives: Regulation

Crony capitalism, Dodd-Frank style

In a cronyism twist, new regulations from 2010′s Dodd-Frank legislation will set aside certain businesses for special government oversight because they are too big to fail. (The official term is Systemically Important Financial Institution). This arrangement may devolve into a special benefit for the designated businesses because it will tell the public that the corporation has the government’s backing.  From the American Enterprise Institute blog:

Now think about that when you hear the great hew and cry of the folks who purport to be worried that the big banks are too-big-to-fail (TBTF). They denounce the funding advantages these banks get because of the markets’ belief that the government will not allow them to fail… Who could resist buying insurance from a firm the government will not allow to fail?

Why the China Dream Might Be a Mirage

In a reminder that cronyism is not a uniquely American phenomenon, this Bloomberg piece highlights the ubiquity of cronyism, government intervention, and corruption in China.

Above all, the government needs to reduce the state’s outsized role in banking, finance and industry…

Average Chinese who call for leaders to disclose their assets are detained. Journalists who do lifestyle checks on key politicians to find out how their families amassed hundreds of millions of dollars are regarded as subversive.

Chicago-based utilities company faces questions from shareholder about crony relationship to administration

Andrew Evans from The Washington Free Beacon has recently reported about the close relationship between a Chicago-based power company and the current administration. Exelon Corp., has been receiving money from the federal government and has been leveraging regulations in order to protect themselves from competition.

A representative for the National Center for Public Policy Research (NCPPR), a Washington-based think tank that holds stock in utilities company Exelon Corp., attended Exelon’s shareholder meeting and asked CEO Chris Crane about the company’s relationship to the Obama administration and the wisdom in taking government money.

Exelon officials used their connections to the White House to shape environmental policies in order to hurt their competitors, according to a New York Times article. […] Exelon also secured favorable loans from the government for an already-financed project.

Study: Nevada’s Renewable Portfolio Standard to Cost Residents $2.275 Billion

Michael Chamberlain from Watchdogwire.com reported how the Silver State’s Renewable Portfolio Standard (RPS) will cost Nevadans $2.275 billion over the next twelve years, according to this study, done by the Beacon Hill Institute.

The authors claim the RPS will result in a loss of approximately 1,930 jobs and a reduction of more than $230 million in Nevadans’ disposable income during that time. In addition, the study states that the RPS isn’t likely to reduce Greenhouse Gas emissions (GHGs) nearly as much as advertised.

The study found: The current RPS law will raise the cost of electricity by $174 million for the state’s electricity consumers in 2025, within a range of $45 million and $310 million Nevada’s electricity prices will rise by 6 percent by 2025, due to the current RPS law, within a range of 1.6 percent and 10.8 percent.

$2 Trillion Underground Economy May Be Recovery’s Savior

Mark Koba, senior editor of CNBC has written the following article, emphasizing the growing underground economy in the U.S. and how it may help to sustain economic growth.

The shadow economy is a system composed of those who can’t find a full-time or regular job. Workers turn to anything that pays them under the table, with no income reported and no taxes paid — especially with an uneven job picture. “I think the underground economy is quite big in the U.S.,” said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. “Whether it’s using undocumented workers or those here legally, it’s pretty large.”

“People are running out of patience when it comes to finding a job and losing income,” Gonzalez said. “So it’s not that surprising to have workers take jobs that are in the shadow economy. But it’s a sign of how bad things are and how we have to get the real economy moving again.”

Pinup Panini Food Truck Quits Over Proposed Regulations

Benjamin R. Freed at the DCist writes about a food truck that is going out of business because of proposed regulations:

Another D.C. food truck is leaving the road over the District government’s proposed regulations over the growing industry. Cori Bryant, the owner of the Pinup Panini sandwich truck, announced that today would be her last day serving pressed sandwiches out of the window of her light blue truck painted with the image of a 1940s-style pinup girl.

“The new regs are to much for this little startup,” Bryant wrote from her truck’s Twitter account this morning. And after serving today’s lunch crowd in Chinatown, Pinup Panini packed it up for good.

Strassel: Nearly Sideswiped by Another Green Car

A WSJ column by Kimberley A. Strassel delves into the cronyism involved in the government loan process for automakers, showing an example of a company that was almost given loans despite clear signs they were not qualified:

For an excellent study in how green-energy cronyism works, look instead to the near miss (for taxpayers) of Next AutoWorks. That startup applied for a $320 million federal loan guarantee in 2009, promising a Louisiana factory that would produce cheap and fuel-efficient cars. Next didn’t, ultimately, get its loans.

It wasn’t from a lack of political lobbying. Emails referenced in a House Oversight subcommittee hearing this week confirm every suspicion about the degree to which powerful moneymen worked the system on behalf of their investments, pushing their political contacts to roll over Energy’s credit department.

Reason: You Can’t Just Sell an Electric Car to Someone, This is America!

Ed Krayewski at Reason’s Hit & Run blog writes about a case of cronyism in the auto dealer industry:

Ever since Tesla announced its plans to sell cars directly, with factory-owned Tesla Stores and Tesla Galleries acting only as display showroms, car dealers and their associations have denounced the plan.

They’ve also sued Tesla for violating franchise laws in several states–Massachusetts, most notably–and gotten laws changed in others to make Tesla’s model flatly illegal…