Friday, March 20, 2009

self-regulation can kill

It's shocking, simply shocking, that when for-profit organizations are responsible for assessing the safety and soundness of how a business operates, cozy relationships between the auditors and auditees sometimes spring up, and things that should not be acceptable are covered up, swept aside. In fact, sometimes these organizations are actually PAID by the company, let's call them Company A, they purport to be overseeing.

Sometimes, you end up with another business, let's call them Company B, that decides to inspect the operations of Company A themselves - and find that it is NOT being run in a safe, sound way. But Company B of course has no obligation to blow the whistle on Company A, and so the malfeasance continues unabated until something goes wrong, and people are hurt badly.

In THIS particular instance, I'm talking peanuts. Company A, the Peanut Corporation of America of salmonella fame, and Company B, Nestle, which decided NOT to buy PCA's peanuts after seeing the shit on the floor.

But it sure sounds like Wall Street, doesn't it? Substitute rating agencies like Standard & Poors instead of inspectors like American Institute of Baking International (which gave PCA's operations passing grades). When Standard & Poors and their fellow rating agencies gave AA ratings to securities including all sorts of dubious mortgages, they were essentially telling us all that those securities were safe to consume. In the case of peanuts, several people have died.

The credit rating agencies contributed to destroying Wall Street and the economy by calling those rat-turd infested CDOs "prime investment material."

Even Alan Greenspan now realizes that allowing industries to "self-regulate" (which means "minimally regulate") is NOT effective.

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