Regulatory economist Bruce Yandle invented the catch-phrase “Bootleggers and Baptists” to describe
how regulations are supported by seemingly opposing groups when both profit
from the regulation. The theory is that Bootleggers
like laws against alcohol consumption because it keeps them in business and
limits competition, and Baptists like alcohol laws because it gives them the
moral high ground. A similar situation
is unfolding with the Dodd-Frank banking regulations and the political ascension
of Elizabeth Warren. She reaps huge
political capital from railing against the big banks and their greedy
executives and proposing ever increasing legislation to control the banks,
while at the same time, Lloyd Blankfein, the CEO of Goldman Sachs, stated
publicly that “More intense regulatory and technology requirements have raised
the barriers to entry higher than at any other time in modern history,” and “only
a handful of players” will be able to compete on a global scale. So, Ms. Warren makes political hay by
limiting the competition that Goldman has to face. Isn’t it wonderful to see the cooperation
between the public and private sectors?
