BLANKLEY: Brother, can you spare a regulation?

If we enter another depression, the likely reason will be new financial rules

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In a much-discussed live televised forum last week, Jamie Dimon, CEO of JP Morgan Chase, asked Federal Reserve Chairman Ben S. Bernanke the 64-trillion-dollar question. While most commentators focused on the apt question, it was Mr. Bernanke’s answer that shocked me when I heard it - and ought to shock the nation much more than it has so far.

Question: “Now we’re told there are going to be even higher capital requirements, and we know there are 300 [financial regulatory] rules coming. Has anyone bothered to study the cumulative effect of these things? And do you have a fear - like I do - that when we look back and look at them all, that they will be the reason that it took so long for our banks, our credit, our businesses, and most importantly, our job creation, to start going again? Is this holding us back at this point?”

Answer: “Nobody has looked at it in all detail, but we certainly are trying as in each part to develop a system that is coherent and that is consistent with banks performing their vital social function in terms of extending credit.”

Before breaking ground on the construction of a building, bridge or other substantial construction project, the architect calculates the cumulative stresses on all the load-bearing parts of his structure to be sure that when the thing is built, it will not collapse of its own weight and kill thousands of its occupants.

After President Obama, Mr. Bernanke is the man with the most comprehensive responsibility for designing the new financial regulatory structure of the United States and, in fact, of the entire world, as Mr. Bernanke and the United States are also the dominant force in coordinating the U.S., European and Asian financial regulatory structures.

The bald-faced admission that there has not been an effort to assess the cumulative load-bearing effect of the proposed new regulations on our financial system brings into question the minimal competence of both the Federal Reserve governing board and the most senior elective and appointive level of the U.S. government, which has the ultimate responsibility for the new financial regulations.

After all, it’s only the economic survival of 300 million Americans at stake if the federal government miscalculates the new financial regulations it is busy promulgating. If our financial system buckles under the combined weight of all those new regulations, no one, from CEOs to assembly-line workers (if we have any left after this is over) will be safe from the collapsing edifice. Think of the terrible image of the thousands of people running from the collapsing World Trade Center towers on Sept. 11, 2001, and project it (figuratively) to all of us running from a collapsing economy induced by unbearable regulatory weight on our financial institutions.

Maybe this is part of the explanation for last week’s CNN poll in which 48 percent of Americans said they thought it was “likely” that the nation would be in a new Great Depression within the next 12 months. Maybe half of the country is worried about something that has not dawned on our Federal Reserve chairman or other senior executive branch officials.

“Nobody has looked at it in all detail” Mr. Bernanke said. Why in heaven’s name have they not “looked at it”?

If I were the president of the United States or the speaker of the House or the majority leader of the Senate, I would have raised holy hell when the Federal Reserve chairman made that admission on live television last week.

Short of war and peace - and maybe even more important - is the financial system of our country. It is the lifeblood of our economy. If through ineptitude and inattention the federal government imposes a regulatory structure that crushes our financial system, not only our jobs and prosperity are threatened, but even our national strength and sovereignty.

Many historians think that starting in the 17th century, the reason the British Empire surpassed the French Empire and became the dominant force on the planet for two centuries was the greater strength and stability of British finance.

Who can doubt that American dominance in the world - including the capacity of our industry to out-produce our enemies during World War II - has been the result of the great power and stability of our financial institutions?

And as we go about the most comprehensive rewriting of our financial regulations since the Great Depression, the Fed chairman admits he hasn’t even tried to calculate the combined effect of all the daffy regulatory ideas being put forward and there is not a peep of critical comment from the White House, the Treasury or Congress.

No wonder half the country is bracing for a new depression.

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