Government agency

All posts tagged Government agency

Administrative Law and Business

Published August 28, 2013 by Mayrbear's Lair

Administrative-Law

There are those that favor an increase of government regulation in the business arena in light of events like Enron and the credit crisis of 2008, while others believe that self-regulation is more effective without the intervention of government agencies and their administrative laws. Funk and Seamon (2009) suggest that administrative laws are like the air we ingest: invisible and ubiquitous.  Administrative agencies effect many areas of our lives that most people take for granted. In other words, they are part of the atmosphere that comprise modern society and like our physical environment, a necessary component (in some form) to help sustain civility (Funk & Seamon, 2009).  However many company leaders believe that government intervention is not effective and regard it as an unfair practice that forces financial burden on businesses, particularly small ones. Seaquist (2012) contends that the purpose of government agencies and their administrative laws is to help oversee and carry out specific government functions that help maintain a civil society (Seaquist, 2012). However, the effectiveness of these regulations are altered and evolve as society does and as administrations change and incorporate their political views.

government_regulation

In order to better comprehend what role government regulation should play to ensure ethical corporate conduct, we must first understand what role administrative agencies and their laws are meant to play and why they were established in the first place. Funk and Seamon (2009) purport that historically, the most significant agencies (or departments), consisted of the President’s Cabinet or close advisory members.  There are fifteen areas these departments oversee: Agriculture, commerce, defense, education, energy, health and human services, homeland security, housing and urban development, interior, justice, labor, state, transportation, treasury, and veterans’ affairs. The formation of these agencies and the demands placed on the leaders altered the historic importance of the cabinet members (Funk & Seamon, 2009). Subsequently, as these agencies evolved, they slowly began to take on a life of their own. For example, the agencies focus on implementing and managing their administrative laws, which are primarily about procedure and the systems they maintain, in order to take action that affect citizens. The administrative laws in turn, are determined from judicial opinions, driven by judicial decisions – as opposed to statutory or regulatory content.  In the meantime, growing concerns over costs and the efficiency of these government regulations, continue to lead to the creation of many new laws and executive orders designed to reform them. In theory, as society evolves and new technology expands, these regulations and agencies continue to make adjustments and the cycle continues.

961-300x300_FTC_Seal

One thing is for certain, administrative regulation agencies have been granted considerable power. Gellhorn and Levin (2006) purport that some of these powers are assigned on an industry wide basis like the FBI and IRS whereas other agencies enforce norms of conduct within the economy like the Federal Trade Commission (FTC) that enforces the ban on unfair methods of commerce and competition (Gellhorn & Levin, 2006). What makes these agencies dramatically unique is that each operates wielding the power of all three principal branches of government. In other words, they have legislative power to issue rules that control behavior, including the enforcement of heavy civil or criminal penalties for violations. They also have executive power to investigate possible violations and prosecute offenders. In addition, they have judicial power to adjudicate disputes that fail to comply with mandates. For example, the Securities Exchange Commission (SEC) created regulations that outline specific disclosures that must be taken into consideration in a stock prospectus. This later becomes a law that is passed by the legislature that the SEC uses to enforce and prosecute violators. Then, the SEC acts as the judge and jury by conducting adjudicatory hearings.  What makes this a unique situation is that these administrative agencies are typically unattached to any of the three branches of government (executive, legislative, or judicial). This then, raises questions of concern with respect to the constitutional distribution of authority in our government which is based on the principle of the separation of powers. We must remember that the division of these branches serves to provide a check and balance system of the power exercised by the other two branches. This means that the combined powers of the administrative agencies are not in alignment with the three part paradigm of the democratic government system the founding fathers designed. Institutions granted that kind of power can become dangerous because they have no one but themselves to answer to. In light of this significant information, it seems the real question is not whether government should increase or decrease their regulatory measures, the real question is how to make them effective at what they were designed to do, with checks and balances in place to ensure that these agencies and the government leaders that run them, manage society in a fair and ethical manner and that the distribution of power is more evenly divided to detect ethical misconduct before another crisis threatens the global economy.

********

References:

Funk, W., & Seamon, R. (2009). Examples and explanations: Administrative law (Fourth ed.). New York, NY: Aspen Publishers.

Gellhorn, E., & Levin, R. (2006). Administrative law and process: In a nutshell (Fifty ed.). St. Paul, MN: West Publishing Co.

Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.

Regulation and the Greater Good

Published August 26, 2013 by Mayrbear's Lair

tech_innovations_2012_01

Innovations in technology and politics have been significant factors for the expansion of government agencies and the administrative laws that govern citizens. Seaquist (2012) suggests these government agencies are also considered the fourth branch of government. Since the 1930s, the federal government has been expanding its regulatory authority on most areas that affect commerce. Congress created these administrative agencies to oversee and manage specific functions. In addition, they are empowered to create agency rules set forth by guidelines provided from the Administrative Procedure Act (APA). Furthermore, these agencies have the force of the law to support them (Seaquist, 2012). For example, Federal agencies consist of two separate branches: (a) independent and (b) executive. These agencies manage regulatory control and are powerful entities. Independent agencies (some of which include the EPA, EEOC, FCC, ICC and FTC) are granted the power to create their own rules, enforce them, conduct investigations and arbitrate disputes. In other words, they have been granted the power to act as legislator, law-enforcement, judge and jury. Executive agencies, on the other hand, serve to assist carrying out the responsibilities of the executive branch of the government. These agencies include the Justice Department’s FBI, the Treasury Department’s US Customs Service, the FDA is part of the Health and Human Services Department, and the FAA is an offshoot of the Transportation Department. These agencies, unlike independent agencies, are under the direction and control of the US President, who is also responsible for appointing and removing staff members. These agencies serve to regulate and control laws that govern society.

43230-16x9-340x191

With all these agencies and the government regulations established, how was an event like the credit crisis of 2008 even possible? Blinder (2013) reminds us that as many witnessed the financial crisis unfold, one of the most perplexing issues Americans faced was how very little explanation was offered as to why and how it occurred. During the crisis, President Bush, on his way out of office, was elusive, and although President Obama was more visible, his explanation fell short of what the citizens deserved (Blinder, 2013). For example, the US economy, leading up to the crisis was that of growth and job creation. According to Jarvis (2012) Alan Greenspan, the head of the Federal Reserve governmental agency lowered interest rates which made investors eager to take advantage of (Jarvis, 2013). In other words he created cheap credit and made borrowing money easy which motivated bankers and lenders. The investment bankers in turn used their leverage to control outcomes to make more money by joining banks together with homeowners offering high risk sub-prime loans.

download

So the million dollar question is, if these government agencies were established to oversee and regulate laws, how were Wall Street investors and bankers able to create the credit crisis in the first place? And even more important, why was no one held accountable for their conduct or their part in creating the crisis? Soros (2008) contends that the crisis was slow in coming and that authorities could have anticipated it several years in advance when the “dot com” industry of the internet exploded in 2000.  The Federal Government responded by cutting interest rates. This cheap money helped create a housing explosion because of leveraged buyouts and other excesses. The mind set was that because money was practically free, lenders kept lending until there was no one left to lend to (Soros, 2008). What could have prevented this? Many agree there is no one easy answer. Government agencies are there to help prevent situations like this, but when government officials are also being compensated by big business and are favored by Wall Street, they are more inclined to look the other way and go with the flow, until the situation reaches a tipping point. In other words, until those in places of authority are caught in ethical misconduct, these situations will occur because of issues like greed and power. Until serious reforms are implemented from trusted institutions these events will continue to surface. The first order of business in my view, is to identify the agencies and authorities that have a proven record of trust and ethical behavior including spotless track records. Use those as models to build others. Unfortunately, however, it has been difficult to discern who is trustworthy and truly have the citizen’s best interests at heart.

credit-crisis
The US economy has endured financial crises in the past, but the credit crisis was a new beast that spread like wildfire from one market across many others. One thing is certain, that the financial markets and authorities were very slow to recognize that the global economy would be affected. Perhaps there were those that did not care about the consequences because they were too consumed by the wealth and affluence they enjoyed. What this crisis did reveal however, was that greed and excesses were at the root of the credit crisis. The good news is that the value of the American dollar will continue to grow because of the ongoing expansion of raw materials and energy. For example, biofuel legislation is generating a boom in agricultural products. Economic growth and falling interest rates in countries like China that turn negative, are positive signs that is normally associated with economic growth. This gives hope that the winds of change are making progress.

********

References:

Blinder, A. (2013). After the music stopped: The financial crisis, the response, and the work ahead. New York, NY: The Penguin Press.

Jarvis, J. (2013). The crisis of credit visualized. Pasadena, CA, USA. Retrieved August 11, 2013, from http://vimeo.com/3261363

Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.

Soros, G. (2008). The new paradigm for financial markets: The credit crisis of 2008 and what it means. New York, NY: PublicAffairs.