There are more laws and regulations on the books now than anyone can follow. If the regulators had followed current law we would not have had all these bank failures. In almost every case it has been a human problem.

Some of the human error was caused when the original regulations were thought up. No one bothered to extrapolate the unintended consequences.

Others were plain crooks who were stealing money.

Worst of all were the dummies who made errors and refused to admit to them. The most notable was the demise of Baring Bank. That was ancient history and happened so long ago no one can remember it. Let’s see. Oh, now I recall 1995. And they made more regulations so it would not happen again.

One trader, just one, ran an error account to almost $2 Billion. His first error was only, that’s an only these days, $20 million. He didn’t want his boss to see it so he created a special error account (that his boss should have seen) and started hiding all his losing trades in it. These are supposedly professionals.

Do you see now why your 401K and managed account has done so poorly? It is a matter of ego. The managers don’t want to admit they don’t know what they are doing.

How about the worst excuse of all that the S&P500 went down 40% and our (notice it is “our”) fund only went down 38% so our fund beat the S&P. I continue to tell folks these are professional amateurs. They have not learned their profession.

Regulators think that regulations will protect customers’ money. It won’t because egos and crooks get in the way. Actually it is the crooks who do the least damage. The egotistical managers who think they know more than the market do much more damage.

The housing debacle that still hasn’t bottomed was caused by Congress (Frank and Dodd) who passed laws requiring banks to give money to people t hey knew could not repay it. It gives a warm and fuzzy feeling that everyone should own his own home. But not at my (taxpayer) expense. He has to pay for it himself.

Congress today is still trying to prop up home prices with taxpayer money in the form of special subsidies. All the new regulations will not prevent the housing market from continuing on its downward path. That means more bank failures as foreclosures rise.

You cannot regulate stupidity. We seem to have an overabundance of it in Washington. I will predict this new law will cause more problems that it will solve.

Each time there is a problem our lawmakers think they can solve it with a new regulation. Each new law brings unintended consequences.

How does one regulate common sense?

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.