NCPA - National Center for Policy Analysis

Federal Financial Regulators Prevent Free Enterprise

March 2, 2015

Federal financial regulators celebrated the New Year by compiling more than 11,000 pages of rules and regulations, most of which are aimed at the free enterprise capitalist system. Though only about 65 percent of the rules were proposed before the Act's rule-making deadline, many of the policies subject corporations to political impulses.

Some of these regulations include:

  • Banks must comply with complex minimum capital rules, which are enforced by federal employees who decide what levels of capital are sufficient for a corporation.
  • Federal law mandates only 12.25 percent of credit unions' loans can be to small businesses.
  • Private entities can recommend specific investments for retirement accounts, but only if the recommendations fit regulators' definition of suitable.
  • Under Securities and Exchange Commission regulations, loans to small businesses by banks, individuals or other financial institutions are typically exempt from registration requirements. Loans through peer-to-peer lending platforms are not. 
  • SEC regulations S-K and S-X impose high costs on companies seeking to access the public securities markets. As a result, small and medium-sized companies are unlikely raise capital.
  • Federal regulations dictate who can invest in certain companies. For example, entrepreneurs who want to advertise they are raising money are required to take "reasonable steps to verify," That investors qualify as "accredited investors."
  • Federal policies suggest private companies should not be allowed to lend to poor people - unless they do so in the name of furthering some socio-political goal, such as increasing home ownership.

Source: Norbert Michael, "We Haven't Had a True Free Enterprise System for Decades," Daily Signal, March 1, 2015. 


Browse more articles on Economic Issues