From: forbes.com 
By Norbert Michel
People who believe in the power of individual liberty and free enterprise have had a rough time lately. And with so many recent examples of government intrusion, it’s hard to feel good about the future of capitalism.
In the case of financial markets, the tide has never really turned in favor of free markets. At the federal level, the 2010 Dodd-Frank Act effectively enshrines as law the progressive movement’s paternalistic view of regulation. Under this view, it’s not enough to merely deter and punish fraud; the government also has to protect everyone from virtually everything that could go wrong.
Thankfully, there’s a ray of hope for everyone’s inner capitalist – a spirited defense of capitalism from Frank Keating, president of the American Bankers Association. In a recent Wall Street Journal interview, Keating argued it’s not the federal government’s business to dictate private companies’ salaries. According to Keating:
“[I]f it’s private money, if it’s not FDIC-insured money, for example, if it’s private capital, private stockholders, whatever they pay or don’t pay is their business. This is a free enterprise capitalist system after all.”
Now, if you’d like to remain in a state of capitalistic bliss, read no further in that interview. Please. Because the rest of Keating’s interview displays symptoms far more in keeping with the paternalistic approach to regulating financial markets.
This approach goes well beyond simply providing legal protections for property rights and against fraud. Instead, it defines exactly what people must consider high risk versus low risk, and it dictates which risky activities are acceptable for which people.
As a result, we end up with exactly what we have: a giant mess that hinders the formation and use of capital and subjects it to political whims.
The last part of Mr. Keating’s defense is dead wrong because we really don’t have a free enterprise capitalist system. We haven’t had one for decades.
To paraphrase financial journalist Jim Grant, what we have is much closer to some sort of smiley-faced socialism. Government doesn’t fully own the means of production, but it directs the daylights out of them. Especially in financial markets.
The 2010 Dodd-Frank Act is a great example of the ills that come with smiley-faced socialism.
By the end of 2014, federal financial regulators had finalized more than 11,000 pages of rules and regulations. But they had also missed more than 36% of the Act’s rule-making deadlines, and they hadn’t even bothered to propose more than 20% of the required rules.
Anyone paying attention to this rule-making process over the last few years can see that the process spawns crony capitalism. Regulators work with industry employees to craft the rules because they have to.
Employees have expertise regulators need to do their job, and vice versa. In a social sense, they end up working together. Nobody should be surprised that some of these people build symbiotic social relationships rather than antagonistic ones.