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Comment by yellowstuff | Hacker News Reader

Matt Levine looked into these competing theories and came up with more evidence for the view that harsh regulators get hired by banks more than lax regulators:

https://www.bloomberg.com/view/articles/2014-06-26/strict-re...

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Incumbents usually prefer harsh regulations to lax regulations because only the incumbents have the resources to comply with them. This is doubly so if you need to hire the author of the regulator to make sense out of the regulations.

Business is a parimutuel system: something that harms your company can actually be beneficial if it utterly demolishes your competitors. Many regulations are of this form. They are expensive and difficult to comply with for big companies, but they are impossible to comply with for small companies, and thus keep competing startups out of the market entirely.

This is a reasonable argument, but I sincerely doubt that people who worry about the "revolving door", are worried about regulations being too harsh.

Usually, people make the opposite argurment. That laws won't be harsh enough. And the evidence proved that wrong.

Plenty of libertarian arguments couple concern about the revolving door between government and the private sector with concern about harsh regulations. There wouldn't be 16,000 registered lobbyists in DC and its environs if there weren't hundreds of thousands of federal regulations managing the economy.

Levine’s stuff is great but this one conflates strictness with complexity. You could have simple regulation which is harsh on banks.

What's the possibility that harsh regulators are hired more to create a kind of regulatory capture. The harsher the regulation, the more you need the expert to know how to navigate it, and the less likely competition will be able to navigate the regulation.

Was he then hired by a bank? :)

Other way round - he's Goldman alum

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