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Editorial: Don’t rush reform

Whenever news of the latest corporate scandal reaches the
ears of our legislators in Harrisburg and Washington, D.C.,
you can count on one thing: more regulation.

Whenever news of the latest corporate scandal reaches the
ears of our legislators in Harrisburg and Washington, D.C.,
you can count on one thing: more regulation.

This week, the Business Journal offers two reform stories:
one about federal and state efforts to revamp oversight of financial
institutions in the wake of the subprime-mortgage scandal, the other about a
state proposal to license homebuilders.

Truth be told, there are occasionally legitimate reasons for
imposing more rules or enforcement on businesses. But more often than not,
government’s response ends up as rushed, politically driven mish-mash that
creates more red tape, doesn’t really address the core problem and has
unintended consequences (see Sarbanes-Oxley rules for accounting or
Pennsylvania’s attempt at property-tax reform in Act 72).

In the case of the financial shell games that appear to have
created an environment encouraging risky mortgages, a reasonable person could
conclude that more oversight would be a good thing. But local
financial-industry observers rightly worry the issue could become a political
football in a presidential election year.

“There’s a difference between coming up with a solution that
works and coming up with a solution that’s politically expedient,” said Jeff
Roof, president of Roof Advisory Group Inc., an investment firm in Harrisburg.
Roof spoke to Business Journal contributing writer Joel
Berg (see “Lenders brace for more federal oversight,” this
issue).

Homebuilders apparently have a few rogues among them that
prey on consumers. They take deposit money and hit the road without building
the house. So Harrisburg
lawmakers are considering requiring builders to register with the state
Attorney General’s office and pay $300 a year. The money would go into a pool
to help reimburse ripped-off consumers.

Bill sponsor Frank Andrews Shimkus (D-Lackawanna County)
introduced the measure after hearing a couple of reports from his district
about constituents losing deposits to shady individuals.

We’re not against protecting consumers, and we certainly
sympathize with anyone that lost thousands of dollars, but this seems a little
like using a bazooka to kill an ant. If homebuilders want to police themselves
and collect money for a consumer-reimbursement fund, that would be fine. But
the state’s effort seems heavy-handed and unnecessary.

We’d like to think that the folks working to reform rules
for lenders and homebuilders would come up with a smart-government solution
that prevents abuses from happening in the future.

History doesn’t give us much confidence.

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