ABOLISH THE SEC by Graeme B. Littler
9 min readSep 16, 2019
Abolish the SEC
Graeme B. Littler
O fficial academics call the Securities and Exchange Com-
mission (SEC) a savior of capitalism. In fact, it is an
enemy of the free market.
The SEC was set up in 1934 by Franklin D. Roosevelt to
regulate securities markets. There was almost no public oppo-
sition. Official opinion of all sorts agreed with the first New
Dealer, Herbert Hoover, that falling stock prices were caused
by “sinister, systematic bear raids . . . , vicious pools . . .
pounding down” stock prices so traders could “profit from
the losses of other people.”
Similar sentiments prevail today among the politicians
who advocate more power for the SEC. But rather than giv-
ing the SEC more money and power, Congress should abol-
ish it. Here are just some of the reasons why.
One: The SEC Erects Barriers to Competition.
Thanks to the SEC, raising capital through the issuance
of new stock is an extremely time-consuming, highly techni-
cal, and costly process. It requires a mountain of paperwork,
the filing and refiling of documents, and very expensive
CPAs and lawyers. Many small companies— which don’t
have the resources and knowledge to negotiate this bureau-
cratic maze— can’t raise new money and grow. Large, estab-
lished firms do just fine, however, and they like the lessened
competition.
Two: The SEC is Anti-Shareholder.
The SEC defends the interests of entrenched, old-line cor-
porate management over the true owners of companies, the
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shareholders, by hampering corporate “raiders.” Raiders seek
to make a profit by buying out a firm’s owners, firing top-
heavy and inefficient management, and installing people
who will make the company more profitable.
The SEC requires “raiders” to file public reports after
they acquire five percent or more of a company’s stock, in ac-
cordance with the Williams Act, which was devised by the
SEC and corporate lobbyists. These filings are designed to tip
off management about possible tender offers, thus giving
them plenty of time to scheme a takeover defense to secure
their jobs at shareholder expense.
Three: The SEC Turns Innocent People into Criminals.
Last year’s biggest scapegoat was the insider trader, who
committed the “crime” of buying or selling stock on the basis
of non-public information. But it is the SEC’s own com-
plicated and time-consuming takeover rules that make inside
information valuable in the first place. Without the filing re-
quirements, “raiders” would quietly acquire shares voluntar-
ily in the market from people who want to sell. Without
SEC-mandated delays, there would be no “inside informa-
tion” to capitalize on.
There is nothing wrong with using inside information. In
fact, insider trading is economically beneficial in the sense
that it causes security prices to adjust faster to critical new in-
formation. Insider trading is a victimless crime. There is no
moral requirement to tell the owner of the property you’re
buying that you know how to make a profit out of it. No
stockholder was ever forced to sell shares against his will.
Four: The SEC Protects the Brokerage Industry Cartel.
Since the SEC restricts entry into the brokerage industry,
it is the enforcer of a highly profitable cartel. With brokerage
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houses as its constituents, it’s not surprising to see the SEC
campaigning against the recent efforts to repeal the Glass-
Steagall Act, which restricts competition.
Five: The SEC Profits From Its Blunders.
As Ludwig von Mises observed; government regulation
generates unforeseen problems, which excuses more regula-
tion, which causes still more unforeseen problems. The SEC
has a history of growing and profiting from crises. It has, for
example, capitalized on the 1986 insider-trading scandal by
getting a bigger budget and more staff, the dream of every
D.C. bureaucrat. In fact, its budget is 62% higher today than
in 1982. And today, it’s busy using the Crash of 1987 to
justify more regulation, especially of the competitors of Wall
Street in the futures and options markets.
Six: The SEC Favors Price Controls.
The SEC is pushing for the power to shut down the finan-
cial markets in times of “emergency.” SEC chairman David
Ruder also endorses the idea of daily trading limits on stocks,
which would halt trading once a stock price hits its SEC-set
maximum daily limit. It is very damaging— even in government-
caused emergencies — to prevent willing sellers and buyers
from making a trade.
Seven: The SEC Invades Privacy.
Acting on behalf of the SEC, the U.S. government pres-
sured Switzerland, England, Japan, and others, to swap in-
formation on the stock market dealings of private citizens.
For all these reasons the SEC should be abolished and the
laws backing it repealed. This would dramatically simplify
selling new stock and thus be a boost for new businesses,
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competition, and the free market. And industry self-regulation
and normal police agencies will protect against fraud.
The securities industry is not problem-free, of course, and
never will be. But it will function better without the Big
Problem, Washington, D.C., in charge of it.
Cancel the Postal Monopoly
Llewellyn H. Rockwell, Jr.
I n the 18th century, as he had for millennia, the urban ped-
dler went from door to door with a sack on his back.
When we see this antique method of economic organization,
not in a museum setting at Colonial Williamsburg but daily
on the streets of every city and town in America, we know
the government is in charge.
The Post Office has been a federal agency since 1775. And
since 1872 it has been illegal for anyone but government em-
ployees to deliver a letter. In that year, at Post Office behest,
Congress outlawed the low-priced, fast delivery of the Pony
Express. It was to be the last express service available to regu-
lar mail customers.
A few years ago, a Rochester, New York, teenager offered
his neighbors same-day bicycle delivery at 10y each for
Christmas cards in his subdivision. Soon Postal Inspectors—
who seem to be the only fastmoving part of the
“service” — arrived at his house and threatened to arrest and
jail him unless he stopped.
Somehow, even from just a common-sense viewpoint, this
doesn’t look like something that should be illegal. But indeed
he was violating two parts of the postal laws. He was de-
livering first class mail— which is a federal monopoly — and he
was leaving his mail in mailboxes.
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By law, all “mail receiving devices” belong to the Postal
Service and can be used only by it. That is, the mailbox
which you buy and install on your property belongs to the
U.S. government. (Note: it belongs to the government in the
sense that your silverware belongs to the burglar who just
took it at the point of a gun. Property can be owned only by
those who acquire it honestly and voluntarily though pro-
duction or trade.)
The penalty this teenager faced was a $500 fine and six
months in jail for each count of the potential indictment, i.e.
for each letter delivered. This is from the same government
that thinks nothing of freeing murderers and rapists after “re-
habilitating” them for a year or two. But then the govern-
ment has always taken “crimes” against itself far more seri-
ously than actual crimes against the people.
With the government in charge, the bureaucratized ser-
vice keeps getting worse. It takes longer and longer for mail
to arrive. And the Post Office long ago abolished twice-a-day
delivery and is working on ending door-to-door delivery as
well. Most big offices have the mail dumped in a pile at their
front door; postal workers used to sort and distribute it.
Then there’s the “cluster box” system for residential areas,
where rows of boxes are placed far away from homes in a
place convenient for the postal workers.
Typical of government, as the service declines, the price of
stamps keeps going up, from 22 ? to 25? most recently. That
makes a total increase of 675% since 1958, more than twice as
fast as the general price level, which has gone up 300%
(thanks to another government monopoly, the Federal
Reserve). In addition, the Post Office gets billions a year in
direct subsidies.
Where does all this money go? Mostly to the bureaucrats
themselves. The postal system spends 84% of its budget on its
746,000 employees, 100,000 of them added during the austere
years of the Reagan administration.
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The average postal employee— who is an unskilled worker
by private sector standards — earns $30,000 a year in wages
and perks. And a GAO study found that this same average
worker takes 50 days of paid leave a year (vacation, “sick”
time, holidays, etc.). That’s 10 weeks of repose, although con-
sidering the pace of work in the Post Office, it may be hard to
tell the difference.
There’s an old story about a UPS delivery man meeting a
friend who worked for the Post Office during Christmas
time. “How are you doing?” asked the government employee.
“Just great!” said his UPS friend. “Business has never been
better. Volume is way up. How about you?”
“Terrible,” said the postal employee. “There’s too much
mail!”
In a government enterprise, customers are at best a
nuisance. If the Post Office could get away with it, it would
prefer no mail and no customers. That’s why, during lunch
hour, only one window is open, and why the P.O. takes every
opportunity to cut service. The recent abolition of Saturday
window hours is only the latest example.
There is only one answer to the Post Office problem, and
UPS and Federal Express show us the way: privatization, i.e.
repealing the laws which give the Post Office a monopoly.
However, real privatization means letting the free market de-
cide, not contracting out to politically connected businesses
as advocated by the President’s Commission on Privatiza-
tion. Such a process leaves the bureaucrats in charge and is
an invitation to political corruption.
We cannot know what kinds of communications services
free-market entrepreneurs would provide for us. We can only
know that they would be far more efficient than the present
apparatus, that they would make use of new electronic and
computer technology, and that they would be pro-consumer.
The Post Office charges that this would not work. It
claims, for example, that rates would go up. Coming from
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the biggest champion of higher rates, I find this unconvinc-
ing. But certainly the rate structure would change. There
would be a whole array of alternatives available, varying in
price according to distance, speed, handling, etc.
The Post Office says that we would no longer be able to
mail a letter from Washington, D.C., to Hawaii for 25y. But
why should it cost the same amount to send a letter across
town as across the continent? This is typical government
pricing: one high price for everything, which a bureaucracy
can administer much more easily than a rational rate sched-
ule. It rightly costs more to ship freight or make a phone call
over long distances, and postal service should be no different.
The Post Office also says that rural delivery would stop.
That’s nonsense, of course, but people in sparsely populated
areas might have to pay more for some services, just as city
dwellers have to pay more for fresh vegetables and firewood.
The free market would reduce the difference to trans-
portation costs, however, thanks to arbitrage and entrepre-
neurship, and there would be constant competition to make
transportation cheaper. And UPS delivers 25% of its pack-
ages to rural routes and makes a profit at it.
The Post Office also claims that only the U.S. govern-
ment can secure our privacy and guarantee access to the
mails. But this is Newspeak. Government is the great invader
of our privacy, mail and otherwise. In the 1970s, the CIA
routinely opened mail. And the same thing is happening
now to opponents of the administration’s foreign policy. And
the Post Office claims the right to search the mails for “con-
traband,” a practice that would never occur to UPS or Fed-
eral Express.
As to freedom of access to the mail service, the Post Office
frequently claims the right to decide what can be mailed. It’s
banned novels, refused to deliver National Health Federa-
tion booklets because they conflicted with the “weight of
scientific opinion,” and censored advertising.
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Mail, says the Post Office, is a “natural monopoly.” But
there is no such thing, only the natural tendency of people
who want to live off the taxpayers through monopoly to
claim there is. If any monopoly were actually natural, it
wouldn’t need a government gun to enforce it.
The Post Office is a socialist organization. It is inconsist-
ent with the American vision of liberty. It’s time to end so-
cialized mail delivery and allow free-market competition.