Isaac Newton once said, “I can calculate the motions of theheavenly bodies but not the madness of people!” Newton was caughtup in the South Seas Co. bubble, a shell company opened to buy thedebt of England after the War of Spanish Succession, and reportedlylost $4 million in today's dollars. While Newton is best known forall of his scientific and mathematical achievements, historyoverlooks the fact that Newton was the master of the Royal Mintduring the time of this bubble.

Newton was an insider and should have understood that the SouthSeas Co. was not mathematically sound. But, the instinctive humandrive to achieve wealth without effort kicked in, and Newton, inthe weeks preceding the bursting of the bubble, invested and lostalong with everyone else.

It is with some certainty that the people called for newregulators to stop bubbles from ever occurring again. Funny, itseems that bubbles of varying degrees keep coming in pretty regularintervals, thwarting the best efforts of regulators.

Increased regulatory activity will only hasten the failure ofsmall credit unions and increase Americans relegated to predatorylenders. Increased regulatory burdens will create megabank-likecredit unions through consolidation, which will provide all thenecessary disclosures but fail to reach those most in need.

In biblical times, Joseph told the Pharaoh that you have sevenyears of good and seven years of bad. He advised that you saveduring the times of plenty and spend the savings during the leantimes. For centuries nobody listened. (It seems that human naturehas an adversion to saving during good times.) Joseph did notrecommend expanded bureaucracy and increased regulatory burdens asa solution to tough economic times.

The elite among us have repeatedly attempted to control thebusiness cycle and human nature's reactions to it. The cures haveoften only served to protract the down cycle. Politicians will callfor new regulators and regulations to prevent losses caused bybubbles that are a natural part of the business cycle. What weshould be doing is evaluating the destructive power of anunnecessary regulation prior to implementation. It is interestingthat the regulator requires reams on asset-liability managementprojections that truly serve to protect nothing, yet they seldomcomment on the failure of some well-meaning but defectiveregulatory scheme.

Many disclosures are lost on the average American consumer.Complex, convoluted disclosures are meaningless except to theoverpaid attorneys, regulators and politicians who have a vestedinterest in promulgating a fraud on the public by asserting thatmore disclosures are the elixir to preventing or mitigating theconsequences of normal business cycles. Conflicting regulations donot help the people they are intended to protect-the Americanconsumer of financial services.

I pray that NCUA Chairman-designate Matz will come to recognizethe consequences of the burdens of unnecessary regulatorydisclosures on smaller credit unions. The decreased number of smallcredit unions and the increase in the number of Americans forced touse payday lenders are directly correlated to the increasedregulations. The larger credit unions and banks will accept thisadditional regulatory burden. The acceptance by the largerfinancial institutions will raise the bar for smaller credit unionsand banks beyond their economic ability to provide services,forcing less local choice for financial services.

Where will the trade associations stand on reducing the burdenon the moderate and smaller credit unions? If history is anyindication, they will go along with any solution that the megacredit unions accept; they will use smaller credit unions to obtainregulatory concessions for the large. The trades will then toss thesmall credit unions under the bus and decry any bifurcated systemof regulation placed on credit unions as endangering the taxexemption of the large. When you finally force the merger of allthe smaller credit unions into large ones, how long will thisargument work?

I am not against reasonable regulations. However, attempting tocontrol the outcomes of the business cycle is a fool's errand.Joseph Schumpeter, an economist who wrote about the role ofcreative destruction in capitalism, would have suggested thatattempts to control business cycles were actually destructive. Wewill get less of what we need and more of what we do not.

Credit unions were a simple solution to the major problemscaused by the Great Depression. During this time of economic need,we should be looking to lift the regulatory burden and not magnifyit. We should be looking into using technology to simplifyoperations and expand the consumer financial pie. If Matz trulywants to affect the lives of the weakest among us, she shoulddirect regulatory resources to develop a simple credit union modelthat small, local credit unions can use and thrive. The closer wesafely move the financial decisions and products to the end userthe better for everyone.

Newton admitted his humanity and inability to resist the siren'scall of a financial bubble, and the desire for faux security byincreasing regulatory burdens, no matter how well-intended, willsimply not work. Will creating an environment that enhances theopportunity for small- and moderate-sized credit unions to thrivework? It just may.