Government & Business: A Tenuous Partnership

Jevin Sackett Blog GovernmentWhen discussing the relationship between government and business, one of the first images that comes to my mind is that of The Flying Wallendas—the famed high-wire acrobats.

I’m reminded of that image when considering the unlikely, and often tenuous, relationship between the two entities because I believe the interaction between them bares many similarities to a high-wire act: the risks of government regulations are many—and potentially harmful—while the rewards remain uncertain; and, as with each new high-wire performance, every new law passed by government has the potential for an “unexpected” and unintended conclusion.

Now to be clear: there is no disputing that one of the main purposes of government is to pass legislation. As eloquently stated in the preamble to the Constitution, the Founding Fathers believed that our country’s first—and most important—laws were being put in place with very specific objectives, namely: “establish justice; ensure domestic tranquility; provide for the common defense; promote the general welfare; and secure the blessings of liberty to ourselves and our posterity…”

Of course, the United States that existed in the 18th century is vastly different from 21st century America. However, the principles upon which the Constitution was based remain as valid today as they were when they were first penned.  And the role that government plays—or should play–in regulating the lives of both Americans and American business still remains a topic of much debate and discussion.

As CEO of Sackett National Holdings, I am all too aware of the impact that government regulations can—and do—have on conducting business. All of our subsidiaries are both directly and indirectly affected by a wide array of government regulations; some laws require us to avoid certain business practices, while other rules dictate that our products and services meet government-mandated guidelines. I’m also proud to add that our company’s subsidiaries have become industry leaders in several heavily regulated business sectors, including financial services, automotive and employment screening.

Still, entrepreneurial businesspeople tend to oppose too much government regulation; there are countless challenges that inherently confront anyone with the desire to start their own business, and adding a multitude of regulations can often make an already difficult task seem nearly impossible.

Adding to that frustration is the fact that there are almost countless non-federal regulations that can vary widely from state-to-state. And even though SNH is headquartered in Nevada—a state that tends to have less regulations than others–through our subsidiaries we conduct business nationwide. As a result, in addition to all federal regulations, we are subject to a potpourri of state and local laws that govern our business practices.

Of course, as times change, so too do the regulations under which we operate. And, as times change, the need to update government regulations is often indisputable; the best example of this would be the Internet.

An entity that barely existed two decades ago, today the Internet plays a large role in both our business and personal lives. Wise and prescient as they may have been, it’s a sure bet that the Founding Fathers did not have the Internet in mind when considering the role of government in regulating commerce.

In the world of commerce, one of the more significant examples of ‘updates’ to federal regulation is the “Dodd-Frank Wall Street Reform & Consumer Protection Act” (or simply ‘Dodd-Frank’) passed by Congress in 2010 in the wake of the Great Recession.  Widely seen as one of the most sweeping changes to financial regulations in decades, Dodd-Frank has become the ‘Rorschach Test’ of government’s regulatory responsibility: to its supporters, it symbolizes a reasonable response to perceived ‘excesses’ that led to the recession, while opponents see it as an overreach by federal regulators.

Regardless of your view, all sides can agree that Dodd-Frank is the proverbial ‘game changer’ for the financial services sector, and a classic example of government regulating commerce. In fact, as a financial services industry leader, our company’s subsidiary SettlementOne will be offering a White Paper at the upcoming American Bankers Association Lending Conference examining a major regulatory change for the mortgage sector that takes effect this August; that new law is a direct result of the Dodd-Frank legislation.

In keeping with The Founding Fathers’ vision, government most certainly has a role to play in regulating the affairs of business. However, those same Founding Fathers were also strong proponents of the concept of “checks and balances” designed to ensure that no person—or entity—ever gained too much authority over individuals or businesses.

At the end of the day, the relationship between government and business will continue to be one based more on tolerance than affection. But when crafting new legislation, regulators should remember that governing is, indeed, a ‘high-wire’ act requiring both skill and wisdom–with the potential for many unintended consequences.