07/01/2010 04:15 pm ET Updated May 25, 2011

Same Old, Same Old: Wall Street and Big Oil -- The Illusion of Reform

Oil is gushing into the Gulf of Mexico. And we are unable to even agree on the rate of gush. In September of 2009, the nation's economy seemed poised to fall off a cliff. In each case, public attention focused on the government's immediate response to the respective crisis. In the case of the economic collapse, there has been a public furor around the "bailout" of major financial institutions. Much of the public has sensed that the "big guys" were bailed out, but "no one seems concerned about bailing me out." In the case of the Gulf oil spill, the media has focused public attention on the demeanor and posture of the President. Does he show enough emotion? Mobilized enough government resources? Made enough personal trips to the Gulf?

But the public reaction to each crisis, though emotionally understandable, focused only on symptoms of larger problems while completely ignoring the underlying causes. This makes it virtually certain that each event will essentially happen again; the only question is when, not if.

Financial crisis? Demonize the culprit financial institutions. Haul executives before Congress. Watch them squirm. (Remind anyone of our response to the S&L crisis of the 1980s?). But when the shouting is over, don't implement any reforms that would seriously impact the incomes or operations of the financial firms.

Gulf oil spill? Urge the President to trash-talk the President of BP. But all but ignore whether there has been any serious effort towards increasing alternative energy sources or even regulatory reform of drilling practices since the Exxon Valdez.

As always, we search for villains. The obvious ones are easy to spot. In the case of the oil spill, it was BP -- and regulators who were both literally and figuratively in bed with those they regulated. Financial collapse? Look at financial firms who sold products to clients while simultaneously betting the house money on the failure of the instruments they peddled.

These easy and obvious targets.

But our vision is far too short-sighted. The "anything goes" regulatory spirit which cuts across both of these crises goes back at least 30 years. And it has not been seriously challenged by any President (of either party) since then. We were all having way too much fun at the party to want to notice.

The "Don't-regulate-private-industry, it-costs-us-jobs" mentality clearly infected the approach taken to off-shore drilling. And you need go no further than the reactions of Louisiana and Texas congressmen to see that the massive oil spill has done nothing to change this mantra. And that mantra sounds exactly like that of the Wall Street apologists.

In each case, solutions require proactive long-term approaches with little immediate political payoff. But, as with fighting wars, we do much better when the targets are obvious and the modus operandi required is quick and decisive. We don't seem to have the attention span when the task is protracted.

As long as there is offshore drilling there will be spills. Accidents do happen, though better regulatory oversight environment will impact their frequency. If we want a zero risk of future spills, we need alternative sources of energy. But these will be neither cheap nor immediate. A long-term energy strategy is a sustained, expensive and multi-decade endeavor with few, if any, immediate political payoffs for those who propose it.

For the financial crisis, it might be possible to construct regulations that would keep us from again having to choose between global financial collapse or propping up undeserving financial bandits. But the devil is always in the details. And the only people who seem to understand those details are those impacted, so it is difficult to be optimistic about the results. The current "financial reform" package before Congress would seem to fit this description. I have yet to see a financial expert who thinks it will do much of anything to prevent future financial collapses. But it does, of course, meet the political need to "do something".

If the subtleties of micro-regulation cannot be trusted, what about applying basic, and easily understood, antitrust principles? If "too big to fail" were to be deemed to be "too big to exist" we would not again have to face the choice of bailing out private companies or risk collapsing the entire economy.

In both oil and finance large sums are made in lax regulatory environments that few will ever understand or even care about.

Once oil is gushing into the Gulf or the financial system is on the edge of collapse, all of the choices are bad. And none of the measures taken to clean up the respective messes to date seem likely to do anything whatever to keep either from happening again.