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August 16, 2013


In civil law, if you run a red light and cause a wreck, you are liable in damages. In criminal law, if you rob a bank, you do heavy time in prison. Both of these liabilities stem from breaking rules, rules of conduct that are set by the society in which you live – by statute, ordinance, and other rules set by subsets of society, like zoning setbacks, for instance. In every case, there must first be a consideration of the appropriateness of the proposed law or ordinance or rule, the wrong or other evil it was designed to counter, whether it is constitutional, enforcement and penalties for deviation from the established law, ordinance or rule adopted. Enforcement in a democracy demands equal application, rich or poor.

Other than a few whacko anarchists turned libertine, most everyone understands that we must have some rules set by society in order to have a modicum of order itself. Red lights and bank licenses do hamper one’s total freedom to do as he/she pleases, but that is a small price to pay to avoid carnage at street corners and wholesale theft by unlicensed banks. The theory is that society must have the power to make rules for the greater good and to avoid its own implosion in navigating its members through anarchy and greed. In a representative democracy, as in our country, it is the people through their representatives who make their own laws. This is the way it should be, because it is we the people who are maimed at red lights and we the people who are fleeced by unlicensed bankers. It’s a matter of self-defense. Government makes the rules, subject to adjustment from time to time, and we follow them.

This is prelude for a most interesting article by Thomas Frank in the current edition of Harper’s Magazine. Frank’s thesis (which he surrounds with unimpeachable proof) is that we are so poisoned against government that we blame government for everything, from the Great Recession of 2008 through increased tuition. The government is “meddling” with the market, distorting it, sticking its nose into affairs that the market should decide etc. etc. etc. The “government” should butt out and quit regulating business practices; let the market decide who should or should not stay in business. Even so prominent a personage as Mayor Bloomberg has inserted himself into the blame the government game a few years ago when he assured us that the financial sector was an innocent bystander in the Great Recession of 2008; that (as Frank puts it) the government’s role in ruining the nation was “pure and simple.” (I here note that the mayor of New York City’s job is to keep investments coming to his city, is himself a billionaire, pro-bailout, and unlikely to be unbiased in his assessment of “government,” government in which he personally participates on the one hand while denigrating it on the other.)

By September 2008, notes Frank, real-estate values had been falling for some time, Bear Stearns and several big commercial banks had failed and the government had taken over the mortgage insurers Fannie Mae and Freddie Mac the previous week. But that Monday morning Lehman Brothers, the nations’ fourth largest investment bank, finally succumbed to the effects of the noxious securities on which it had gorged itself for years (my note – the “noxious securities” were Wall Street paper and not U.S. Government treasuries.). Later that day, in a climate of almost complete panic, Merrill Lynch – the nation’s third largest investment bank, which had fed at the same trough (Wall Street paper) – managed to find shelter in the arms of Bank of America. Next day the Fed and the Treasury Department announced that they were saving AIG, the mammoth insurance company that had transformed itself into a stealth hedge fund. As for hedge funds, more than 700 of them collapsed in the next four months. Goldman Sachs and Morgan Stanley, the last two investment-banking leviathans, desperately registered themselves as “bank holding companies” and threw themselves upon the mercy of the all-forgiving Fed.

After this came the final outrage – Bush’s treasury secretary, a former chairman of Goldman-Sachs, demanded and received $700 billion from Congress to resuscitate the banks run by his former colleagues on Wall Street. All of the above along with sharply increased unemployment and a severe drop in the Dow was the “government’s” fault; Wall Street was “an innocent bystander.” Right. Two and two are five. Quick, find a scapegoat! How about the “government?” There’s lot of residual hatred for government out there; let’s cash in on that and beat the heat.

We should have let the market decide, we are told. What these government haters who are so propagandized by Wall Street don’t understand is that the market DID decide; it made a choice, and its choice was that the big banks were bankrupt and should be out of business due to lack of regulation of their reckless international crap shooting in credit derivatives and other such paper. We did not let the market decide; we intervened with public money with bailouts which we, the bilked, provided to the bilkers, and “let the market deciders” quickly morphed into “please don’t let the market decide” status.

The financial sector and their politicians (who regularly and loudly disdained intervention by government) were suddenly transformed into beggars, not just for money but FOR intervention by government in buying Wall Street’s other near worthless paper at par. We were very generous to crapshooters who told us they were too big to fail, and that if we did not come up with quick cash, the world would collapse. Frank sums up the situation nicely: “I’m talking about the lesson of the bailouts, which was impossible to dodge: that government was essentially the servant and protector of crooks.”

Now that the big banks’ immediate crisis is over and things are back to normal, so to speak, we are hearing a switch in propaganda. They have gone from interventionist “please bail me out” for my excesses” to the scapegoating “it’s all the government’s fault.” Yeah, right; the government sold credit derivatives from Capetown to London to Tokyo and was the sole crapshooter in causing that crisis. How can even Wall Street peddle such nonsense in broad daylight? Are we so cynical about government that we swallow that? What’s next? Are we going to bail out bank robbers because the “government” is “meddling” in their business with its criminal statutes proscribing bank robbery? Where’s the logic?

Robert McElvaine recently pointed out that a talented hedge-fund manager managed to contrive to make $2 billion in 2012. Here’s the math: Assuming he worked eight-hour days and took two weeks of vacation, he earned more than a million dollars an hour, and all in a Wall Street-induced economic climate where median family income has been decreasing for several years, off-shoring jobs continues apace, decent-waged jobs are unavailable, education is unaffordable, cuts in the social safety net are proposed etc. etc. etc. Wall Street’s take? LESS REGULATION! My take? MORE REGULATION.

This is our marketplace, not theirs, and as suggested above, society has an overriding interest in protecting itself from Wall Street crapshooters and other economic terrorists (see Oriental mercantilists) just as surely as it has a right to protect this country from armed invasion. Wall Street with its anti-government propaganda and political influence via “campaign contributions” has the tail wagging the dog. Participants in the market do not own the market; you and I do. Let’s wag OUR tail.  GERALD  E


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