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Cut the Partisan Crap ... BOTH the Private Sector AND the Government are to Blame for the Financial Crisis
Partisan GOP hacks say the financial crisis was caused by too much regulation, and government interference in the markets.
But Glass-Steagall was repealed, derivatives were left unregulated, and the regulators were watching porn instead
of preventing fraud. Giant banks, hedge funds and other fat cat private
players knowingly gamed the market and committed fraud in more ways
than can be listed in a single post.
And remember, even the "father of economics" - Adam Smith - didn't believe in completely unfettered free markets.
On
the other hand, partisan Democratic party hacks say that bad
corporations caused the crisis, and that if more power is given to
Summers, Bernanke, Geithner and the other governmental honchos, they'll
fix everything.
But Summers, Bernanke, Geithner and the other meatheads largely caused the crisis through their actions. And as Simon Johnson points out, the government created the mega-giants, and they are not the product of free market competition.
As I pointed out in February 2009, government fraud is pervasive:
In
case you believe that there are only "a couple of bad apples" in the
United States, here is an off-the-top-of-my-head list of corruption by
leading pillars of American society:
- Senior military officials stole approximately $125 billion dollars out of Iraq reconstruction funds, dwarfing Madoff's $50 billion Ponzi scheme (in turn, the looting which is now occurring under the bailout/stimulus programs will far surpass $150 billion)
- Texas billionaire Robert Stanford ran a multi-billion dollar fraud scheme of his own
- Senior judges in Pennsylvania have pleaded guilty to falsely convicting and imprisoning hundreds of youths (they got kickbacks from the prisons).
- The
government-endorsed ratings agencies which were supposed to accurately
rate the credit-worthiness of companies and nations committed massive fraudThere are hundreds of similar stories of corruption which have come out recently.
But surely government employees would have done something to stop such corruption if had known about it, right?
Well, actually:
- Whistleblowers alerted the government about the looting of Iraq reconstruction funds, but nothing was done
- A whistleblower "gift-wrapped and delivered" the Madoff scandal to the SEC, but they refused to take action
- The Treasury department allowed banks to "cook their books"
- The Pennsylvania Supreme Court refused to hear a case regarding the corrupt judges. A month later, only after the judges confessed to criminal wrongdoing, did the Supreme Court change its mind and take any interest
- Instead of insisting on accurate books, the government encouraged fraudulent bookkeeping. For example, as of 2006:
"President
George W. Bush has bestowed on his intelligence czar ... broad
authority, in the name of national security, to excuse publicly traded
companies from their usual accounting and securities-disclosure
obligations."- The government knew about mortgage
fraud a long time ago. For example, the FBI warned of an "epidemic" of
mortgage fraud in 2004. However, the FBI, DOJ and other government
agencies then stood down and did nothing. See this and thisThese are just some of the many examples of the government aiding and abetting corruption.
A lot has come out since then about Geithner, Bernanke, and other officials. See this, this, this, this, this and this.
Indeed, government employees are mainly using their time in office to feather their own nests, rather than to do anything constructive.
So let's cut the partisan crap.
Both the fat cat players and the government are to blame for the financial crisis, and we need to rein in corruption and fraud in both.
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Uh? a typo here"You want to fix this mess? Deregulate. Protect nobody and dont enforce the law."
Nope, no typo - you missed the premise as well as mis-quoting me.
Deregulation is king, but the aforementioned are protected, as in "regulated" government sponsored monopoly, which is worse than any deregulation.
The public at large will tear any offenders to shreds, but the problem is the "regulated" have government sponsored protection to lie, cheat and steal.
End that government protection and there would be slaughter as the real market (not the government protected regulated one) would prevail.
Most don't grasp that there is a pandemic of complacent enforcement, not problems with regulation..
Get government out - period.
In the United States, government is bought and paid for - one can see this as it acts as a private corporation bought and paid for by other corporations. Politicians are even optional as we've seen.
When has regulation ever worked?? Gulf Coast? Wall Street?
If you think regulation works you are the sucker. Regulation is merely collusion between corporations and government which insulates and protects BOTH. Only the people and true market lose in a regulatory environment.
This is just horseshit. Really, it is.
Deregulation means a free-for-all.
You seem to misunderstand that regulation is not coextensive with "gov't sponsored monopoly." Also that regulations are powerless without regulators who actually regulate.
We have laws. So, if the police are corrupt, what, we should do away with all laws and let the "marketplace" sort it out?!? This is the most absurd premise I've ever encountered.
This is a well done brief rundown of the systemic fraud and corruption in governments and the private sector, GW.
The worst part is that those few who openly oppose the deceit and lies are branded as dangerous crackpot idealogues by the ruling oligarchies. And our masters have partnered successfully with what used to be known as the " free press ".
No matter who we elect, they all seem to get sucked right into this whirlpool or overpowered and drowned in it.
The only way back to approaching normal is to demand a 21st Century Constitutional Convention. The old one doesn't work anymore, and it has been effectively neutralized in its mandate to protect the well being of the citizens by the Lawmakers and lawyers. Even the States seem to be drifting further apart from the Union.
The government tail now wags the taxpayer dog. For sure.
Thank you GW, couldn't agree more. Seeing the problem and therefore the solution as all one thing or the other keeps the parasites happy and keeps leaving us with this Frankenstein of govt and private sector that Broker NotBroke describes.
Parasites can be crony govt. bureaucrats doing nothing on job or financial sector execs that work long hours but take away out-sized chunk of GDP thru insider manipulations and fraud.
Private business corrupt govt, govt controls allows govt to determine winners and losers..which came first? If problem had to solely one thing I would not pick govt or Wall Street/ big businesses, I would pick K Street.
We need some democratically controlled, centralized policing or no one trusts markets and non-efficient manipulations occur. For some services, the most efficient way to deliver it, like say local utilites, is via a central, monopolistic organization - govt agencies or heavily-regulated private utilities companies can and do successfully provide efficient solutions in right situations.
But we also know the govt and the FED (whatever that private-banking cartel with the right to print our currency Frankenstien is), have caused huge problem from inefficient and maladaptive interfence in markets - see housing.
So its seems mainly question of where and how best to draw the line, not that no line should be drawn.
I'm ideologically opposed to regulation. But I'm a realist.
As long as we have a central bank that is engaged in price-fixing the price of money (ie: interest rates) then we do not have free markets.
If you're going to manipulate interest rates then you must regulate to limit risk-taking.
Much as I would love to abolish the Fed, I despair of the idea ever taking hold among a majority of voters or their elected representatives.
So we need
1) regulation with teeth that: a) creates an exchange for derivatives; b) puts derivatives on the books; c) eliminates manipulative behavior like 'banging the close' and the computer tricks used in prop trading; d) imposes significant capital requirements
2) a regulator that is properly incentivized to enforce the regulations, a regulator that is above influence by those it is tasked with regulating
Lack of regulation would permit polluters to make cost/benefit analyses on deaths versus profits.
I am not ideologically opposed to regulation; regulation is what societies do. They're called laws.
The Glass-Steagal regulatory regime seemed to serve us well by PREVENTING the use of ordinary bank deposits as leverage capital. What is wrong with this type of regulation?
That isn't possible unless we have a fun fact filled ride through the records of how and how much the regulators were paid not to regulate. As most know we have enough laws on the books that the bulk of this could have been stopped. The only incentive left is negative incentive and even that may get out bid with death. Positive Incentives such as bonuses, medals and pat on the backs are public knowledge and trivial to out bid against the potential pay off. Pass the toughest bill they can and it won't stop anything. Break up the banks, throw the CEOs and 1-2 levels down in prison, bar anyone who worked their from working in the securities business and we get maybe 2 years of peace- see time between Enron, Worldcom and Quest convictions and the start of the next bubble. I think they overlapped because it's the mentality of "it can't happen to me" No one ever thinks "it" is going to happen to them. There has to be an absolute assurance that it will. Time and time again, we have have seen that deterrence had no effect on Wall Street. In fact the tougher the sentences the more often we are exposed to deeper levels of fraud. That means we are probably at the tip, the very tip of the iceberg. The 80s filled insider trading cases seemed to be the big kick off of the last 30 years of fraud, which was really minor league shit compared to now. Think how many scandals have gone down since then?
Right now they are selling the next string of hits. We are just getting the public educated on the last string. Now we see Wall Street, the lawmakers and the Enforcers are intertwined. Until we untangle that mess, no laws passed, no promises made, and no assurances can be given that the market is anything but rigged.
I just don't see why we are wasting our time on this Kabuki theater when we all know it will have no effect. No one is going to let a firm fail like Anderson did again.
Depending on politicians to work under the rule of law is a joke when they can change the rules anytime they want when properly incentivized.
I don't have the faintest idea what comes after that either, but I do know this, this is not getting fixed, no matter how much crap we hear about reform. The joke is on us if anyone believes this. We have already seen prison sentences have no lasting effect. Laws mean nothing.
In order to write a good laws, it would have to be done just like software. Alpha and Beta Versions, Release Candidates, Release, maintenance fixes and full version upgrades as the loopholes are found. That means dedicated law enforcement and lawmakers working hand in hand as arrests are being made. I just can't see it happening.
Fraud is now entrenched in the culture. I think the ending of that has been written and seen numerous times in world history. Americans watching American Idiots will only be roused when the cable company collapses under the weight of too much debt and too many CDSs taken out on default so the winners can buy and launch personal satellites and the losers will just have to learn how to read again.
Dood, you remind me of all the douchebags out there who want to argue the points strictly academically.
Can't be done. The ultra-rich have grown too powerful, and only extreme measures can alter this situation.
I agree that the ultra-rich have grown too powerful.
But I think we need a strategy that is a little more sophisticated than just 'sharpen your pitch-forks'.
"I'm ideologically opposed to regulation. But I'm a realist."
What does that mean?
It means that I think we would be better off letting markets regulate themselves.
Except that the central bank manipulates interest rates and encourages risky borrowing so we need regulation to reduce risky behavior.
you can't have both, we've already had a megadose of the first.
Too bad the Fed doesn't set interest rates, and actually lags its rate policies to those set by the private market. It also does not determine the money supply via open market operations, as many people like to think. This is all a scheme to make average citizens think that their representatives can control the economy and can make everything better when things go bad. The best they can do is mitigate some of the damages from the fallout, the worst they can do is magnify the problem and help out banks who caused the crisis while everyone else suffers... which is what they're doing now.
The 2 sectors are existing symbioticitally, one feeding off the other. Businesses pay for officials friendly to them to get elected, the officials then legislate in favor of those businesses leading to greater market domination allowing for the businesses to pay for greater lobbying and campaign spending. Everybody wins, except the host, the taxpaying consumer...
It may seem a bit sick, but one wonders at the possibilites that arise from a mass global soverign debt crisis. When the music stops, there's too many people and too many chairs (albeit fewer chairs than people) for the powerful to maintain their grip. Exciting times in which we live eh?
Any forecasts for when the world decides to wake up?
Right about the time that the Great Depression got rolling (1932) there was a news event that took all precedence:
Lindbergh kidnappingAll news sources were engulfed with it. It was a great sensation. It was manna from heaven for the crooks in Washington and on Wall Street. The Great Diversion.
There will never be a "wake up" so long as there are salacious items to focus on.
Partisanship is a diversion. I often hear people arguing over left vs right and point this out. Both sides give me blank stares. Huh?
No one has the guts to solve the problem and quite frankly, I am in the school of thought that kinda thinks its too damn late anyway.
also, I often compare the "Whose at Fault" arguments to two engineers sitting on the deck chairs of the Titanic, arguing over whose fault it was that the ship is sinking.
If its possible, lets fix the problem and write the history later.
(PS--off to buy seafood before it hits $10 for a can of tuna, LOL)
When Kim Kardashian, Paris Hilton, Princess Die, and Lindsay Lohan get over their Daddy issues.
The real private sector has no influence and has had none for atleast 25 years. 'Private Sector' is a euphemism for the publicly(aka investors) held companies. there are three sectors in business namely GSE aka government sponsored enterprises or government sector, public companies i.e small and large investors owned businesses or public sector and the truly private sector i.e businesses owned by individuals or small groups of individuals. Private Sector is a much abused term, so to answer the title of this post, the private sector is a victim of the government and the public sectors
Absolutely concur. And how George Washington fails to delinate is astonishing.
Now if he infers that we elected these criminals - we truly in the private sector - well then okay. But the euphemism and the public sector are a two-headed slush.
NOTHING CHANGES until we clean out Congress. Whatever you want to call whomever occupies the executive branch - progressives, democrats, communists, parliamentarians, dickheads, anti-americans - they have shown their true colors and that color is anything but red-white-blue. Just RED!
A total washout of the racketeers in the House and Senate is where we must begin and it better happen fast. Otherwise America will truly be a euphemism. And we will enter the mother of all Past Tenses.
As usual, IMO, George speaks the truth and as Observer observes, the only private sectors left are the independant farmers and local services to the populace.
The only Private Sector left is a grunt in the army.
That's a mammoth of a project.
how about we document the doofi in a database with internet access.