To Regulate or Not to Regulate?
REGULATE, FOOS!!
It can’t be undone now, but choosing to tackle a resource-demanding issue like healthcare reform in the midst of such a severe economic downturn was just stupid. Helloo? Obama? Pelosi? Agggh, stupid. I’d love to see meaningful, substantive healthcare reform, and especially A PUBLIC OPTION, but it just wasn’t going to go well when there were so many other issues that should’ve taken precedence. How about focusing on a decisive Gitmo solution and probably even torture prosecutions? How about a massive environmental policy turnaround to correct for the Bush years? And the biggest: re-establishing a foundation for an economy that doesn’t list like a drunken sailor every 5-10 years. I am not surprised AT ALL that Brown won in Massachusetts. The Dems have lost focus almost as bad as the Republicans.
The issue that should’ve been first and foremost on the agenda is working to see that the economy remains on solid ground. I’ve written before that we need a sustainable economy. Briefly defined, we need to account for external costs to the environment, move away from measuring success in the form of a gross national product, and establish a stable, sound economy that is not dependent on continuous, unending, unsustainable, resource-depleting, materialistic, consumer-based GROWTH rather than an economy that is balanced in an equilibrium with brief periods of expansion and contraction. (And, yeah, easier said than done. But at a minimum, can we get some accountability from the Fed?!?!?! Cause I’m just not so sure that their goals still reflect the goals of a democracy!)
This is even more relevant today. In a horrible case of life imitating the Onion, we have analysts saying that we may ALREADY be in the next bubble. By taking responsibility for so much bad debt, the US government has eaten the ugly bubble and is now looking like the stink spirit in a Miyazaki film. Result? A populace that sees our government as an over-reaching bloated hogstorm of irresponsibility with deep ties to the ultra-wealthy and little concern for holding fast to the ideals of our democracy. Both parties have sold out hard. Neither one of them is worth the price of socks. All the posturing about Libertarian ideals and the smothering evils of regulation — pshah!
Do we need to increase regulation of the finance industry? YOU BET YOUR ASS WE DO!!! And don’t let any smooth-talking faux Libertarian tell you otherwise. Alan Greenspan relied on the all-knowing invisible hand and just let it keep shaping more exotic financial “instruments,” which is code for “wrapped-up in 27 layers of legalese and fancy bows when we know damn well that there’s nothing in here but bait-and-switch crap.” I’ve read lots of nay-saying about regulation from free-market fools who claim that regulation will strangle financial “innovation.” Helllllooooo??? We don’t need innovation in finance! We need stability and integrity!! If you want innovation go invent a REAL PRODUCT!!
Right. So. Because smarter people than me say everything better, here is a link to an article that you must read: How Supposed Free-Market Theorists Destroyed Free-Market Theory. An excerpt:
The greatest lesson from the crisis that we haven’t yet learned is that “industry interests” and “free-market interests” are not the same. In fact, they are more like oil and water, as the industry profits most in the absence of true market competition. And so it should be no surprise that Wall Street has devoted itself to making contracts indecipherable, building boundless negotiating leverage and fighting for favorable breaks and regulation at every turn. What should be a surprise is that the same scoundrels that killed our markets (and also, mind you, wrecked the global economy and demanded taxpayer bailouts) have so ably sold themselves as natural heirs to von Hayek and Friedman — and that so many of us have let them.
Stay on it. Let your Congresspeople know that you care, and that you vote. (You do vote, right?) In an earlier post I explained that we have a “friend” who was a NY investment broker. He laughed as he explained his job to my husband two years ago, “I bundle up shit mortgages and resell them as prime investments to other banks.” Ha, ha! That’s pretty funny! He still has a house in the Hamptons. A second house. The first one is in a tony area of Manhattan. Some of my hard-working friends are struggling with no jobs and the threat of losing their houses. Not good. Yes, we need financial regulation. Without it, free-marketers will run us into the ground.
Obama Dissed, Volcker Speaks Out Against Bankers Gone Wild
If anything about the financial crisis made you beet-red angry, then you must read Simon Johnson. Johnson is a former chief economist for the International Monetary Fund who wrote one of the best pieces on the financial crisis in print, the Quiet Coup. This week he urges people to pass on the message of Paul Volcker, former head of the Fed Reserve (before Greenspan), and now the head of Obama’s Economic Recovery Advisory Board.
Obama met this week with the heads of the major banks in an attempt to discuss regulation and the return of stability to the financial system. Guess who decided to attend the meeting with the President of the Free World only by phone? If you guessed Lloyd C. Blankfein, the chief executive of Goldman Sachs; John J. Mack, chairman of Morgan Stanley; and Richard D. Parsons, chairman of Citigroup you got it right. (Thanks guys, cause that shows how much you appreciated the use of all our taxpayer dollars!!)
The meeting continued with discussions about executive compensation, regulation, and making more loans available to small business. From the NY Times:
…the banks are seeking to restore executive pay to high levels and asserting that the government’s demand that they hold bigger financial buffers against possible losses makes it hard for them to issue more loans. During the hourlong meeting in the Roosevelt Room of the White House, Mr. Obama prodded the executives to stop fighting the regulation legislation intended to deal with the problems that led to the financial crisis”
Paul Volcker was one of the few outspoken critics of the unprecedented response by the Federal Reserve in the financial crisis. Far oversimplified, he did not agree that it was a good idea to bail out failing banks at all.
After President Obama’s meeting with the top banking executives, Volcker had this to say (emphasis added):
Every day I hear financial leaders saying that they are necessary and desirable, they are wonderful and they are God’s work. Has there been one financial leader to stand out and say that maybe this is excessive and that maybe we should get together privately to think about some restraint?
I hear about these wonderful innovations in the financial markets, and they sure as hell need a lot of innovation. I can tell you of two—credit-default swaps and collateralized debt obligations—which took us right to the brink of disaster. Were they wonderful innovations that we want to create more of? [...] Wake up, gentlemen. I can only say that your response is inadequate. I wish that somebody would give me some shred of neutral evidence about the relationship between financial innovation recently and the growth of the economy, just one shred of information.
Paul Volcker and Simon Johnson for the win.
Confessions of a Liberal
It’s tough to be a progressive these days, really tough. When Bush was sauntering around the world, cocky and ignorant (dangerous combo), life was easy. We could rail on fundamental religion, bemoan aggressive US foreign policy, argue for more funding of all the take-better-care-of-the-people programs because back then, at least we weren’t broke.
But like so many Americans, massive debt does not fly with me. It doesn’t turn me into a Republican, I’d still rather see more money going to inner cities than to buying Israel, but it does bring out the conservative STFU mentality (as in, “Times are tough? Too bad. STFU and quit whining.”) Now all that’s left to debate is who needs to STFU over what. I’ll give you this at the get-go: Liberals need to STFU about expanding social programs in a time of scarcity, but then, that’s tough when the bankers are rolling in swine flu shots and bonuses.
Healthcare is simple, really. Drug companies? STFU and deal with the competition that the rest of us have been dealing with. All that overseas cheap labor that everyone from manufacturers to tech workers have had to compete against? Yes, YOU my big fat US corporations, can compete against cheap drugs from Canada just like the rest of us have had to deal. This gets complicated since our man Obama has apparently caved massively on this issue. Aging populations whining over their Medicare benefits getting trimmed? STFU, because we’re your kids and grandkids, remember?? We are going to inherit the debt you are insisting upon every time you refuse to allow Medicare coverage to be reeled in. Do I support government funded healthcare for the elderly? Absolutely. But yes, it does need to be rationed. We ration our own money every day.
Wall Street needs to STFU. All the newly converted, anti-Obama faux-Libertarians need to STFU. Why? Because (cue overarching Liberal premise) money begets money and money protects money and we have a tacit agreement in the US that we’ll try to keep equal opportunity alive by supporting some form of income wealth redistribution. If we didn’t have a mixed economy we’d end up back where we started: feudal lords and fiefdoms. Goldman Sachs is a feudal lord, you are a peon. Don’t delude yourself that it’s any different. Regulation ensures that these players stick to the rules of fair play. Have you heard the arguments from investment bankers? That regulations “curb innovation”?? You can call CDOs “instruments” but keep in mind, these are not actual products. They’re pyramid schemes. Not my definition of innovation.
So, enough with the STFU. I am aware, painfully aware, that I also could use to STFU. And I have. No posts for months now. Because Obama has not been the great fixer he set out to be, and it’s taken some time to sort out the complexity of going from a righteous progressive during the Bush era, to being a disillusioned progressive today.
If there’s one thing I’m certain of it’s this (and then I really will STFU): the parties, Dems and Repubs, are irrelevant. Easy answers do not lie on either side of the fence. Times are so complex that a massive realignment and reshuffling seems in order. My hope is that pragmatism rules the day.
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