>>>it's not lack of regulation! It's not a failure of the holy MARKET! GET REAL. If you let the greedheads run free, this ALWAYS happens.<<<
In a separate post, I argued that the President has enormous powers through the Department of Justice to remold society. Specifically he gets to decide which crimes or behavior get prosecuted. I trust this requires no more explanation or evidence.
I question the cry for more regulation or that "W"s degulation stance caused the problem. I think that there are plenty of regulations already on the books. I fault both Clinton and W for choosing what got prosecuted and what didn't.
Let me give you an example from the Enron days. First let me state that back in the '30s the Roosevelt administration made illegal the practice of round trip trades. Round trip trades are where one party sells an asset to another and then buys it back under a previous arrangement. This presents the illusion of liquidity or high market volume. What is wrong with that??? Think SIVs. We all know now that they don't move - and shouldn't (because they smell so bad). But what about the sucker who bought one thinking he could dump it when he wanted because the banks were swapping thousands of them every day to create the illusion of liquidity??? Yes you could sell them if you were a bank (on the inside), but if you weren't part of the club....you would have held the bag. This practice was very prominent in the late '20s market boom. It was made explicitly illegal.
Back in the Enron days it was clear that there was massive round trip trading of energy contracts. After the meltdown, this was discovered and a stink was raised. The defense offered was that it was a new market and not explicitly banned. This was unadulterated horses%*t IMO. The bottom line is that it was intended to defraud, and had no legitimate business purpose. There are adequate laws on the books to address this matter - in general wire fraud is the broad catch all if the government wants or needs to nail someone - telling a lie across state lines. I hold that electricity deregulation is a good thing. However at the time of the meltdown the anti-free market cry of insufficient regulation was waved. Mostly this was made by Dems who had heavy contributions from the incumbent utilities who were losing market share. The Pubs in the Dixie cried against deregulation but in that region, they receive most of the utility funding.
Lets address prosecution a little more. In any organization, there is the agency problem WRT employees. The boss has an agenda which he expects the employee to carry out. In fact, the employee has a different agenda. His might be spending an hour a day talking to his girlfriend on the company phone. In the government an employee might have an opposite agenda so he only does enough of what the boss wants to keep from getting fired, or fabricates small lies or fails to pass on true or important information because he deemed it insignificant. This is sometimes known as passive aggressive behavior.
In government, the top dogs change with the admin - the bureaucratic drones remain. At one point W's AG, Alberto Gonzalez, fired a bunch of mid level prosecutors - left over from the Clinton admin. I believe the stated reason was not investigating voter fraud - in certain heavily Dem regions. There was a huge stink. We all know that it takes an act of Congress to fire any government employee. At the end of the day - as I recall - Congress raised a stink, Gonzalez got fired for firing the prosecutors, and they got reinstated with back pay. (Check me on that.) The point of this is that even if the Prez has a strong agenda and regulations are on the books, what he wants to happen might not. So in fact the credit crisis may not be an indictment of free markets at all.
Lets take things one step further and discuss Ms Clinton. She is very bright. She also understands power. The first thing she did when she became president in 1992 was fire the White House travel staff. She fired lots of others who had posts which would work against her agenda or not help it enough. There was no problem because the Congress was all Dem. I think that she will be in the admin/cabinet. If she is - just watch the mid level firings. I don't care what post they give her. I can guarantee that she drew up the list of firings 18 months ago as part of her broad plan. Even if she doesn't get an appointment, the list is already in Obama's hands.
That is why I think that divided government (Prez of one party and Congress of the opposite) is essential. The founders provided checks and balances. While we nominally have that in the Admin-Legislative-Judicial setup, it is corrupted because of the persistence of the mid-level bureaucracy.
Regulations aren't the problem and aren't the answer. I am sure that an adequate law exists to throw Fuld, Paulson, Raines, Stan O'Neil, etc in jail. Everybody knows what happens if you leverage a large financial institution 30:1. There is no excuse. How about criminal negligence?? How many have been badly hurt through this? There is the crime. The negligence??? 30:1. Fry their asses.
I think that we need the bailouts to prevent systemic collapse. The argument against that is moral hazard. If we decide today to throw say...500...bank managers...in jail, I think that will help with the moral hazard problem going forward. |
