Too big to fail
February 19, 2009
It has become crystal clear to all but a few die hard libertarians and cynical politicians that we are all going to sink together unless government stakes the future of our nation on deeper involvement in our economy. We keep hearing new names for it, but in one way or another our taxes, mostly future taxes, are going to be transferred to the remaining financial institutions. Not at all being a fan of nationalization of anything, I see no way of avoiding these transfers of wealth. But we at the very minimum need to insisting on a number of conditions to the process.
We need to assume the role of membership on boards of directors and shareholders in future income from these institutions. We need to say “shut up” to those shrill voices in opposition to strong regulation of financial activity. We need to condition all of these transfers of wealth with strict limits on the ability of recipients to lobby government except through channels controlled by government.
Most of all we must use this situation to rebalance the power with regard to finances. Labor must be given more influence on decisions by their employers. Many of the high risk decisions by management were at the cost of the middle class. Thanks to the Reagan to Bush (and my verdict is out as to Obama) oligarchy, most Americans have lost money and income in the past 20 years. Their share of the total wealth has dramatically shifted to the economic elite. It must be just as dramatically reversed.
I say these not out of ideology nor politics, but out of the most dramatic lesson to be learned from the past few months. It is highlighted by the once vibrant conflict between those who favor letting the bankruptcy system to handle the detritus and those who see governments as the only institution that can handle our meltdown. Bankruptcy may be fine for those with wealth, or even those involved in facets of the economy that might be less affected by mass bankruptcies.
But the rest of us, those who work for a living, need investments for retirement income, or are just who might could end up on the street if everything tanks cannot afford to let the economy go through its own bankruptcy. We are too big to fail. We are flesh and blood, families and friends, we need to eat, have housing and find work. We cannot be allowed to fail.
So I say, use our future wealth wisely but aggressively. Invest in the economy to stop the bloodletting and build a better tomorrow. But failure is not measured by economic loss alone. To me more important is that we not allow this time to increase the flow of wealth to the already powerful and greedy, but to reduce the wealth gap and empower all people to make their own investment in the future. Tax cuts are not the answer, as has been demonstrated so many times over that it is amazing anyone puts that nostrum forward with a straight face.
Just as failure prone is any form of nationalization in which government takes the risk only and leaves the upside to investors. That is just plain rape and pillage economics. This is the time to rebalance, redistribute, and re-energize the real economy instead of the mythical world of high finance. We do not need debt swap securitization, we need each to stop credit card companies from getting away with moral usury. We need to use this crisis to take away the incentive to pile risk upon risk and call it be a new fancy name that conceals how rotten our system is to the very core.
We are indeed too big to fail. But fail we will if all we do is patch the leaks in the system, allow a greater degree of wealth imbalance to occur, and allow this opportunity for every citizen and worker and employer to reform every attitude about money that has put us where we are. We are too big to fail but fail we will if this is not the time when we unite, shoulder to shoulder in the great enterprise of life, sharing its burdens and its benefits equitably.