Too big to fail

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.

 

Comments

  1. Phil Hoskins

    What I had hoped to generate was a discussion of what kind of "regulation" of the economy do we want, not whether to regulate or not which I consider to be an entirely different conversation.

    For many decades the oligarchy has been successful in further shifting power and wealth to itself. It recoiled at the pull back represented by the Roosevelt administration and used the cover of WW II and the following boom times to institute anti-labor laws, weaken anti-trust rules and create a level of fear of the bogeyman of communism to hide from Americans the fact that our rape had started.

    All the name calling (socialist, communist, collectivist, etc) is used to hide from us the fact that by giving meaning to those fears we give away our power.

    Call it what you will, I say it is time to take control over the flow of money and make it reflective of who really earns it — not the suits on Wall Street and around the world playing the shell game called finance, but you and I and the billions of people around the world who labor to produce products and services. You know, real work.

    I say tear down the entire financial edifice and restructure it so that the highest rewards go not to those with the greatest greed but to those who produce the most good for the most people. I say deincentivize greed, no more tax incentives for outrageous pays (use the tax code to penalize it) and no more compliant bank regulators who turn their eye to dangerous practices.

    It is fine to talk about how bad this or that politician is, but that is really more part of the shell game than a way to solve this. We have to become politicians ourselves, each and every one of us, pressing, cajoling and insisting that wealth be returned to us who create it. For wealth is not, contrary to the oligarchy’s preaching created from the top. They manipulate it, they create nothing but gain for themselves.

    Phil Hoskins

  2. almandine

    “What I had hoped to generate was a discussion of what kind of “regulation” of the economy do we want, not whether to regulate or not”…

    The whether-to-or-not question is exactly a what-kind-of-regulation- do-you-want discussion.

    Looking at your latest post, though, it remains clear that you don’t see the need for capital formation to support the “making of money by the little guys”.

    You don’t see that somebody has to pay for the system of production… and since the little guys can’t, themselves, buy the “factors of production” necessary to turn raw materials into goods, where do they come from?

    Are you truly suggesting that government should be the source of all things materialistic? That we all work for the govt as THE societal way of getting along? Is Socialism your regulatory end game?

    How’s that for discussion?

  3. AustinRanter

    Phil,

    I believe that a good place to start is by repealing the Commodities Futures Modernization Act 2000 and the Gramm-Bailey-Leach Act 1999.

    Those two pieces of legislation are responsible for many of the financial and economic woes we are experiencing today. These laws allow for marketeers to virtually steal from people around the world, and they are protected from legal consequences. Also, it would take away the ability of banks and insurance companies to compete in the security instruments business…and would all but bring down the derivatives market.

    Credit card companies have a license to be legal predators and hold hostage their customers…infinitely. In other words, credit card holders become indentured servants from the moment they first use their credit cards. These companies have held an even stronger hold over our politicians and government by filling their pocketbooks to look the other way. It’s time to legislatively remove the head-lock-hold these folks have on consumers. There are fair ways for these companies to conduct business without using rape and hostage tactics.

    Also we have to make sure subprime lending schemes never ever surface in any shape, form, or fashion.

    We must have oversight and transparency with the Federal Reserve System. Even the founders warned of future problems.

    We The People “must insist” that government back four corruption-fighting reforms: stopping contributions from lobbyists or political action committees, ending earmarks, increasing congressional transparency, and supporting public financing of congressional campaigns. If we have to vote out every swinging incumbent in Congress, then so be it…and this includes letting the Executive Branch know that these issues are not negotiable…and must be addressed at all levels of goverment.

    Lastly, and way more important than all of the above, WE THE PEOPLE …MUST stop being reactionist…and become proactive. We can’t use the excuses of lying politicians and media manipulation any longer. I’m not going to go into all the ways that we all need to make sure that government understands who they work for…and why.

    Welp, that’s about it for my 2 cents.

  4. RichardKanePA

    Phil, I think a condition for bailout should be divestment, in say 90% of assets, to qualify for help. Maybe that’s too strict. But something must be done to prevent an institution from being too big to fail over and over again.

    Note,
    http://capitolhillblue.com/cont/node/13392

    Is it possible that the tough conditions for new bailouts be retroactively applied to the first institutions that fail or would that create more instability?

    Note according to David Leonhardt some knew help would be for coming if they failed which affected their financial decisions,

    http://www.nytimes.com/2009/03/11/business/economy/11leonhardt.html?em

  5. almandine

    First a company must cripple itself so as to prove that it needs rescue? How bizarre…

    Why not just leave the companies alone and do away with bailouts?