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.



  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


    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.


    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,

  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?

  6. Janice

    Wow. Well said Phil Hoskins. Everyone in this country should read these very true and wise words of yours. I’m sending them to my representatives, and all my family and friends.

  7. remoran

    “Never stop questioning.” Einstein

    The first thing that has to be done is to abolish the Fed, something no one talks about unless you’re Ron Paul, Ralph Nader or others of independent thought who has done due diligence to understand how the monetary system works in this country. Until this is done, we will continue to flounder and the banksters will continue to run government as they have for over 90 years. The debt monster finally has reached critical mass driven by tech, greed, the abolition of the Glass Stegall act and the criminal malfeasance of the BA and Congress (Reagan was the start point here.). In essence, both institutions are broken and need to be fixed before it’s too late. I fear Obama lacks the courage and charisma needed to make it happen as the Fed pours four trillion into the black hole of the banks.

    Good article but I disagree about the too big part when one factors in entities like the Roman Empire, the Mandarins of China and the collapse of the Mayans, among others.

  8. jverner

    I got about half way through the column and was thinking “well said.” But Janice beat me to that comment. All the same, well said!

  9. adamrussell

    If we give them our money and do not take control that is worse than socialism – it is feudalism. The banks will be the rulers that collect taxes from the peasants. They tell us to give, or else.

    OTOH if we as a nation buy into the banks and become shareholders with all the normal rights of control due to shareholders, that is not socialism that is capitalism.

    Socialism is when a country takes control of business without paying for it.

  10. griff

    I would have to mostly agree with and echo the comment by remoran above. We flat out refuse to even entertain the idea of if not completely abolishing the Fed, at the very least to bring it back under the purview of the Congress, and thusly the people. As it is now, the Fed is no longer required to report M3, which is the total money in circulation. A pretty important item to know from an economics standpoint.

    With all the talk of the Bush administration’s crimes and the lack of desire on the part of Obama to pursue justice, you would think that most folks would want some justice sought for the true and fundamental basis for our disastrous monetary and fiscal problems.

    And I will disagree with Phil on his main point. It’s not that we’re too big to fail, it’s that we’re too small, and small-minded, to be effective.

  11. switters

    Everyone should read these words. It’s chilling to me how many Americans are starting to feel this way.

    For those of us who come from the opposite perspective, the one which does NOT believe in or agree with a huge, debt-ridden federal government, these comments are more sad than frightening.

    I prefer to do everything legal in this one’s man ability to work for the dismantling of as much of this goverment as possible. We could be out of this so much more quickly if the goverment would stop trying to help and got the hell out of the way.

  12. almandine

    Say it again, Switters…

    And if not, let me say it: Phil, you are totally off base.

    The problem for way too long has been TOO MUCH government intervention. ZERO INTEREST RATES… gimme a break. Remoran is all too correct… we NEED to get rid of the Fed and its banking syndicate. THAT is where we need to regain control. Had we not spent one cent on any of these bank bailouts, the REAL bailout would be much farther down the road. Let those crooks fend for themselves.

    While it may be hard to figure at first, it must be understood that our government has NO MONEY except what it prints… we don’t pay enough taxes to cover our collective debt, and now we probably never will – hyperinflation aside – and ANY talk that suggests government can divvy up a non-existent financial pie is PURE IGNORANCE!

  13. Warren

    Guess I’m a ‘die hard’

    I agree with most of what you said except the underlying premise.

    “What 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.”

    This a classic case where if enough people repeat the same false mantra enough times it becomes truth and fact. Let’s all just believe the mainstream media hype, with no questions asked.


  14. Janice

    For those of us who come from the opposite perspective, the one which does NOT believe in or agree with a huge, debt-ridden federal government, these comments are more sad than frightening.

    For the record, I am not a fan of big government. However, I am a realist, and this debt and big government is the reality we are dealing with right now. With that being said, Bush has put us in this position – where big moves are necessary to stop the freefall created by greed and corruption. I find the bailout distasteful, I find the debt horrible, and I do not think our country and our fellow citizens would survive this financial disaster without government intervention. I seriously doubt anyone is excited about the need for this bailout and the debt it is creating, but I respectfully disagree with you.

    The government enabled this gap between the rich and the rest of us – and it is up to the government to fix it. I am not a fan of Wall Street and the crooks that slither around there. I am not happy about Bush shoveling billions of our dollars into the greedy hands of the financial institutions that caused this disaster in his last ditch pillage of the American coffers.

    I don’t give a rip if Wall Street doesn’t like what the Obama administration is doing. If they don’t like it, then it is the right thing to do. I am very angry, and I am glad there is finally going to be some at least some level of accountability in Washington. I know it’s not going to be what we would like to see, but that is the difference between the dream, and the reality of what we have to work with. We do not live in an Utopian Society, we live in a country that is very damaged by greed, gluttony, and all the other sins embraced by the hyprocritical.

  15. Warren

    Banks CAN fail.

    Did you ever take Economics 101, or possibly anything above? Where there is a need the market fills the need. If the current money mongers fail as the result their own stupidity, there’s STILL a need for mortgages and car loans and business loans. Other banks, and there are thousands, will fill the holes left by the idiots who screwed up. This is the way market economies have worked for thousands of years. We don’t need to reinvent this. It’s worked since before recorded history.


  16. Janice

    I never said banks can’t fail. And, I’ve taken quite a few courses that involve being able to do more than fog a mirror. I understand that in the purest sense, the big financial institutions should have been allowed to fail, and other banks would have stepped up to fill the void. But, the Bush administration did not allow this to happen, and they funneled our tax dollars into the black hole of Wall Street. No one is suggesting that we re-invent anything, just that we end the absolute corruption and stop celebrating greed. It’s time to stop preaching about values, and time to start living them.