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Friday, October 07, 2011

Wall Street Couldn’t Have Done It Alone

To Occupy Wall Street:

Wall Street couldn’t have done it alone. It takes a government and/or its central bank, the Federal Reserve System, to:

  • Create barriers to entry for the purpose of sheltering existing banks from competition and radical innovation, then "regulate" for the benefit of the privileged industry;
  • Issue artificially cheap, economy-distorting credit in order to, among other things, give banks incentives to make shaky but profitable mortgage loans (and also to grease the war machine through deficit spending);
  • Make it lucrative for banks – and their bonus-collecting executives -- to bundle thousands of shaky mortgages into securities and other derivatives with the knowledge that government-sponsored enterprises Fannie Mae and Freddie Mac and other companies, all subject to powerful congressmen looking for campaign contributions, would buy them after a government-licensed rating cartel scores them AAA;
  • Inflate an unsustainable housing bubble by the foregoing and other methods, enticing people to foolishly overinvest in real estate.
  • Work closely with lending companies to establish a variety of programs designed to lure people with few resources or bad credit into buying houses they can’t afford;
  • Attract workers to the home-construction bubble, setting them up for long-term unemployment when the bubble inevitably burst;
  • Implicitly guarantee big financial companies and/or their creditors that if they get into trouble they would be rescued;
  • Compel the taxpayers to bail out those companies and/or creditors when the roof finally fell in.

No bank or group of banks could do these things on its own in a freed market. It takes a government-Wall Street partnership – the corporate state -- to create such misery and exploitation.

So demonstrators, you are right. Something is dreadfully wrong. But your list of culprits is far from complete. So go ahead and protest outside Goldman Sachs and Bank of America. But also spend some time outside the White House, the Fed, the Treasury, and the Capitol Building. Together they are responsible for our current economic woes. These are the entities that control our fate and over which we have no real say. It's time for things to change.

Greed without political power is boorish. Greed with political power is dangerous.

The freed market is the alternative to what you properly despise.


Julia Riber Pitt said...

Even so, I wouldn't vindicate Wall St. Going after the state without going after the rich in hopes of creating a stateless society would be the equivalent of trying to overthrow a monarchy simply by assassinating the king; chances are, another noble would take his place. Same thing here: get rid of the state without going after the corporate fatcats and the fatcats would just bring the state back as they have every incentive to want it back. Heck, the rich will be the first people to resist any kind of transition to statelessness (seeing as how, just like you pointed out, they're the ones who benefit the most from having a state). It's a lot more complex than just "the state created Wall St." and would take a lot more than just attacking the state to solve it.

Sheldon Richman said...

Who vindicated Wall Street?

Joe said...

It would be nice to see this next to Naomi Klein's piece in The Nation.

Joe said...

Or perhaps get it published in the Occupied Wall Street Journal.

Bill the Butcher said...

Recently, on another site, I was in an argument with a certain ultra-right wing person about the functions of banks.

"The business of banks is to make money...Duhhh" is what this person said.

Really? I thought the business of banks was to provide a series of services, including safekeeping of one's earnings and provision of finance at reasonable terms so one doesn't, you know, have to borrow from the local mafia boss or moneylender. It's when the bank itself starts acting like a mafia boss or moneylender that problems start. That's why regulatory bodies exist.

But what happens when the regulatory bodies, and the government which controls them, start acting like a mafia boss or moneylender?

I think the people occupying Wall Street know the answer.

dennis said...

While thinking more on this whole libertarians interacting with the occupiers thing, I was reminded of Austen Heller in Rand's "The Fountainhead". While the book was probably the least pro-freedom of Rand's works, the scene where Heller speaks at the same rally as Toohey certainly comes to mind. So I'm all for trying to reach them, as long as we don't adopt their terminology and repackage our ideas to suit them. When libertarians reached out to the paleocons all those years ago they did damage to the freedom message that still hurts us.