Two thick, black layers of wool are being pulled over the eyes of Americans: the political hype that Washington politicians are working for the good of the American people and the financial hype that Federal regulation of the financial system is designed to enhance the national welfare. When are people going to see through this double fraud?
Corrupt banks enrich themselves by gambling at a Federal table that covers all their bad bets…with “other people’s money.” Brandeis’ famous phrase, and the title of his landmark analysis of pre-Great Depression financial corruption, might not constitute such a damning condemnation of fraud if it were accomplished exclusively with the money of investors eyes wide open and willing to take the gamble. All capitalism is a gamble, though usually not such a dangerously uninformed one as playing with derivatives (i.e., buying something that is not real but, well, “derived” from something real) or “tranches” (i.e., portions) of a bundle of liar-lone mortgages.
Capitalism reduced to financial manipulation, an ideal set-up in itself that undermines the stability of the financial system, is bad enough, but in a true capitalist system would harm only the irresponsible idiots who choose to gamble their money on an investment they almost certainly do not understand (since the whole point of the operation is to enable the bank to conceal the level of risk from the naïve investor). Immeasurably worse is a financial system based on corporate socialism, i.e., a system in which financial corporations keep their profits when they win but have their losses covered by taxes paid by the public, including all the mature citizens who chose not to participate in the original gambling scheme. The previous sentence describes not only the financial system that produced the 2008 Recession but, all the hot air about reform notwithstanding, the financial system that exists in the U.S. today.
Government essentially has only two purposes: it is either a tool for bullies to exploit the people or a tool of the people to protect society. “Government” is neither good nor bad, any more than a hammer is good or bad. A corrupt Wall St. CEO would find today’s Federal government, which tips the economic table to ensure that a rising proportion of national wealth flows into his hands while slipping him a “get out of jail free” card, very good indeed. A homeowner (a person with one home, probably mortgaged) watching his income fall, his benefits evaporate, and his retirement contract broken by his employer or a social scientist evaluating the long-term health of a nation moving back toward 19th century two-class status, outsourcing jobs, allowing infrastructure (even nuclear weapons sites!) to decay, and coddling a financial elite that focuses on gambling with financial products rather than making real products would find today’s Federal government to be about as good as a hammer with the head rusted off.
The whole debate about “regulation” is a red herring. The business of politicians is to regulate. Let a member of the 99% pull off a bank heist and see whether or not his behavior gets regulated. The issue is whether or not regulations are applied according to a single standard that applies to all. CEOs and workers both are required to drive on the right. But the regulation prohibiting the intentional misrepresentation of investment risk has, to put it politely, separate standards for billionaires and for the rest of us.
The U.S. government is supposed to serve the voters, who are supposed to select their governing representatives on the basis of “one person, one vote,” rather than the “one dollar, one vote” system now in the process of being instituted. When it comes to fraud, the political fraud being slipped past the tired eyes of the American people is even more outrageous than the financial one.
The government of course does not force any citizen to commit a financial crime; it simply refuses to prosecute billionaires for the fraud committed by their corporations even when those corporations are deemed “guilty” and forced to pay fines! Corporations may be criminal but surely not the poor, helpless, little CEO’s! Thus, the sharp reefs of moral hazard sink the ship of state on which society depends: if the powerful are not compelled by convention and law to behave in a moral fashion, they will not.
Bad money drives out good; government policies favoring financial crime will : 1) persuade the honest to turn dishonest, 2) marginalize the honest; or 3) persuade the honest to “leave town” (e.g., drop out of the market, stop voting). The visible result of this process in contemporary America is the explosive rise in the stock market at the same time as the 99% are experiencing vast unemployment, historically high dependence on food stamps, and a shift from high-paying industrial careers to low-paying temporary service jobs. What group will endlessly support a system designed to cheat it?
Perhaps the answer to that question is: “The American worker.” Why the average American worker failed to vote with his feet in support of the Occupy Movement in the face of the overwhelming evidence of corporate-government elite collusion in 2008 is a question sociologists will be pondering for a long time. That elite, and its fast-talking elected representatives, are betting that the American worker will continue to vote against his own best interests.