Former community activist and President of the United States, Barack Obama has released his plan for “re-regulation” of the market place for the financial industry. As usual, accepting no responsibility on behalf of government for the “sub-prime” lending mess that precipitated the latest recession, the President leveled criticism at market participants instead. He referred to “a culture of irresponsibility” and in proposing a new consumer financial protection agency basically endorses the position of community activist groups which malign the sources of mortgage loans as “predatory lenders”. The provisions of the new rules reaffirm the long-standing central government policies of urging banks to increase lending in low-income areas.
The nanny state ambitions implied by the plan sent to Congress to grind into legislation are as grand as Obama’s dream of occupying a place among the Pantheon of advocates for state control of individual lives and businesses:
My administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.
Actually, some of those state interventions and “reforms” are what made the depression of the 1930’s a great one. According to Robert Higgs, Franklin Roosevelt abandoned his 1932 campaign promises to, among other things, cut spending and stop centralizing power in Washington. Instead, he and Congress launched a massive interventionist thrust that included a confusing array of new expenditures, taxes, subsidies, regulations and economic participation by government. As a consequence, the fear, anxiety and confusion created among investors and entrepreneurs effectively retarded the formation of wealth. Does some of this sound similar to the confusing flurry of 24/7 Obama proposals being streamed through a compliant media today? Then as now the White House was filled with advisers who had no experience or knowledge about “running” things, but as one writer commented, “they like to run things.”
The Obama plan proposes to regulate derivatives like the mortgage backed securities and credit default swaps that became famous in the sub-prime crisis. These are the instruments that received criticism from politicians for being so complicated that even those trading them did not understand them. Do not fear however, for the super regulators will be able to understand not only derivatives but the entire semi-free financial system. How is that? Senator Charles Schumer explained to viewers a while ago on MSNBC that it would work something like this:
You’re gonna find a different system of regulation. … There will be a strong, quiet, hopefully more unified federal regulator…..And he’s gonna be tough—or she. But they’re gonna be quiet. So like when Bear Stearns began to run into trouble, they’re gonna call the heads of Bear Stearns in and say, “All right fellas, you’re getting rid of those two hedge funds; you’re gonna raise more capital—even if it means you have lower profitability. We’re not gonna tell anyone you’re doing this, but you do it or we’re gonna take sanctions against you.”… You need a tough, strong regulator, unified—no holes in the system—… who … sees the problem ahead of time, so they have complete transparency, they know exactly what’s going on … and they come in and say ‘straighten up even if your … profitability is lower and your stock has to go down.
Don’t you feel better now? A thinker of the caliber and eloquence of professional politician Charles Schumer has explained and justified it all in one neat statement. He will probably have a hand in selecting just the right “unified,” “tough,” “quiet,” “strong,” and apparently omniscient super regulator to oversee the entire financial system, and keep it “transparent” to boot. The Grand Regulator will also need to be a jack-booted thug as he (“or she”) threatens the financial executives with “sanctions” unless they take strategic and operating instructions from the central government agents.
All of this maneuvering, by everyone from the Community-Activist-in-Chief to the robbers in Congress, is simply deceptive. None of them are honest enough to zero in on the essentials and then actually justify their proposed actions with any proof or even a rational argument. The market economy has performed remarkably well, even as the common trend over the last century has been for vastly increased government oversight, participation and taxation. The market performance is a property of the semi-free system and even Obama has acknowledged its productive capacity, though he opines from his Marxist-influenced tutelage that it can “spin out of control”. Unregulated markets actually are controlled, Mr. President. They are controlled by market discipline, which is the doctrine that develops when people enjoy both the rewards and suffer the consequences of their market choices, unfettered by nanny state interventions. Control of markets by government is control of people by government.
But the interventionists, led now by President Obama, keep up the charade that more regulation, state corporatism, deeper deficit spending, higher taxes and inflation will have different results this time. There is a colloquialism about the tendency to repeat the same actions expecting different results. It is called “insanity”.
©Copyright 2009 Edward Podritske