As it turns out, most Americans believe in capitalism even though we can’t agree on how it should work. Regulation is much debated and misunderstood.
After our recession, financial crisis and bailouts, unregulated free-market capitalism was supposed to be our big solution. After supposedly learning from our colossal mistakes, our problems remain — more wealth is still accumulating at the top and more losses at the bottom.
The New York Times’ Paul Krugman writes that there is no middle ground between opposing political thoughts on government regulations:
“One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net … It’s only right, this side believes, for the affluent to help the less fortunate.
“The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft.”
Compare Main Street with Wall Street. The Dallas Fed defines community banks (Main Street) as those holding less than $10 billion in assets, and that each of our 12 biggest megabanks (Wall Street) hold from between $250 billion to more than $2 trillion.
The New York Times’ Nicholas Kristof writes of Wall Street bankers, “Their platform seems to be socialism for tycoons and capitalism for the rest of us. They’re not evil at all. But when the system allows you more than your fair share, it’s human to grab.”
Conversely, Forbes’ Richard Salsman writes, “We need more freedoms and less controls. We must identify, locate and excise all those many government agencies, subsidies, taxes and regulations that violate our liberties and rights, those that transform officials from mere referees on life’s field into savages running amuck, altering rules and redistributing well-earned points — and thereby wrecking an otherwise perfectly fine and fun game.”
Attorney General Eric Holder admits that megabanks have become so big that they are difficult to prosecute. Criminal charges could impact on our national economy.
Richard Fisher, president of the Dallas Fed, spoke at March’s Conservative Political Action Conference (CPAC) concerning megabank regulation. He endorsed rewriting the Dodd-Frank bill to make it more effective in protecting taxpayers.
“Rescuing too-big-to-fail banks from their bad investment decisions imposed an enormous economic burden on the American people. It also perpetuated a sense that powerful banking mandarins operate above the law and prosper at the expense of the thrifty and hardworking citizenry,” Fisher says.
“Here are the facts: A dozen megabanks today control almost 70 percent of the assets in the U.S. banking industry. Today, these megabanks—a mere 0.2 percent of banks, deemed candidates to be considered ‘too big to fail’ — are treated differently from the other 99.8 percent and differently from other businesses. Implicit government policy has made the megabank institutions exempt from the normal processes of bankruptcy and creative destruction. Without fear of failure, these banks and their counterparties can take excessive risks.” (Community banks account for 98.6 percent of all banks and hold only 12 percent of total industry assets.)
Senators Sherrod Brown (D-Ohio) and David Vitter (R-La.) are working on the SAFE Banking Act. “Already, the nation’s six largest megabanks enjoy what amounts to taxpayer-funded guarantee by virtue of their size, making it harder for regional and community banks to compete,” Brown says. “Now, these megabanks may also enjoy some impunity when they violate the law by laundering money or illegally foreclosing on homeowners. Wall Street should pay the full price of its wrongdoing, not pass the costs along to taxpayers.”
Greed-driven mutant capitalism has taken its toll on our young country, exploiting without care. Why should it be acceptable for ethics to be purely optional when making a profit?
— Marylin Olds is an opinion columnist for the Kingston Community News. Comments are welcome at marylin.olds@gmail.com.
