As it turns out, most Americans believe in capitalism even though it’s been impossible for us to agree how it should actually work. Greed has become rampant and regulation has become politicized.
Who ends up suffering in this situation? Are mega-corporations or megabanks suffering the consequences? Or are you and I, and our families and neighbors, average Americans?
After our most recent monetary meltdown, financial crisis and bailouts, it was decided that unregulated free-market capitalism was supposed to be our sure-fire solution.
Yet after supposedly learning from those colossal mistakes, the same problems remain — more and more accumulation of wealth at the very top, more and more financial losses for everyone else.
The New York Times’ Nicholas Kristof says 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, economist Richard Salsman writes in Forbes business magazine, “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 …”
The difference between Main Street and Wall Street is significant. The Dallas Fed defines community and regional banks (Main Street) as those holding assets of up to $10 billion, while megabanks (Wall Street) hold from between $250 billion to more than $2 trillion.
Megabanks have become so big, Attorney General Eric Holder recently admitted, that they are extremely difficult to prosecute. Bringing up criminal charges on a megabank could actually impact our national economy.
Richard Fisher, president of the Dallas Fed, spoke recently at the Conservative Political Action Conference regarding megabank regulation. He advocated rewriting the Dodd-Frank bill in order 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,” Fisher said. “It also perpetuated a sense that powerful banking mandarins operate above the law and prosper at the expense of the thrifty and hardworking citizenry.
“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.”
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 said. “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.”
What constitutes justice here for average Americans? Many believe effective regulations will require mega-corporations and megabanks to do the morally right thing.
No less should be required.
— Columnist Marylin Olds welcomes comments at marylin.olds@gmail.com.
