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The Fault Lies Not in Our Stars but in Ourselves

Posted by Larry Doyle on June 18, 2009 11:24 AM |

Just as Cassius could not serve both Caesar and the republic, neither can our political leaders today serve two masters. Who are these masters? On the one hand, politicians claim to serve the public interest, while on the other the politicians are beholden to the big money showered upon them by lobbyists representing large financial interests.

Unless and until these conflicts are exposed and extirpated, in my humble opinion, our nation will never regain its stature. The evidence is overwhelming. The gall of the politicians is unending. The media is largely beholden to the same interests and enables the charade to continue.

The Wall Street Journal touches upon these issues in writing Hope vs. Financial Experience:

The main idea behind the Obama Administration’s new financial revamp is essentially this: With more power and a modest reshuffling of the bureaucratic furniture, the same regulators who missed the last credit mania will somehow prevent the next one. If nothing else, this concept is certainly true to President Obama’s campaign theme of “hope.”

From my experience, “hope” is always a lousy hedge. What do I mean? If I, in whatever role I occupy, am relying upon hope rather than thorough preparation, discipline, and ethics to achieve my desired goals, then I am in an unenviable position. As a nation, we occupy that unenviable position currently. Why?

We “hope” the financial system and reforms will serve our national interests. However, those charged with developing and implementing these reforms are conflicted. How so? They feed from the trough of those supposedly being regulated while supposedly representing the interests of the public, i.e. those they are supposed to be serving. No man can serve two masters.

President Obama and his Congressional colleagues from both sides of the aisle would promote the concept that our financial regulatory system had gaps which banks profitably penetrated. The promotion of that concept is pure pandering. Those gaps were created and paid for by the massive flow of lobbying dollars that went from Wall Street to Washington. In turn, the politicians hoped the gaps would not be detected or overly expensive. They “hoped” and we as a nation lost. Where is the acccountability?

Many would say there is much blame to go around for this financial crisis. However, if we do not call those in Washington on the carpet for their culpability in this turmoil, we are doomed to repeat it.

As I watch the Congressional testimony of Secretary Geithner this morning, my blood boils. Seeing the likes of Senators Chris Dodd, Chuck Schumer, and many others pretending to represent the national interest is very hard to swallow. Why?

All we need to do is review the names of those who facilitated the financial fraud that occurred at Freddie Mac and Fannie Mae. President Obama himself, in his short stint in the U.S. Senate, was a huge beneficiary of the largesse from Freddie and Fannie and the financial industry at large. Make no mistake, the intentional “cooking of the books” at both those agencies was fraudulent and criminal behavior. Washington enabled it and profited from it.

The WSJ addresses this very point in the process of reviewing Obama’s proposed regulatory reforms:

This “gaps and weaknesses” theory has the political benefit of ignoring the role that Washington played in creating the credit bubble. There’s not a word in the 85 pages about the Fed’s years of negative real interest rates, and the only mention of Fannie Mae and Freddie Mac is a placeholder paragraph noting that reform of those housing giants will come later. Also nowhere in sight is any explanation for how the Fed, which had every power imaginable to regulate Citigroup, could have allowed Citi to sell tens of billions of dollars of off-balance-sheet mortgage products.

Thus, the debate in Washington will continue. I view that act as a mere sideshow to the main play going on behind the curtain. That “show” burdens the taxpayer, both now and in the future, with an enormous and unknown cost!!

LD

  • While I agree with what you are saying wholeheartedly, what do you propose as the solution? It is not enough for us all now to say, well, we shouldn’t have repealed some strategic parts of the old law. The answer to that is that our investment banks will be unable to compete with the ret of the world’s scheisters. I guess I would like a lower % of leverage allowance, but how do you reinstitue a chinese wall? So many problems, so few good ideas. personally, I feel that if the PPT would let the market reward or punish the financial stocks for their hubris and excess, thats the solution to me, not a “regulator” who will be beholding to Congress and have tunnel vision when times are good again and make no mistake about it, if we all continue to expect more than 5% returns, then we will see bubbles and busts for the rest of my life. One just needs to look at the stock market since deregulation in 1997.

  • I would propose the following:
    1. first an acknowledgement by those in Washington of their culpability

    2. a public airing of the massive lobbying funds spent by the financial industry

    3. a fully independent commission outside of Washington to collect ideas and information

    4. I would also share the following piece I wrote the other day…

    http://www.senseoncents.com/2009/06/lets-give-barack-some-sense-on-cents/#more-6258

    First and foremost, though, we need to change the dialogue from sufficiency of regulation to the transparency and integrity of regulation. The rest will follow from there.

  • TeakWoodKite

    Watching WH presser…Gibbs says that a “lack of regulation” is responsible…how about enforcing the laws already on the books?

    For example are not anti-trust laws or similar laws meant for the “to big to fail”?
    Are not RICO laws meant for orginized crime? Criminal acts are committed in the light of day and just like the IG for the Fed, they don’t have a clue or or representives are complicit and do not wish to be outted.

    Well said LD.

    • The media has allowed govt officials to define the argument. That’s unacceptable.

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