Conservatives Should Hate Big Banks
That's what Washington Examiner columnist Tim Carney (author of Obamanomics: How Barack Obama is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists and Union Bosses) writes. He gives three examples from the last week to demonstrate "how the bailed-out subsidy sucklers of Wall Street continue to profit, not from the free exchange and risk-taking that embodies the market, but from cronyism and offloading their risk onto the taxpayer."
- Bank of America, which would have collapsed without the taxpayer bailout, moved $55 trillion (with a t!) in derivatives to a subsidiary backstopped by the FDIC. That means taxpayers will be on the hook if risky derivatives blow up.
- Lenders and realtors lobbied successfully for a measure to expand taxpayer insurance for mortgages on homes worth nearly $1,000,000! A $100,000 home is one thing. But it's ridiculous that taxpayers would be on the hook while banks still get paid.
- A Government Accountability Office report highlighted the numerous conflicts of interest at the Federal Reserve during the 2008 bank bailouts. For example, New York Fed official Stephan Friedman was on the board of Goldman Sachs and actively buying Goldman shares while the Fed moved to give it special access to lending windows. And JP Morgan CEO Jamie Dimon sat on the same NY Fed board while the Fed was giving billions in bailouts to JP Morgan.
His column also adds information about the revolving door between government institutions benefiting big banks and the big banks themselves. Finally, he notes how the bailouts create false market information. He concludes:
So banks profit largely through activities that do not create value or efficiencies. They profit through financial games that rest on government favors. Many Occupy Wall Street protestors demonize all profit. Conservatives defend profit-seeking as the engine that creates prosperity for all of society.
But the big banks have rigged the game so that they profit without creating value. In fact, they profit from activities that weaken the economy by creating instability.
Today, big banks give capitalism a bad name. Believers in the free market should stop giving banks cover.
Carney reports that some conservatives are responding by saying "don't blame corporations, blame the government and its rules." Would we say the same about how ACORN or unions exploit government rules?
- Comment (34)
- · Quote
- · UnfollowFollow (4)
- Pages:
- 1
- 2
Comments:
May '10
Re: Conservatives Should Hate Big Banks
Power corrupts, and absolute power corrupts absolutely. It doesn't matter if the power is in public or private hands; when a company or government gets too big, the checks and balances (competition, in many cases) that keep them serving us are minimized, and they start acting in their own interests more than in ours. It's human nature, duh.
And the worst is when you combine the two. Private companies with their lobbyists influencing policy in favor of their firms, or even with former executives now working as "regulators" in the government. You get this highly corrupt hybrid of private and public power, where the government backs up corporations and banks in THEIR bad decisions, using OUR money.
I am very angry. And that does not make me anti-capitalism-- far from it, I believe true capitalism, which includes letting big firms fail, is the answer to this sham capitalism (corporate socialism) we have today.
Edited on October 24, 2011 at 5:25pmMay '10
Re: Conservatives Should Hate Big Banks
The more control you give the government over how banks operate, the more cronyism you will engender. So all this outrage only inspires more regulation, more involvement, more lobbying and more cronyism. I don't see how you break the cycle in an economy that is so weak that politicans fear what could happen if you started to remove supports. You want to see capitalism work? Remove FDIC insurance. But of course that would likely cause a run on the banks and create unwanted turmoil and further suffering. It's a pickle.
Aug '10
Re: Conservatives Should Hate Big Banks
I would say there's a difference between "blame" and "dislike".
I certainly dislike (maybe "loathe" would be a better term) ACORN and/or unions for exploiting government rules, but I don't blame them for doing so. It's perfectly rational for them to take advantage of any edge that government hands over to them.
The same goes for banks that accept government handouts. I may dislike that they profit from government coercion, but I can hardly blame them for doing so.
At the end of the day, the onus is always on the government for making the rules, not on the organizations that follow the rules.
It's like welfare. I can think that welfare is a bad idea without feeling animus towards people who receive welfare cheques.
Edited on October 24, 2011 at 5:39pmAug '10
Re: Conservatives Should Hate Big Banks
That does it !
It's time to occupy Fifth Avenue. Meeting at the Four Seasons, business casual. Lunch, wine only.
Edited on October 24, 2011 at 5:35pmMay '10
Re: Conservatives Should Hate Big Banks
I personally stay away from the big banks. I prefer local banks and credit unions. They've always given me the best rates and service.
Part of the problem is the government. It's got its fingers in everything now, controlling everything, so naturally companies will gravitate toward trying to influence power in Washington. If Washington were not so powerful, it would not attract the same level of crony capitalism that it does.
However, I don't absolve large companies in the least. Unfortunately it is the nature of power that it tends to get concentrated unless there are checks and balances. Competition, in normal times, provides those checks and balances. But when companies grow too big or acquire too many of their competitors, that is lost. This is why, as much as I don't trust government power, I view antitrust measures as a valid last-ditch mechanism to restrain power from concentrating too much in one company in the private sector.
The important question still is, how do we make the government itself more answerable to the people? Big corporations ARE a problem, but big government is a much worse problem.
Sep '11
Re: Conservatives Should Hate Big Banks
My brother in law is a vp at a good sized bank in Texas. He thought they should have been left to fail. There are plenty of banks like his that would have loved to have the business.
It's not like the people and businesses that needed the banks would disappear as well.
Mar '11
Re: Conservatives Should Hate Big Banks
We love "our own" and dismiss or loathe "the other." It is easy for political conservatives to see the mote in the eye of "the other" and miss the log in "our own." Focusing on the "sin" of statism is a worthy exercise in seeing clearly, but failing to look around our own tent and see that we have fathered or adopted more than a few ugly corporate babies of our own, babies whose milk of choice is rent-seeking, leads eventually to silly spectacles like OW. We don't need navel gazing, but honest hard looks in the mirror would be a good start.
Re: Conservatives Should Hate Big Banks
Carney misapprehends cause and effect. The government is the entity rigging the game. The banks are responding in the most economically efficient manner available, given the rules. The socialists in charge enjoy having the "capitalist cutout"taking the blame for intended and unintended dislocations caused by their "transformative" policies.
Example 1: Overheard on a call-in radio show on my morning commute, an Occupy Wall Street supporter was pointing to banks charging for checking accounts as evidence of their unalloyed greed. He was, of course, invincibly ignorant about the genesis of this policy in the recently enacted Dodd-Frank financial reform bill.
Example 2: There is much sturm und drang at my office over annoying coverage changes being made by our health insurance provider. Of course, the casual observer is blissfully unaware that these contractual shifts are corporate survival moves being taken in advance of revelation of the full scope and majesty of the Patient Protection and Affordable Care Act [sic]. So, instead of holding the president and congressional Democrats accountable, it's the evil capitalists at fault. Again.
Blame the victim.
Dec '10
Re: Conservatives Should Hate Big Banks
I believe I heard Krauthammer put it this way: capitalism without the possibility of failure is like Christianity without the doctrine of hell.
As far as blaming banks for exploiting the system goes, I can't blame them except that through lobbying they helped craft the system. I get a lot of mileage out of this article from Kevin Williamson. In it he explains how affecting legislation/regulation has become just another area of competition in our system. Those with the size and money to sway government outcomes in their favor beat the competition by reducing their compliance costs or by receiving special treatment. Todd Zywicki argues in this article that the 17th amendment made such rent seeking much easier and more profitable. It's not how our system was designed that is broken, it is how we broke it that is the problem.
Aug '10
Re: Conservatives Should Hate Big Banks
Mollie Hemingway, Ed.:
At the end of the day, lobbyists do not pass laws. Only governments can pass laws.
Of the members of the 111th United States Congress:
These people are not stupid. They are not mindless drones who can be "tricked" by lobbyists. I cannot fathom why anyone would hold lobbyists more accountable than legislators for the laws that are passed.
Dec '10
Re: Conservatives Should Hate Big Banks
Misthiocracy
These people are not stupid. They are not mindless drones who can be "tricked" by lobbyists.
I believe "bought" is the adjective we're implying.
Aug '10
Re: Conservatives Should Hate Big Banks
The King Prawn
Misthiocracy
I believe "bought" is the adjective we're implying. · Oct 24 at 9:30am
Nobody can be "bought" unless they first put themselves up for sale.
Aug '10
Re: Conservatives Should Hate Big Banks
Also, I think "bought" is a verb, not an adjective. ;-)
Dec '10
Re: Conservatives Should Hate Big Banks
Misthiocracy
The King Prawn
Misthiocracy
I believe "bought" is the adjective we're implying. · Oct 24 at 9:30am
Nobody can be "bought" unless they first put themselves up for sale. · Oct 24 at 9:33am
Dodd. Frank.
Dec '10
Re: Conservatives Should Hate Big Banks
My southern is slipping out again.
Aug '10
Re: Conservatives Should Hate Big Banks
The King Prawn
Misthiocracy
The King Prawn
Misthiocracy
I believe "bought" is the adjective we're implying. · Oct 24 at 9:30am
Nobody can be "bought" unless they first put themselves up for sale. · Oct 24 at 9:33am
Dodd. Frank. · Oct 24 at 9:39am
All my comments are predicated upon the condition that banks/lobbyists follow the rules. Receiving financial favours in exchange for political favours, such as the favours that Countrywide is alleged to have given Chris Dodd, is not legal.
As for alleged nepotism on the part of Barney Frank, I fail to see how anybody other than Barney Frank should be held accountable.
Dec '10
Re: Conservatives Should Hate Big Banks
Misthiocracy
All my comments are predicated upon the condition that banks/lobbyists follow the rules. Receiving financial favours in exchange for political favours, such as the favours that Countrywide is alleged to have given Chris Dodd, is not legal.
As for alleged nepotism on the part of Barney Frank, I fail to see how anybody other than Barney Frank should be held accountable. · Oct 24 at 10:00am
The system works now as the very definition of crony capitalism. Those who technically create the rules are dependent on those who benefit from the rules and vice versa. It's a very unhealthy codependency.
May '10
Re: Conservatives Should Hate Big Banks
As Trace doesn't point out, we should all notice during this political season: we don't get to choose between good and bad. Most of the time the choice is between "bad" and "worse". The FDIC doesn't need to be eliminated, just changed, for example eliminating the multiple accounts loophole that pierces the $100K limit per bank, and even capping the per-person coverage at $100k, period, regardless of among how many banks accounts are spread.
That is the situation with the very large banks, such as CitiGroup, which gets into existential trouble every decade like clockwork, Ban of America, Goldman Sachs, JP Morgan, and a coupe of others. The only thing I like less than the federal regulators diving in and breaking up those banks is for things to continue as they are now. This thread goes into some of the arguments, particularly the interplay between my good friend Trace and me on this subject.
Arnold Kling is a libertarian, MIT economist, tied to George Mason and Mercatus, and a former Freddie Mac staffer. He explained, in that socialist, government-oriented publication, National Review, why we need to break up the big banks as they are now.
Aug '10
Re: Conservatives Should Hate Big Banks
Legislators do not "technically" make the rules. They make the rules, full stop.
Cronies with deep pockets can attempt to influence legislators with bribes and gifts, but they cannot coerce an honest legislator. Only legislators have the power to coerce.
Dec '10
Re: Conservatives Should Hate Big Banks
Misthiocracy
Legislators do not "technically" make the rules. They make the rules, full stop.
Cronies with deep pockets can attempt to influence legislators with bribes and gifts, but they cannot coerce an honest legislator. Only legislators have the power to coerce. · Oct 24 at 10:11am
The key word in that is honest. While I won't condemn the lot of them as dishonest, I will say many must exercise expediency. To do the good they intend to do they must remain in office. To remain in office they must run campaigns. To run campaigns they must have money. The threat of not receiving the money they require does have influence over them.
The reason I said technically is because of things like Obamacare. Legislators may have voted on it, but they had minimal influence on its actual creation. It's yet another facet of the problem.