Friday, December 11, 2009

Regulating Wall Street

Since banks and financial institutions are some of the largest contributors to senators and representatives, it is no surprise that these organizations have become less and less regulated in recent times. The last serious attempt to curb their speculative excesses occurred during the grandparent of all financial disasters, the Great Depression. The regulations put into effect then -- including the Glass-Steagall act -- have been gradually but continuously eroded, most rapidly during the Clinton and Bush administrations.

The House just passed (today) Barney Frank's bill to re-regulate certain aspects of the financial industry, including not just banks but "private equity" investment houses. It would, for the first time, regulate derivatives, equities whose worth depends on the speculative value of other securities such as mortgages and insurance policies. It would also set up a kind of consumer protection agency for public investors.

Opposition consists mostly of ludicrous begging of the question, such as the charges that it would add ponderous regulations and expenses for the financial industry. Well duh! The lack of regulation just led us to the loss of trillions of dollars and tens of millions of jobs. Fly-by-night speculators and quick-profit traders have been bailed out and enriched at the expense of the vast majority of Americans. Tough ponderous regulation of their activities is exactly what we need to slow them down. However much regulations may cost to put in place and enforce can only be a tiny fraction of what their absence has cost us so far, and may cost us in the future if we don't have themn.

Part of the bill creates a way of dismantling large organizations deemed "too big to fail." Frank's House committee specified that the cost of doing this, when said businesses seem to be in a death spiral -- as were Bank of America, CitiCorp, AIG etc. not so long ago -- would be paid for by a tax on all financial corporations. Seems fair to me -- especially since, for once, the American taxpayers won't have to foot the bill run up by the Wall Street high flyers.

Let's hope the supporters of the bill can preempt the Big Lie campaign about it that is already being ramped up: "Government Interference", "Anti-Wall-Street, Anti-Business" etc. etc.

You betcha!

(Let's hope it also kills a few jobs -- those of the overpaid corporate CEOs.)

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