Latimer on Law & Politics

What Every American Needs To Remember About Deregulated Financial Markets

   What Every American Needs To Remember About Deregulated Financial Markets

                           "Those who cannot remember the past are condemned to repeat it."

                                       - George Santayana, The Life of Reason, Vol. I  (1905)

               Professor Gordon Ourside, head of the Musicology Department at the East Arkansas College of Biblical Knowledge, returns, performing a timely selection from his anthology  Songs of Morning Again In America.

 http://www.youtube.com/user/gordonourside#p/a/u/0/KeQuGNkU4WE

              We are hopeful that this selection, as performed by Professor Ourside, will help everyone attain a clear understanding of how deregulated financial markets work in actual practice, as opposed to the a priori belief that self-correcting  "free markets," allowing the greediest elements in society to operate with minimal or no oversight by an indulgent small government, will somehow, magically, work to attain the greatest possible good for society as a whole.  That belief, of course, is the foundation of post-Reagan GOP economic and political ideology, the same ideology that caused the American economy to crash in 2008, just as it had done seventy-nine years earlier in 1929.

            This selection, "It's Moving Day," was written by country-music legend Charlie Poole just after the crash in 1929.   The original lyrics simply described the plight of the millions of Americans who had been dispossessed of their livelihoods and their homes due to the unchecked corporate greed of an unregulated financial industry based on Wall Street. 

             This rendition by Professor Ourside is more specific as to the causes of such plight, with a sharper focus on the economic and political forces put into play over the past 30 years by the political ascendance of Reaganomic "small government" ideology.  That ideology, pumped up by the Bush administration over eight years, with GOP majorities in both houses of Congress through 2006, allowed deregulated Wall Street corporations, again, to become "too big to fail."  But, of course, fail they did.

            That failure, caused by unchecked greed in the deregulated financial markets, required that billions of our tax dollars be used to bail out the most irresponsible corporate miscreants.  This phenomenon can only be described, in the words of Nobel Prize winning economist Joseph Stiglitz, as an ersatz capitalism that socializes the risk by putting it onto the taxpayer, while privatizing all the gains for the benefit of irresponsible corporate managers and   investors who, foolishly, put thier money into  risky financial "products" based on nothing but paper and pie-in-the-sky algorithmic projections derived from unrealistic asset valuations -often fraudulently so.

           The crash of 1929 led to the Great Depression, while so far the crash of 2008 has only brought on "the Great Recession," in the words of Stiglitz and other Keynesians.  After the crash of 1929, Democratic majorities in Congress, working with FDR, began assembling a panoply of regulatory laws designed specifically to prevent another devastating economic crash.  An important part of that legislation was the Glass-Steagall Act of 1933.

           Glass-Steagall prohibited financial institutions from combining investment banking, commercial banking and insurance under one corporate aegis, and that, specifically, was to prevent  individual companies from becoming so big that one or two corporate failures could bring down the entire economy again, as occurred in 1929. 

           As Santayana observed over 100 years ago, before the crash of 1929, those who cannot remember the past -or will not as with today's GOP, are condemned to repeat it.  That would be fine, too, if it only affected the corporate elite and the rentier class who play with free money,  but blind faith in small government and free markets, a faith that ignores both history and reason, condemns the great mass of ordinary Americans far more than it does the very rich who cause crashes, due not only to the ever widening gap in income and wealth, but also the ability of the very rich to hide assets in overseas accounts from both creditors and Uncle Sam.

             Thus, like the song says, it is indeed "moving day" for many, many Americans, again today, due to the excessive risks taken by the deregulated financial industry on the GOP's watch.  We all know, so save your breath, that Clinton signed Gramm-Leach-Bliley in 1999, but it was a Republican bill, based on GOP free market ideology, put into effect by the Bush White House and GOP control of Congress for six years, while the issue we face today is not who was to blame but who is willing to recognize the error and take steps to correct it through responsible regulation and tax policy. 

            Such willingness to undertake responsible measures to correct the present financial crisis is clearly not being shown by today's Republicans, people like Scott Brown who stated during the senatorial campaign last fall that he sees no  reason to regulate the financial industry, and who declared in his first press conference as senator the  belief, now thoroughly debunked by events, that tax cuts create jobs.  Where, for example, are all those  jobs today that were supposedly created ten years after the Bush tax cuts for the wealthy in 2000?

             The plain truth is that America cannot afford any more ideologically driven Republican misgovernance based on the naïve belief in unregulated free markets and tax cuts.   Such continued reliance on market forces alone, without a strong federal regulatory effort to curb the excesses of Wall Street, can only result in  further economic decline, turning today's Great Recession into another great depression even more devastating than the one we experienced in the 1930s.  Hundreds of thousands of debtors are facing foreclosure on their homes today, and millions more are just a paycheck away from the same fate, while they wait to see whose job will be downsized next.

             So let's thank Professor Ourside for his contribution here.  He succinctly crystallizes the complex political and economic issues we face, in a piece of musical Americana that should be readily understood by even the most gullible among the Republican constituency.  They are the ones who have, over the past thirty years, forgotten the lessons of history and  allowed themselves to be gulled by Reagan's small government rhetoric into letting big business take control of both government and the economy while  ordinary Americans slide further and further into debt.