Partisan GOP hacks say the financial crisis was caused by too much regulation, and government interference in the markets.
But Glass-Steagall was repealed, derivatives were left unregulated, and the regulators were watching porn instead of preventing fraud. Giant banks, hedge funds and other fat cat private players knowingly gamed the market and committed fraud in more ways than can be listed in a single post.
And remember, even the “father of economics” – Adam Smith – didn’t believe in completely unfettered free markets.
On the other hand, partisan Democratic party hacks say that bad corporations caused the crisis, and that if more power is given to Summers, Bernanke, Geithner and the other governmental honchos, they’ll fix everything.
But Summers, Bernanke, Geithner and the other meatheads largely caused the crisis through their actions. And as Simon Johnson points out, the government created the mega-giants, and they are not the product of free market competition.
As I pointed out in February 2009, government fraud is pervasive:
In case you believe that there are only “a couple of bad apples” in the United States, here is an off-the-top-of-my-head list of corruption by leading pillars of American society:
- Senior military officials stole approximately $125 billion dollars out of Iraq reconstruction funds, dwarfing Madoff’s $50 billion Ponzi scheme (in turn, the looting which is now occurring under the bailout/stimulus programs will far surpass $150 billion)
- Texas billionaire Robert Stanford ran a multi-billion dollar fraud scheme of his own
- Senior judges in Pennsylvania have pleaded guilty to falsely convicting and imprisoning hundreds of youths (they got kickbacks from the prisons).
- The government-endorsed ratings agencies which were supposed to accurately rate the credit-worthiness of companies and nations committed massive fraud
There are hundreds of similar stories of corruption which have come out recently.
But surely government employees would have done something to stop such corruption if had known about it, right?
- Whistleblowers alerted the government about the looting of Iraq reconstruction funds, but nothing was done
- A whistleblower “gift-wrapped and delivered” the Madoff scandal to the SEC, but they refused to take action
- The Treasury department allowed banks to “cook their books”
- The Pennsylvania Supreme Court refused to hear a case regarding the corrupt judges. A month later, only after the judges confessed to criminal wrongdoing, did the Supreme Court change its mind and take any interest
- Instead of insisting on accurate books, the government encouraged fraudulent bookkeeping. For example, as of 2006:
“President George W. Bush has bestowed on his intelligence czar … broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations.”
- The government knew about mortgage fraud a long time ago. For example, the FBI warned of an “epidemic” of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this
These are just some of the many examples of the government aiding and abetting corruption.
Indeed, government employees are mainly using their time in office to feather their own nests, rather than to do anything constructive.
So let’s cut the partisan hooey.
Both the fat cat players and the government are to blame for the financial crisis, and we need to rein in corruption and fraud in both.