Banks and Socialism
2009-01-25
Posted by: badanov
I visit the good folks at RedState regularly because it is a generally good site where I can get the latest news about what the left is doing to screw things up.
Normally, I read Blackhedd about economics, and while I do not agree with him a lot, he has a good handle on economics.
As with everywhere you get lame commentary such as the above referenced post whereby the declaration that nationalizing banks is an idea only a Euro-socialist would consider to be a generally Bad Idea.
Under a socialist regime, I would agree if the impetus is to advance Marxist economics. Let's face it folks: if the crisis had hit in January of 2009, the main impetus at nationalizing banks would be undoubtedly Marxian in nature; you could not miss with such a contention.
But it didn't it take place then. It happened under the most conservative president in 20 years and his reaction was likely how the Obamanation would handle it: by throwing cash at it rather than deal with the general underlying problems.
As I said, I would agree that anything that sets a Euro-commies atwitter is probably a Bad Idea, but that sort of generalization is how conservatives got into the wilderness they are in now.
The American banking system is a hybrid of private requirements and federal regulations. There is no central bank unlike the rest of the world. We only have the federal reserve system which essentially regulates interest rates and money supply, selling government debt in order to reach a targeted rate.
Congress sets the tone for the banking industry just like it did with Freddie Mac and Fannie Mae. Our banks are privately owned and both federally and privately regulated.
Because of that hybrid system, you can hardly call banks a paragon of wild, unbridled capitalism; they are at the mercy of politics just as any federal institution is, and when politics come to play to change the rules, the result are likely to be something other than intended.
That is why nobody so much as batted an eyelash when the reserve requirement for banks were raised from 10 to one to 30 to one by Congress. Banks could, with this depression era constriction on their activities engage in every sort of behavior they can, and banks held nothing back.
The calls, such as in the above referenced article to remove banks further from regulation is just plain silly. The paradigm changed from the 30s when banks engaged in similar reckless behavior as they did 80 years later, and the sentiment and policy from that point on was ( and should have been ) that the banking system was a matter of public concern; a utility as it were. To change the rules and then declare bank deregulated is as dumb a thing as Congress has ever done, and that is saying something.
You don't want to work all your life saving for retirement,or the kids' college to have it shorn away because a goofus straight out of "B" school discovers a new algorithm for the bank's spreadsheet software that will generate those elusive marginal profits.
Keeping money safe from predators with guns and knives is as important as keeping it from predators in suits and ties.
Banks should be similar to a public utility, and should have a set of regulations that keep it safe from itself as well as it keep from the grubby, corrupt hands of Congress as well.
There is a big difference with maintaining a federal entity which is regulated yet privately owned and one that is owned outright by the government. And yet we are told that trying to get the government to resolve a problem it itself created is socialism, I have no doubt that would be the idea. But would that be the truth?
The banking system is in a mess that Congress paved the way for. TARP is a Bad Idea, but getting Congress to clean up its mess is not, even when the tools of government ( its only one: brute force ) are the only ones at hand.
The way things in banking are being played out is that bank are refusing for obvious reasons to have a "Come to Jesus" moment about that state of their books; that they are insolvent and should do the right thing, allow price discovery and then let the chip fall where they may.
It is why a "Stimulus" program will not work. It is cash that is being spent on everything, yet the issue of bank solvency is not being addressed.
And it may well be up to the market under these conditions to right things, painfully, but in an efficacious manner only it can.
And true to form, only then will Congress intervene riding to the rescue amongst the carnage and nationalize the banks, after the market has fixed it.
Then we really will have socialism.
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