It would be nice if liberals could make up their mind.
The New Republic's Tim Noah
here traces TARP, Dodd-Frank and ultimately the general state of regulatory capture (Stigler) of the government by the banks to John Kenneth Galbraith's vision in his 1967
The New Industrial State:
Galbraith (who died in 2006) argued that big U.S. corporations had become immune to competition. Any effort to break them up into smaller companies would neither succeed nor—given the complex challenges of a modern economy—be especially desirable. Better to keep them in harness through a partnership with government. “Planning,” Galbraith wrote (in a sentence you could probably get arrested for writing today), “must replace the market.”
Galbraith was writing about manufacturing giants like General Motors and U.S. Steel. These seemed indestructible at the time, but of course they would soon prove all too susceptible to competition from abroad. Still, Galbraith’s vision of the regulatory state comes pretty close to describing today’s relationship between the federal government and a different oligopoly: the Big Six megabanks. ...
When the 2008 financial crisis hit, the feds went into Galbraithian planning mode. They bailed out the banks through the Troubled Asset Relief Program (TARP), arranged mergers, and, through the Dodd-Frank bill, required big banks to prepare “living wills” showing how they would dismantle themselves in orderly fashion should the need arise. ...
Conservatives were wrong to oppose the government’s bank rescue . . ..
For conservatives who feel queasy advocating the breakup of private enterprises, MIT’s Johnson offers this consolation: Remember George Stigler. Stigler, a conservative economist who died in 1991, won the Nobel for a theory that basically said Galbraith’s partnership approach didn’t work because of “regulatory capture,” i.e., the various ways corporations tame their minders—for example, by maintaining a revolving door between industry and government. Rather than try to control powerful corporations, Stigler thought government should use antitrust law to break them up and let competition rein them in.
What's wrong with this analysis is that banking is not a private enterprise and hasn't been since 1913. The then new partnership of banking with government in 1913 failed in less than 20 years, requiring Glass-Steagall in 1933, which was reactionary liberalism at work. And what we have just witnessed is an instant replay of that debacle, only in faster motion. The Gramm-Leach-Bliley Act of 1999 overturning Glass-Steagall took only 9 years to blow up. But unlike Glass-Steagall, the grotesque of interventions in the wake of this latest panic has done nothing to demarcate clearly the public vs. the private in banking, and consequently keeps the public, and the country, at risk while insuring advantage to those closest to the printing presses at the Treasury. Money goes to money, as they say out in the sticks.
It's not much solace that liberalism's fingerprints have been and continue to be all over the inception and development of financier fascism in the United States. There don't seem to be any conservatives smart enough to understand the advantage it presents to them, and to the country. Or maybe it's just that they've been captured, too.
.jpg)
