I was reading an interesting article this evening on the Washington Post website. I had actually diverted there from another site, I don’t remember which, that was discussing the article and the facts around it. We all are fairly fed up with the bailouts that we have seen. The Troubled Asset Relief Program (TARP) was the only one that I even remotely understood as possibly being needed. That isn’t to say I approved, because I am not sure that it was needed (I would be interested in what some of our more economically inclined folks think about whether it was needed or even good). But, the government unfortunately does not seem to be too interested in my opinion about what they should or should not be doing these days (or the opinion of any other regular citizen for that matter). The bottom line is that they passed the TARP bill and President Bush signed it on into law. They blamed Bush for deregulating and allowing the madness to happen, despite the fact that both parties (and especially you Barney Frank) were fully responsible for what happened.
But an interesting thing has happened along the way that I predicted would happen back when the TARP was passed: The power structure in the financial world has begun to become even more centralized. The Washington Post article offered up some very compelling information that shows that several of the financial institutions that we had negligently allowed to become “too big to fail”…. were getting bigger. After all, the problem was that “Bush had allowed deregulation” of lending practices, and as a result, financial institutions had become behemoths. As such, we were facing a crisis of massive proportions, banks this large falling on their face would destabilize the entire economy causing a great depression. Never one to waste a crisis, the government sprang into action to save us all from the very monsters they had, themselves, created. And TARP was passed, to the tune of $700 Billion. And the world was saved…..
Until the next crisis of course. TARP led to the economic spendulus bill, another $800 Billion in pet projects meant to save us from the “economic crisis” that still loomed. Of course the “Auto industry crisis” was next. Then we heard more on the “global warming crisis”, leading to the Cap and Trade Bill, which will end up costing taxpayers Billions more. Now we have the health care crisis. Isn’t it interesting that we have just had crisis after crisis after crisis after crisis? And conveniently the answer to all crisis situations is to spend a lot of taxpayer money, expand government dramatically, and centralize power with the 535 idiot children that live in the certified asylum we call the United States Capital Building. I can’t wait to see what the next crisis is that will strip away our rights and centralize power in DC. H1N1? Probably. But who knows, the federal government seems to have a propensity for finding (or in fact creating) any number of crisis situations that must be dealt with in an emergency fashion.
But I digress, the point of the article here is the big banks getting bigger. Because that is exactly what they are doing. Before I really address this allow me to say something as a sort of disclaimer. So long as the big banks get bigger through sound business principles and no interference from the government, I don’t have issue with it. I believe in the free market, which means companies should be able to get as big as they can handle. But that is not what is happening with this instance. No sir. The federal government has their hands all through this. And these companies are getting bigger through tax breaks, subsidies, bailouts, government protected bad practices, and favorable hands from those same 535 maniacs mentioned previously. This folks, is banks getting bigger despite their practices, despite their failures, and despite what is good for consumers or the economy in general.
And how big are they getting? According to that Washington Post article: J.P. Morgan Chase, an amalgam of some of Wall Street’s most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued-and-owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.
Process that folks. Four banks in the United States, two of them at least partly government owned, issue 50% of the mortgages and 66% of the credit cards in this country. If the goal was to create some financial institutions that would be “too big-ger to fail”, I would have to say that the government has done a bang up job here. And the mergers that made these big banks bigger were the direct result of government interference. Federal hands pushed failing mortgage lenders and Wall Street firms to merge with bigger banks and handed out billions of American Tax dollars to make sure the deals went through. As the Post article noted: A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.
Isn’t that convenient. Now the question you have to ask is why would the federal government do something as silly as allowing banks that had gotten “too big to fail” to get even bigger… with government help? Surely since they “alerted” us to this crisis and then took our tax money and “solved it” for us, they are well aware that the banks getting too big would put us right back into the “crisis” that they just alleviated. Surely they don’t want that! Or do they?
Just follow me down the rabbit hole here for a moment while I play a little tune about the warnings that were given to us time and again by our founders and their opponents, in their writings, in their debates. The warnings from many people who are well aware of the best way to increase government control. Our founders knew well the danger of allowing the federal government to become too powerful. And that is why they purposefully wanted the states to maintain their sovereignty, to maintain control over everything not specifically mentioned in the Constitution.
In fact it could be argued that the biggest concern people had with the proposed Constitution was a fear that it would allow for a consolidation of power. In fact in the Anti-Federalist Papers, specifically the one written under the name of “Brutus”, this concern was laid out plainly. He said, “It might be here shewn, that the power in the federal legislative, to raise and support armies at pleasure, as well in peace as in war, and their controul over the militia, tend, not only to a consolidation of the government, but the destruction of liberty.” Clearly, Brutus felt that a consolidation of power in the federal government was a clear path to the destruction of liberty. And for the record, he was 100% correct. Therefore, the framers, worked quite hard to sell the idea and to create a document that would specifically empower the states to combat the threat of consolidation of power. Unfortunately, despite their best efforts, they failed.
Consolidation of power is a control mechanism. Look at everything the federal government has done in the last 150 years to take power away from the state and local governments and move it into federal hands, consolidating it where it could be controlled by a much smaller group of elites. The power of consolidation is why it is so difficult to delegate for the most intelligent folks. They sacrifice control.
And if you want to “control” the economy it starts with the financial institutions. The Federal Reserve is controlled by the federal government (yes it is… don’t attempt to play the semantics game with me). Two of these four banks are already at least partially under government control, admittedly. The other two won’t admit so, but I have a feeling the federal government has a lot of say in what they do. The federal government has managed to maneuver a dramatic majority of the financial power in the United States into a few very big institutions. And while they don’t technically have control of them, they certainly have a massive amount of influence over them.
So the question that I am sure you are asking is, “If their ‘crisis’ was there, why didn’t they simply take control of the financial industry then under the claim of an ’emergency’ rather than playing this game?” And that is a good question. My answer would be that they knew there was no way they could simply do that and get away with it. The American people wouldn’t stand for it. Wouldn’t it be easier to simply do it in steps. Say… a series of well timed “crisis” moments that each time allowed a little more federal control over the financial industry. By “crisis” #3 or #4, they could have complete government control and the financial system would be state owned and run. How much more power over the good little citizens would that give them?
Whether those around us want to admit it or not, the federal government has, for years, been consolidating power in Washington DC. In every conceivable way possible. And I submit to you that this is no different. The Great Depression gave FDR tremendous leeway to enact much legislation and take over a vast amount of things. And here we sit with a President in the White House that is at least as progressive as FDR. Do you really think the game in Washington is played by fools? They know exactly what they are doing.
So I submit to you that the first thing we need to think about when discussing a better way forward for America is what moral core should be the defining factor. But shortly after that we need to discuss the fact that the consolidation of power that has been happening over the last 150 years is the primary means of control and power the federal government has garnered. We must figure out how to DE-centralize the United States. It is step one in removing the power from an out of control and overreaching federal government.
I look forward to everyone’s thoughts here. Is what is happening in the financial industry a precursor to ultimate federal control? Is that too far fetched a theory? Or is it a likely scenario? If so, how to we combat it?