There's Only One Solution That Might Fix Our Corrupt Financial System
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But won’t we be subject to bungling bureaucrats?
Do you think public employees possibly could do worse than the mortgage brokers who lied and stole their way into the financial crisis? Would you really miss the shysters who sold dangerous adjustable mortgages to senior citizens who already had secure fixed mortgages? Will you pine for the days when bankers sold toxic assets to school districts and various municipalities all over the world? Are you worried that you’ll grow nostalgic for bankers who made billions on the upside and then stuck the taxpayers with the losses when things headed south?
And please don’t use Fannie and Freddie as counter-examples. Until they were nationalized after utter failure, those mortgage giants were run as private entities – complete with stockholders and highly paid executives – all backed with implicit government guarantees. They were the worst kind of public-private partnerships. We can do better.
Won’t we lose our banking talent by so drastically lowering the salaries?
Yes we would, and thank goodness. There are thousands of very bright people who are drawn into banking because of the enormous financial rewards. Collectively, they are harming our economy. We would be much better off if that enormous talent pool flowed into medicine, science and education.
Just think about what the current system is doing: We lure our best and brightest into finance because they can literally make millions of dollars per HOUR. And in order to do so, they create enormous hazards for our economy. If someone from another planet looked our way, they would surely ask: “Why do you deploy some of the best talent on Earth to destroy yourselves?”
But isn’t this outright socialism?
This is about as socialist as your local police and fire departments. Over the course of history, we have learned that some services best serve the commonwealth when run as public trusts.
Overall, the free-market works reasonably well in the non-financial economy. (Yes it needs very tough regulations to protect the environment, public health and the workforce. And having a larger labor movement would serve as a badly need check and balance to concentrated corporate power.) But our private banking sector defies the most fundamental laws of capitalism: Both banking profits and losses should go to the entrepreneurs and their investors, not the public. Furthermore, if you really care about preserving capitalism in the real economy, we can’t allow finance capital to run hog wild, creating instability and crashes in its wake. Sooner or later, we’ll be forced to nationalize the banking sector. In fact, we already did. We bailed them out. We guaranteed hundreds of billions of toxic assets. We provided trillions in virtually free loans. Under the rules of capitalism, we should own them already given that level of support. (You can be sure, Warren Buffet would own them all, if he provided that kind of financing.) We just didn’t have the guts to take them on.
Look around and you’ll see the wreckage of big private banking wherever you look. The unemployed, the empty houses, the struggling families who are underwater, the collapsing state and local budgets -- all of that was caused by our banking system run amok.
How the hell could this possibly happen in America with a banking lobby that owns Congress? Doesn’t that make this scheme a bit fantastic and unrealistic?
It sure does. But doesn’t that admonition apply also to any and all banking reforms? Right now, with the banksters in control, even the most minor reforms are challenged every inch of the way. So what’s realistic right now? Just about nothing.