A Scary Corporate Coup Is Under Way -- We've Got to Stop It
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The blueprint for regulatory reforms was applauded by the Securities Industry and Financial Markets Association; the American Insurance Association; and the Private Equity Council, the trade group for the major private funds that will get public money and backup insurance to buy the banking system's rotten assets.
This could be born-again patriotism. Or it could be the animal appetites of financiers smelling gorgeous opportunity for returns.
This may be one of those moments where people can find some guidance from their moral convictions. They do not need to know all the details to ask simple questions.
Does the outline of what's happening to rescue major financial institutions seem morally wrong? Or is it justified by the larger necessities of the national predicament? Is the government insufficiently tough in demanding reciprocal commitments from the beneficiaries? Should Washington pursue larger structural changes in the banking system?
Trying to imagine alternatives to the bankers-first bailouts is a good place to start. What follows are suggestions I produced at the request of young people organizing demonstrations around the country for April 11. They call themselves A New Way Forward. I hope they light lots of bonfires.
This rough outline leaves out lots of particular regulatory issues, but the core goal of reform is to create a banking and financial system that serves the society and the economy, not the other way around.
Everything being done to rescue and restore the old order gets in the way of creating something truly new and valuable for the future. Those of us throwing logs in the path of the bailouts are dismissed as naysayers or worse, but the financial titans are trying to foreclose just solutions by stampeding Congress and the president to adopt ill-considered ideas.
If Wall Street gets its way, the "reforms" may further consolidate power and ratify a corporate state -- a grotesque hybrid that combines the worst aspects of socialism and capitalism.
The reform ideas announced by Geithner would plant the seeds by creating a "systemic risk" regulator, presumably the Federal Reserve, to oversee the largest, most politically adept banks and financial firms that qualify as "too big to fail." Capitalism, with its inherent tendency toward monopoly, would have the means to monopolize democracy (see my recent Washington Post article.)
My new book, Come Home, America , asks people to enunciate their versions of "patriotic realism."
That is the essence of an alternative vision: de-concentrate power, liberate people and smaller enterprises, workers and middle managers and investors, to help shape the country's future from many different perspectives. This is how democracy was supposed to work. It can again.
Some points I recommend people consider:
1. Euthanasia for insolvent banks. Transferring their losses to the public will not restore the trillions in capital the bankers helped destroy. It would merely relieve the banks, their creditors and shareholders of the pain.
Government must take control of the system to supervise a just unwinding of the mess -- whether we call it nationalization or something else. Handing out money and leaving bankers in control of how it's spent is nutty and morally wrong. People everywhere understand this. Only Washington seems oblivious to the irrationality of what it is attempting.
2. The Federal Reserve must be democratized and effectively stripped of its peculiar, anti-democratic status as an unaccountable island of power within the government. A new federal agency -- accountable to Congress and the president -- can be refashioned from the working parts of the Fed. Call it a central bank or something else, but its governing power must not rest with heavyweight bankers on the board of directors at the 12 regional banks. (To understand why, consider that the New York Federal Reserve Bank was headed until recently by Geithner.)