Banksters

It is easy to hate the banks; bankers and tax collectors have been our favorite targets since the beginning of time.  Jesus threw the money-changers out of the temple, and forgave a tax collector just to show us He really did mean everybody when we were instructed to love our neighbors as ourselves.    

The term “banksters” accurately describes the cabal of big New York banks who use the Federal Reserve to print their money, the IRS to collect their interest, and the regulators at Treasury to give them the cover of decency.  The protesters on Wall Street did not invent that term; it has been a staple of us libertarians, tea partiers, Paulista’s, and NWO paranoids for years.  

But the demand of OWS for more regulation of the banking monopoly is misguided - the answer to government-regulated corruption is not more government-regulated corruption.  You don’t bust a monopoly by wrapping even more government sanction around it; you bust a monopoly by busting a monopoly.  Let’s shall.   

It would be useful to remember what triggered the financial crisis of 2008, namely the imploding of the sub-prime mortgage industry that began to unravel in late 2007.  And let us recall how sub-prime mortgages – loaning money to people who could not pay it back – came to be a big enough deal to break the world.  If you know your local home-town banker, you know this is not an idea that they cooked up on their own after Rotary Club one Tuesday morning. 

No, making the banks loan money to people who can’t pay it back is an idea so colossally stupid that it would take an act of Congress to make it happen.  Literally - that law was the Community Reinvestment Act, which required banks to loan money to unqualified borrowers.  It was a response to a call for more regulation in the 1970’s, and its provisions were strengthened in response to a call for more regulation in the 1990’s – careful what you wish for in twenty year increments.

Bank regulators wrote the rules and the banks followed. The Federal Reserve provided the money, and Fannie and Freddie guaranteed the loans against default.  The sub-prime loans were so risky that there was no market for them; they had to be pooled with other investments to disguise the risk.  The Wall Street banksters were happy to oblige, but only if they could charge hefty fees and be immunized from regulations that prohibited such wildly unethical behavior. 

Congress and Treasury gave them said immunity, but stationed federal regulators right on their premises to insure compliance with the rules the government set down.  Good sheepdogs do not spend years negotiating terms with the wolves; our government regulators did not simply allow the fleecing of America, they engineered it.  I’ll take my chances against the wolves.   

And now they say they couldn’t see it coming?  And neither could Congressman Barney Frank, or Senator Chris Dodd, the chairmen of the House and Senate committees with responsibility for oversight of the banking system?  The head of the SEC, the FDIC, Fannie, Freddie, the IG at Treasury – none of those guys saw that the government-induced housing bubble was going to burst and take the banking system with it?    

Then how come Peter Schiff saw it coming?  How come Ron Paul saw it coming?  Wayne Allyn Root, Wes Benedict, Thomas Woods, Jim Rodgers, and hundreds of others who didn’t have offices inside Lehman Brothers and Goldman Sachs warned us months and years before the bubble burst that we were headed for disaster.   They are not clairvoyant, just economically literate.     

The banksters, regulators, and currency manipulators at the Fed drove housing prices out of the reach of ordinary Americans.  Their answer to each problem they created was to add another problem, including easy access to crushing debt.  And now millions of Americans who bought at the peak of the bubble have discovered that the illusion of equity can vanish overnight, but debt is forever.  The PSA’s from HUD forgot to mention that part in either language.  

To my knowledge, there have been no convictions of Wall Street bankers for violating banking laws, so it is reasonable to assume that they followed the regulations to a tee.  And if the quality of regulators stationed right inside the New York banks was so bad they either didn’t know rules were violated or were too timid to cite, then what makes us think that hiring more of them would help?  Adding second stringers does not solve a quality problem on the A team.     

We don’t need government regulation to regulate greed – the market not only does it, but does it better and faster.  There is no call to add internet penis pills to the portfolio of the Bureau of Alcohol, Firearms, and Tobacco; we seem be able to avoid some scams without having to call in people with windbreakers that say ATFIPP on them.   

When Enron failed, the government refused to bail them out and their executives who broke the law went to jail.  Correct answer; there hasn’t been another Enron since and we did not run out of energy.  When the banksters failed, the government bailed them out and paid them bonuses, and nobody went to jail.  Wrong answer; they went right back to doing the same crazy stuff they were doing before, only now they are packaging toxic sovereign debt in with toxic mortgages when they engineer their incomprehensible derivative products.  And we have run out of money.   

The problem of how to protect the public from the banking cartels is no different than any other monopoly threat in the economy.  The answer to the corrupting power of monopolies is not to sanction them with the even more corrupting power of additional government regulations; the answer is to use the anti-trust laws to break up the monopolies and allow free markets to cleanse the economy of its bad actors...

...starting with the Federal Reserve. 

“Moment Of Clarity” is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D.  Visit Tim’s website www.timnerenz.com to find your moment.