Shall We Dance?

It seems that after every financial fiasco, the heads of government departments dealing with the financial markets parade in front of Congress with the same ole song and dance. Yes, there needs to more oversight, but no we should not create any new legislation.

The current mortgage fiasco is the latest in a long list of financial malfeasance by corporate America that will be swept under the rug with little more than an asterisk. The average American will once again be made the scapegoat for the greed and excesses of capitalism gone wild. Why is it that only after the raiders have made their money we recognize there is a problem?

Robert Steel Treasury's undersecretary of domestic finance in written testimony stated the following:

"The regulatory structure that we have, through our view, could use a fresh re-look. And that's what we at Treasury plan to do," Steel said. "I can't tell you where that will go. Let's do the work before we have the conclusions."

Steel added that innovation has outpaced regulation, meaning current regulation "is just not attuned as it should be."

Regulation is at the heart of today's financial turmoil. Despite a wide array of federal bank regulators, the standards used by mortgage lenders weakened considerably after 2004. For example, New Century Financial Corp., which wasn't federally regulated and is now bankrupt, underwrote millions of dubious home loans, many with adjustable-rate mortgages to so-called subprime borrowers — those with the weakest credit histories.[1]

Is it just me or are these guys the masters of the obvious? Why do we believe that the greediest people will do the greediest of things to help the most people, it is illogical. We allow these corporations to go unchecked with the false belief that given the opportunity they will do the right thing and every time they prove that they will not. The pie must begin to be shared on a more equitable basis. The American worker must be allowed to organize to offset the growing influence of corporations on our economy and our politics.

The people entrusted to oversee the corporations are many times former members of the very companies they are regulating. There is a revolving door between government and corporations that must be closed. We can no longer afford to have our laws written by the people they are supposed to control. Thanks in large part to the Republicans, we barely have any regulatory powers as it is now and if we allow the few we have to be controlled by the corporations this is a recipe for the types of disasters we are seeing with China and other loosely regulated industries.

The old lie that the marketplace will be the final arbitrator rings hollow when there is not a level playing field. As long as we have the industries writing the regulations that govern the industries we will continue to have economic and political injustice. The economic fallout from the mortgage crisis will be small in comparison, as more and more corporations cut corners in an effort to maximize profits. There are those who argue since the industry insiders know the industries best they should be allowed to write the regulations. This is foolishness, just because the burglar knows how to break into my house doesn’t mean I am going to let him write the code for protecting my house. I believe that there are many conscientious federal employees who want to do a good job, but are not being allowed to do so by corporate interference and political cronyism.

It is time for the politicians to step up to the plate and begin to put some teeth in legislation and regulations that will protect not only our physical wellbeing, but our economic wellbeing as well. It is an abdication of their responsibility as fiduciary agents to continue to sign off on industry written regulations or industry assurances that they will perform better in the future. No longer can we afford to let the financial markets dance without paying the band.

[1] http://www.mcclatchydc.com/227/story/19484.html