Corporate
Capitalists: Government Comes To The Rescue
By Ralph Nader
19 August, 2007
Countercurrents.org
The
corporate capitalists’ knees are shaking a bit. Their manipulation
of the sub-prime housing market has led to a spreading credit crunch
and liquidity crisis. So it is time for them to call on Uncle Sam –
the all purpose bailout man.
Only don’t call it
a bailout yet. It is just an injection of over $200 billion in the past
week to stabilize the heaving financial markets by the European Central
Bank and our Federal Reserve. Governments to the rescue – again.
My father many years ago
asked his children during dinner table conversation: “Why will
capitalism always survive?” His answer: “Because socialism
will always be used to save it.” As a small businessman himself
(a restaurateur), he was not referring to the little guys on Main Street.
He was talking about the Big Boys. Today, we call these self-paying
CEOs “corporate capitalists.”
Central Banks are government
regulators after all. Among other impacts, they regulate interest rates.
But they are so saturated with banking executives or former banking
officials on their Boards, Committees and at the helms, that they see
themselves as part and parcel saviors of their banking brethren.
Brother Henry M. Paulson,
formerly with the Goldman-Sachs investment giant and now U.S. Treasury
Secretary just said: “The markets are resilient. They can absorb
those losses. We’ve gone through challenging times in the markets,
and we will rise to the challenge.”
We? Paulson is a government
official who is supposed to be worrying about the people first –
such as the millions of homeowners who are slated to lose their homes
in the next 18 months.
How to help these “borrowers,
not the wheeler-dealers,” as columnist Paul Krugman described
his “workouts, not bailouts” plan in The New York Times
(August 17, 2007) should be Paulson’s chief concern.
Secretary Paulson did tell
The New York Times that federal regulators should try to eliminate fraud
and market manipulation and that there needs to be more disclosure of
the holdings and actions of hedge funds and other private pools of capital.
Well, that’s talk.
Where is the action? Krugman, an economist, believes that the current
real-estate bubble was “both caused and was fed by widespread
malfeasance. Rating agencies like Moody’s Investors Service, which
get paid a lot of money for rating mortgage-backed securities,”
seemed to be performing much like the major accounting firms that rubber-stamped
the inflated, deceptive financial statements of the Enrons and the Worldcoms.
Passing on the risks of these
mortgage loans through more and more complicated financial transactions,
which are in turn bet on by the huge derivatives markets, allows wider
transmission of these risk viruses throughout the national and the global
financial markets.
A kind of dominoes effect
sets in and induces panic selling and panic inability to obtain daily
commercial loans in the stiffening credit markets.
The European Central Bank
recently has poured tens of billions of Euros into the global financial
system after the giant French bank BNP Paribas SA froze three of its
investment funds.
If matters get worse, the
Central Banks will inject more money into the system. If financial markets
start collapsing along with investor confidence, then Uncle Sam will
certainly adopt additional direct bailout options.
One man – Mervyn King,
the Governor of the Bank of England, is the lone central banker who
resists intervening in the markets. “Interest rates,” he
asserts, “aren’t a policy instrument to protect unwise lenders
from the consequences of their unwise decisions.”
ailing out investors and
their risky investments would just induce them to take on bigger risks
next time, expecting another bailout, he believes.
More and more, corporate
capitalists inside and beyond the financial markets do not want to behave
as capitalists—willing to take the losses along with the profits.
They want Washington, D.C., meaning you the taxpayers, to pay for their
facilities (as with big time sports stadiums) or take on their losses
because they believe that they are too big to be allowed to fail (as
with large banks or industrial companies).
These corporate capitalists
should be exposed when they always say that government is the problem
whenever it moves to help the little guys with health and safety regulations,
for example, but government is wonderful when the bureaucrats are summoned
to perform missions to rescue them from their own greed and folly.
Ralph Nader
is a consumer advocate, lawyer, and author. His most recent book is
The Seventeen Traditions.
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