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Big surprise. The media, politicians and the statists are now enjoined in a deliberate and puerile attack on 'big money', blaming big capital owners for the 2008-2009 economic contraction. These reality-distortionist's maintain that Goldman Sachs, and Wall Street precipitated – on purpose – the 2008 financial and economic contraction. This is very convenient. Attacking capital, wealth, and business is emotionally satisfying for power mongers, however adolescent it is in reality. Goldman Sachs or Golden Slacks is about as responsible for the mortgage and housing finance collapse, as Christianity is for Muslim violence. The logic of charging Golden Slacks with financial impropriety is about as rational and as truth-based, as blaming 1400 years of Islamic jihad on G.W. Bush.
When Enron and 'accounting' scandals 'shocked' the markets post 2001, the natural result was government regulation in the form of Sarbanes Oaxley. Yet SarbOx has been a bust. All it did was raise the costs of all publicly traded businesses by 2 % of revenues on average. This cost is a tax and is passed on to the consumers, or results in lost jobs as firms protect their profit margins, or risk seeing their stock prices decline. In some cases public firms simply relocated to Europe to raise capital. No positive benefits have been seen from the over-reach, and over-regulation of SarbOx. No positive benefits will accrue from the latest attack on capital and wealth creation.
Not that anyone would learn from the disaster of SarbOx. The great minds at work in government and the media are howling that more bank and financial regulation is needed to prevent another financial collapse. This will do nothing except raise costs [regulatory fees are taxes with another name]; lose jobs and force firms to pass on the sur-tax to consumers. It will do nothing to improve transparency, prevent a future financial dislocation, or stop volcanoes from erupting. It probably won't help the children's future or Mother Earth either. New regulation of Wall Street is pointless. It did not cause the economic contraction.
The real culprit of what caused the housing debacle is of course, being completely ignored. Housing finance in the US, including all mortgage lending, became a political tool over 60 years. Governments through federally controlled political pawns [now 100% publicly owned] such as Freddie and Fannie, completely distorted housing finance. Loose monetary policy, no money down, land restrictions [which raise the price of housing]; and an obscene number of subsidies for buyers [targeting minorities]; and construction firms [to hire illegal and lower skilled workers to help build homes]; created a bubble market in which government was the direct master and benefactor. Wall Street had nothing to do with this political interference.
But why should anyone expect politicians or government bureaucrats to analyze their own mistakes, corruption, fraud, graft, and politically inspired statism ? Housing finance in the US was not a market – it was political corruption on a scale that would embarrass ancient Romans. Instead of dealing with the real issues of what caused the current economic problems it is far easier to demonize someone else – especially Wall Street with all those Jews, Anglos, sharp suits and 'banksters' engaged supposedly, in little more than deceit and theft of the innocent people's savings and money. As Thomas Sowell said in a recent book he wrote on the housing collapse:
“Market criteria had long required such things as substantial down payments, as well as income and credit histories that made continuing payments likely. But all that was brushed aside in the political crusade for 'affordable housing' and bigger home ownership statistics.” [p.44]
And:
“A study of the dates that marked the takeoff of home prices in various communities across the country found that those times 'in which housing markets became unaffordable closely followed the approval of state growth-management laws or restrictive local plans....the Reserve Banks of New Zealand put it, in another international study of home prices, 'the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.” [p.13]
Sowell is of course right. Government created this debacle. When banks and mortgage lenders selling Sub Prime frauds, wanted to get rid of their D rated debt, they turned to Wall Street and Golden Slacks. Wall Street happily took this bad debt and magically turned it magically into A rated paper which was then sold, along with insurance or default swaps, to institutional buyers. Most of these buyers are not country hicksters, but sophisticated financial experts. The media and politicians however, are quite ready to demonize these complex financial products – but the underlying mortgages came from governmental intervention in the market, not from Wall Street. Without the socialization of US mortgage and housing finance, they would have been no derivative products from Golden and friends.
But now the absurd cry of 'more regulation' redounds. How politically expedient ! Yet no analysis is being performed on what regulation actually works. This pattern just repeats what happened after Enron. Post 2001 when the rush to prevent accounting 'fraud' was in full political steam, there was no inquiry as to why accounting 'irregularities' exist when literally thousands of statutes, laws and regulations, control and distort every aspect of accounting and financial reporting. No insights as to why more regulations would help post Enron, in preventing future 'scandals' when during the 2008 meltdown for example, it was clear that many firms did not fully disclose their true debt levels.
More regulation means little except two things;
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higher costs since regulatory fees are a tax and
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lost jobs and lower capital made available to firms who need it.
The regulators have never prevented one single fraud or economic contraction in the past 40 years. Not one. Why would anyone believe that more regulation is the answer to prevent what governmental interference is creating ? It is madness.
Demonizing capital, Wall Street and 'the market' might be emotionally satisfying. But it does little to address the real criminals and culprits who cause economic dislocations – namely politicians and the state.
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