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March 25, 2013

TBTF/TBTJ Banks Orwellian Double Speak to Protect Their Profits at the Expense of Everyone Else

If the too big to fail and too big to jail (TBTF/TBTJ) Wall Street banks talked truthfully about their anti-free market business model of  subsidies and oligopoly to create unfair competition and an unlevel playing field, then their privileged and protected status would be rejected by all and they’d be put out of business as they should be.  

To prevent that, Wall Street and its innumerable purchased allies, coat-holders and mouthpieces (including those at the highest levels of government, law, lobbying, communications, etc.) use Orwellian rhetoric and arguments to disguise Wall Street’s naked profit maximizing self-interest as synonymous with the country’s interests when it is exactly the opposite.  Indeed, as was evident in the most recent financial crisis, Wall Street’s anti-free market business model creates riches for itself but at the expense of the country (i.e., more than $12.8 trillion for the last crisis alone and undoubtedly much more next time.)

The latest contestant for the George Orwell award is in today’s Morning Money by Ben White at Politico where the head of one of Wall Street’s largest trade/lobby groups is quoted as saying, among other things, “[t]he financial services industry is strongly of the view that no institution should be too big to fail. … The financial services industry believes that no institution should have a subsidy or funding advantage over another.”  It and they may have those views and beliefs, but that is not the effect or result that the Wall Street/TBTF/TBTJ crowd is fighting for in Congress, the regulatory agencies or the political arena.  If those views and beliefs were to become reality, the TBTF/TBTJ Wall Street banks would almost certainly fail or, at least, be broken up, which is what the market itself is saying given that almost all of them are trading below book or breakup value.  

If they were forced to accurately prices their “products” and “services” without the since 2008-explicit subsidy of the government’s backing (which is why they continue to be too big to fail), then they would be priced out of the market.  That is the core of the entire debate regarding money market funds, a too big to fail industry: if they had to self-insure rather than enjoy the benefit of a federal guarantee and taxpayer funded backstop, then the product of money market funds would be uneconomical compared to other products and it would almost certainly fail in a properly prices, truly competitive market – that is the very free market that Wall Street’s TBTF/TBTJ banks want to avoid and spend unlimited amounts of money to prevent.  

But, denying reality (no matter how sincerely) isn’t all the Wall Street/TBTF/TBTF crowd does. It also states or suggests that the anti-free market business model that enriches them is essential to the health and well-being of the country. Here’s a little more from today’s Morning Money:  “As policymakers implement financial services reforms or suggest additional measures, it is critical that any new policy optimizes economic growth and job creation — as well as maintaining America’s position as the global economic leader.”

This is always the trump card: don’t regulate us to protect the country or for any other reason because “economic growth” and “job creation” will be hurt.  Of course, they never mention that nothing damages, indeed, kills growth and job creation like a financial crisis and economic collapse like the one Wall Street caused in 2008.  The economic wreckage caused by Wall Street’s unregulated wilding can still be seen across this country with persistently high unemployment, low growth and human suffering, all never mentioned by Wall Street or its army of lawyers, lobbyists, academics, PR spinners and so many other purchased mouthpieces.

If it truly cared about “maintaining America’s position as the global economic leader,” then Wall Street  would be in the forefront of enacting regulations to prevent a repeat of that last crisis rather than be leading the fight  to protect their crony capitalism and technically legal bribery that purchases political influence and protection that allows them to continue their anti-free market business model that enables otherwise unjustifiable margins, profits and, what is most important, bonuses.  

As we’ve said before, ” [n]othing wrong with making money, including lots of it, but it must be done in the service of open, fair and competitive financial markets and a growing real economy rather than just grabbing the biggest bonus as fast as possible,” which is the Wall Street/TBTF/TBTJ anti-free market business model of today.  Orwellian rhetoric has worked and continues to work to protect Wall Street, but, as the momentum building to break up the big banks show, it’s not working as well as it once did and it isn’t likely to work forever. 



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