Who caused the financial collapse? Why aren’t they in jail?
May 27, 2010
If you write bad checks, if you steal a car, you are going to jail. That’s how the system works for regular folks. On Wall Street, if you rip someone off, defraud them, take their (our tax) money, you may get a bonus or you may lose your job. But not one of the players that contributed to the financial meltdown has seen the inside of a jail cell. That’s predatory capitalism at its finest. That’s the American double standard that has so many Americans livid about the Wall Street bailout and skeptical about financial reform.
Here are some of the biggest players, who have not been held accountable and won’t really be touched by Financial Reform.
Credit rating agencies. Let’s start with the credit rating agencies, the folks who were suppose to be watchdogs for the mortgage market. Their role, even though the financial reform debate seems to center around derivatives and “too big to fail,” in the financial collapse should not be overlooked. Moody’s and Standard & Poor, etc. gave A ratings on risky packages, sub prime mortgage-backed securities. The entire ratings system was a scam in which they were helping the banks screw investors. They had no real incentive to do their job. They were paid by the banks and therefore had every incentive not to really evaluate the products — but do what the banks wanted.
Even back in Dec. 2006, an internal employee memo illustrates they knew exactly what they were doing.
“Rating agencies continue to create [an] even bigger monster – the CDO [collateralized debt obligation] market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”
The credit rating agencies were suppose to be the watchdogs. They set the credit standards “that determined which loans Wall Street could repackage and, ultimately, which borrowers would qualify.”
Will Moody and Standard & Poor face a Senate inquiry? Will they be prosecuted for their negligence? I doubt it. Will financial reform change how they go about doing their job? Apparently not.
THE EVOLUTION OF CAPITALISM
Capitalism was founded upon basic principles: production, supply and demand, and capital accumulation. It is a social theory whereby prices are determined by profit and loss, as well as market interest and fluctuations.
Although I understand the need for a free market enterprise, such a theory should not imply that we are willing to disregard our environment, or sacrifice the needs and comforts of our humanity in an attempt to realize higher profits (a.k.a., BP, Lehman Brothers, Goldman Sachs, etc).
Capitalism may be wonderful, but like anything else, it is still a flawed system. It’s a work in progress. It needs to be tweaked here and there in order to perfect its balance and to soothe the inordinate swings that occur day-to-day in our financial markets. If left unchecked, however, such a system will prove to be our economic downfall.
How so?
Well, for one thing, there is only so much profit a business can make from a product before it is left to cut costs in both quality and workmanship. In order to continually sustain a profit, businesses have to create those same products with lower quality ingredients and cheaper labor: which means that they must pull up stakes and move to other countries like China, Taiwan, or Mexico in order to survive. What does this eventually mean for people like you and me? It means that the very financial theory that promoted our country to super power status has turned on us. It means that the American workforce is now expected to work harder, longer, cheaper, and faster if we are to compete with the global economy now breathing down our necks.
Where do we go from here?
George Orwell had it right, to some extent, when he wrote his book1984. Many years from now, money will become worthless and the global populace will be employed and subject to hundreds (if not thousands) of individualized corporations that managed to survive attrition through merger aquisitions. It will be a feudalistic society: every corporation out for blood and vying for global dominance and absolute power. Our children and grandchildren will be there too: housed, clothed and fed by these various corporate entities; all the while being sent out on occasion, like brainless automatons, to errands of war, in an effort to absorb the weakest corporations into the fold. After all the dust settles, and everything is said and done, the remaining corporations will finally merge into a one-world government.
Science fiction, you say?
(…I’m left wondering.)