Sunday, August 24, 2008

Big Biz Welfare

Would someone please tell me the difference between an oak tree 75 feet high, and one three-years old and three-feet high?

Other than age and size, is there any difference?

Both are oak, trees, right?

To disregard the small oak, to neither care for it not protect it, while lavishing all of our energies on the mature tree, jeopardises the future, though at the time, the small tree appears insignificant in the shadow of the larger.

Ever since Reagan (the Evil President) introduced numerous lies into the American psyche regarding the sanctity of big biz and the worthlessness of "welfare moms driving Cadillacs," we've been neglecting the little tree - while pouring billions into government bailouts for the big ones - including now the prospect of a bailout for Freddie Mae and Fanny Mac, done in by their own greed and lack of foresight.

Once again, we see how big biz is anything but a savior, and hardly to be trusted with the nephews and nieces. Big biz, like strange uncle Howard, has no sense of boundary and will feed only its own appetites.

Without government regulation (Reagan and his deregulation), big biz does what's natural - it devours everything around it.

At a recent conference on economics, it's been suggested that government listens too closely to Wall Street, that Wall Street is coming to rely upon Uncle Same to clean up the mess, a la Freddie Mac and Fanny Mae.

"The Fed listens to Wall Street," said Willem Buiter, professor of European political economy at the London School of Economics and Political Science. "Throughout the 12 months of the crisis, it is difficult to avoid the impression that the Fed is too close to the financial markets and leading financial institutions, and too responsive to their special pleadings, to make the right decisions for the economy as a whole," he wrote in a paper presented to the conference.

Critics like Buiter worry that the Fed's unprecedented actions — including financial backing for JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. — are putting taxpayers on the hook for billions of dollars of potential losses. They also say it encourages "moral hazard," that is, allowing financial companies to gamble more recklessly in the future.

Fed Chairman Ben Bernanke, who spoke to the conference on Friday, defended the Fed's actions, saying they were "necessary and justified" to avert a meltdown of the entire financial system, which would have devastated the U.S. economy.

Yet, Bernanke also acknowledged that mitigating moral hazard is one of the critical challenges policymakers face as they weigh steps — including strengthening regulation — to make the financial system better able to withstand shocks down the road.

"If no countervailing actions are taken, what would be perceived as an implicit expansion of the safety net could exacerbate the problem of `too big to fail,' possibly resulting in excessive risk-taking and yet greater systemic risk in the future," Bernanke said.

Their failure would be a hardship for millions of investors and pension funds, but with the right kind of support for individual homeowners (who need to stay in their homes), and a recovery of the principles of Teddy Roosevelt and FDR, we'd go a long way toward preventing these catastrophic meltdowns brought upon us by mismanagement and poor planning.

And with billions no longer going for our expansionist war in Iraq and adequate regulation of the greed factor, we might once again reweave the social security net, create more jobs, bolster the American working family, boost education, provide universal health care, rebuild our aging infrastructure and create mass transit.

Greatness is measured, not by the success of Wall Street, but rather by the way we care for the little trees.

One of these days, we may learn: a just society is a profitable one!

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