Regulation: Big Government or Big Business

“the banks should not be allowed to be larger than the government’s ability to regulate them”

If you ask someone about big government, they will probably tell you they don’t want government meddling in their personal business. What they really mean is that they don’t want ANYONE meddling in their lives. In reality, that opened the door to the finance sector to meddle, control and alter our lives. Banks, insurance companies and non-bank financial institutions have co-opted governmental decision making, and forced us all to pay dearly — far more than those taxes that everyone is worried about. Just look at the Wall Street bailout or our ridiculous health-care system.

We have let our aversion to big government get in the way of GOOD government. When government is doing the job of protecting us, they do pretty well — better than we could ourselves. When they don’t, we get screwed.

So now we have a financial system with a death grip on virtually every American, present and future, while we pay ever higher fees, costs and other private taxes for services that are provided in other countries at a fraction of the cost we pay here. Today’s article in the New York Times about our $48 billion credit card bill is just an example of how we pay more in fees to use credit and debit cards than anyone else.

The current debate over “too big to fail” is an example of how we end up talking about the wrong things which in turn leads to the wrong regulation and the usual bad result: Americans have less money at the end of the month while financial institutions have more money at the end of the month.

Nobody will argue about our desire for convenience of having ATM access and branch access wherever we might happen to find ourselves. But there is no reason to allow a monopolistic control over the industry rather than impose reasonable regulation so that consumer costs go down with some healthy competition. The industry backbone is already in place for electronic payments and transfers. Every bank, credit union and others could have equal access to it if we required those who control it to be regulated as utilities instead of private enterprise for the sole benefit of its officers and shareholders.

When AT&T was broken up it did eventually lead to much lower costs for voice communication and other forms of communication. So the argument for breaking up the big banks is based upon solid history and good sense. If AT&T had undertaken actions that put the entire country at peril and caused problems with our foreign relations, that would have been another reason to do it. But our government didn’t wait for something bad to happen, it acted in anticipation of the inevitable result of arrogance that comes with total control.

This time, we have the consequences of arrogance and total control and it did in fact put our entire country in peril and caused disruption in our influence and standing around the globe. But now, with the finance sector pouring $1 million per day into lobbying,  we have a debate about whether we should let that happen again. A debate?

We now have half the number of large financial institutions controlling virtually 100% of the finance system of our country than the number of such firms existing in 2007.  This increases the risk to our country, our lives and our world. So we have already ended up with a net loss and a much higher likelihood that we will see disaster, larger than before. How bad do things have to be for the outrage and consequences of Big Business to be confronted?

In my opinion, the banks should not be allowed to be larger than the government’s ability to regulate them. That simple proposition is the only satisfactory answer. Break them down, increase the size and resources of regulatory agencies and make sure there is real oversight of those agencies and we won’t have this problem again. It won’t solve the recovery issues that confront us today but it will at least take the future consequences of a repeat performance off the table for tomorrow.

4 Responses

  1. Problem is there’s no trust in either

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  4. Neil made a very good argument. Big business or big government? The answer should be neither.
    Most people have a blind spot for big businesses so they unleash their discontentments on their government.

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