Financial Regulation: New Battery, Same Car
Well, as if on cue, just as I finished writing my previous post on the lack of effective action or reflection on the part of our political “leaders” vis-à-vis the economic crisis, the New York Times reports that Obama and the Democrats are considering legislation to rein in institutions that are “too big to fail”. These are certainly positive developments. If the state is more capable of seizing or taking control of large institutions (or their assets and liabilities) that pose a systemic risk before they fail and wreak havoc, this can only help the stability of financial markets and the real economy.
However, given the government’s track record when it comes to effective regulation and conflicts of interest, it would be foolish to think that we have turned a meaningful corner, if for no other reason that no one is seriously considering re-imposing the division between commercial banking and investment banking. And if the Democrats aren’t considering it (corrupted as they are by Wall Street), then the Republicans sure won’t.
While the Democrats are busy blindly defending the Obama administration at every opportunity—regardless of its actual economic policies, or lack thereof—the Republicans are quickly descending into a conflict between a corporate welfare, antiunion establishment elite and a blindly laissez-faire antiunion popular movement. To put it mildly, neither holds out much hope of critically reexamining the assumptions of perfect free markets that have ruled for the last 30 years in the US. And so we wait to see how bad future economic policy will be: bad, really bad, or really, really bad.
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