The Republicans, meanwhile, are in the difficult position of trying to sell Wall Street’s position on the Regulatory Reform bill to their base. That might not sound so very difficult, given that the Tea Partiers in particular continue to oppose further government regulation and have used the idea that Barack Obama’s government is “taking over the banking sector” as a rallying cry. But Wall Street isn’t exactly popular with the Tea Party, either, so selling their side of the debate on this bill is a bit of a sticky thing.
Taibbi says that Sarah Palin has come up with the solution to this political paradox and quotes this passage from her Facebook page:
The current debate over financial reform demonstrates what happens when political leaders react to a crisis with a raft of new regulations. First off, the people involved in writing government regulations are often lobbyists from the very industry that the new laws are supposed to regulate, and that’s been the case here. It should surprise no one that financial lobbyists areflocking to DC this week. Of course, the big players who can afford lobbyists work the regulations in their favor, while their smaller competitors are left out in the cold. The result here are regulations thatinstitutionalize the “too big to fail” mentality.
Moreover, the financial reform bill gives regulators the power to pick winners and losers, institutionalizing their ability to decide “which firms to rescue or close, and which creditors to reward and how.” Does anyone doubt that firms with the most lobbyists and the biggest campaign donations will be the ones who get seats in the lifeboat? The president is trying to convince us that he’s taking on the Wall Street “fat cats,” but firms like Goldman Sachs are happy with federal regulation because, as one of their lobbyists recently stated, “We partner with regulators.”
Sometimes it’s hard not to admire Sarah Palin. You need to have a pair of iron church bells swinging between your knees to pull off a crazy line like this, and she does it almost effortlessly. If you’re scoring at home, the idea here is that banks like Goldman actually want this regulatory bill because it will allow them to “partner with regulators,” i.e. team up with the government, to dominate the economy. This is despite the fact that Washington is currently flooded with financial services industry lobbyists who, in an attempt to kill this bill, are practically lugging suitcases full of money around to throw at the likes of Ben Nelson and Mitch McConnell.
Now on one level Taibbi is of course perfectly correct. But, (and this might be a first on this blog, it certainly is for me), doesn’t Sarah Palin actually have a point here? [I just threw up in my mouth writing that, but there it is].
Or in other words, aren’t they both right? The financial lobbying industry is certainly trying to get the best deal it can get, as determined from its short-term, limited point of view. They may be morons, but they aren’t dumb. They are going to play both sides on this one. On the one hand, they seed money to the GOP and push them to water down the bill if not kill it entirely. On the other hand, they give money to the Democrats so that they know if and when the time comes that the Democrats actually pass a bill, they will do so in a way that cements the monopolization of the large existing financial firms.
Does anybody really expect the Financial Regulation bill to separate financial casino betting from banking? To turn banking back into a public utility and set those who want to go into the investing/speculation game entirely out on their own as ought to be the case? i.e. They take the risk and they reap any losses or benefits. Instead of the current privatization of gains and socialization of losses, favored by both political parties.
If the SEC’s charges end up sticking and being seriously enforced and/or the Democrats cut Goldman loose, they will be the scapegoat–not that they are innocent in this. But Goldman may possibly get used as the public sacrifice in order for the politicians to cover themselves as they pass a bill that basically cements the status quo.
Episodes like this I think yet again show the central wisdom of Belloc’s The Servile State. While it looks on one level (a la Taibbi) that there is some great gulf between Democrats and Republicans on this one, is there really? There’s a difference to be sure, and if I only have a choice between the two parties, I’ll favor a more Democratic regulatory approach. But that fact, in my mind, shouldn’t blind us to the deeper one-party nature of the US system.
What has changed since Belloc’s prescient text is the globalization of capital and financial industries and the death of any alternative economic platforms to capitalism (i.e. communism and fascism in Belloc’s time). The nation-state is not only servile in Belloc’s terms, it’s not subservient to the globalized financial industry. Sub-servile I suppose. The US state has all the fecklessness a Taibbi rightly points out it does while also weirdly having far too much influence as a Palin will point out.