Category Archives: Deregulation and its Evils

Deregulation and its Evils

Systemic Financial Problems Rooted in Laissez-Faire Deregulation

December 16, 2008 – 6:22 pm

There are quite a few scandals that seem to be happening in alarming frequency.  It seems that many people would like to throw shoes, or something else, at policy makers for the many ills that surround us.  When examining how we got to this place, it is worthwhile to look at the philosophy that guided, chided, teased, and pushed for systemic deregulation throughout multiple administrations.

The latest scandals are connected by a common philosophical thread.  The scandals have been build upon the policy of deregulation that largely began in the 1980s.  Today we’ll focus on three business scandals spanning the globe.   Bernard Madoff, the former chairman of the Nasdaq Stock Market was found to have defrauded investors of 50 billion dollars.  Illinois Governor Blagojevich was charged for trying to sell the president elect’s vacated Senate seat, along with trying to get a well paid seat on a nonprofit-corporate advocacy seat for his wife. Another outrageous scandal, German based multinational corporation Siemens was caught bribing officials around the globe to secure bids for projects.  Philosophically speaking, why have these acts been carried out?  Is it because they all thought that they could get away with it?  Is the current system encouraging this type of behavior?

Bernard Madoff’s case exemplifies a major systemic flaw in the current financial world.  While people within the industry say that there are tough regulations in place, in reality, there is not.  The Ponzi or pyramid schemes that he is accused of, have been going on since the deregulation of the savings and loans institutions in the 1980s and have continued for 28 years.  What is utterly frightening about what Madoff did, in a round-a-bout way – of taking incoming investments or funds and using them to pay out high interest rates to previous investors, is essentially happening on a larger and legalized scale within the U.S. economy.

A similar Ponzi scheme is currently happening with (our taxes!) the bailout funds and the banks.  The 700 billion dollar bailout also has a striking lack of regulation, allowing the incoming funds to recapitalize failing banks to allow previous investors to be paid back.  Also because of a lack of regulation, funds are being given out to larger investors, because the bailout simultaneously raised the amount that the FDIC will cover, from $100,000 to $250,000.  All the funds that just went into the financial system, will quickly flow out of the system and only temporarily props up the banks.  Horrible, yes, but it’s happening and it’s also legal, because the Bush Administration appointed a former Goldman Sachs CEO to be the Treasury Secretary.   Is this a systemic problem perhaps?

The governor of Illinois, Blagojevich, tried to sell a seat in the Senate.  The attorney general of Illinois is working to get him removed from the governorship.  Thank goodness she is doing her job. How different through, is Blagojevich’s action from that of securing campaign donations from wealthy individuals on behalf of a corporation, like say, Goldman Sachs, who gave funds to the presidential election of George Bush, then also gets favors and appointments after he is elected?  Funds help to secure one seat, then also gets favors – deregulation has been one of them, in return.  It is fairly commonplace within the current system for people who arranged campaign financing to get appointed to other government positions.  In this way, looting can become legalized.  Henry Paulson as Secretary of the Treasury is a case in point.  I hope that I’m wrong, but looking at past cycles of financial scandals and its patterns with politics is frightening because its happening in greater frequency with larger amounts of money. The systemic deregulation has furthered flawed accounting and logic based on the scandals and the fall of the savings and loans institutions.  (You may notice that we don’t have these financial institutions around any more.)  The deregulation that started 28 years ago, has also become systemic, certain aspects have been legalized, and it has been transferred to the global scale.  The ramifications are horrendously frightening.

In looking at a system of deregulation, one also must look at the system of contracting government business deals.  Under the Bush administration private contracts grew phenomenally in number.  They have been based on the idea that less government is better.  This needs to be examined not only in a political and social context, but also within an economic context.  Does it make financial sense to pay a private contractor 4 to 10 times for something that government can on its own in a regulated environment?  It seems to actually make more unnecessary work, since government regulators (the ones that still do have jobs and haven’t been downsized or outsourced) then need to take the private contractor to court to sue for overinflated or incorrect billing.  The Halliburton case comes to mind.  Private contractors are feeding and refueling U.S. troops abroad, as well as being the collection agency for federal back taxes.  The big problem with private contractors is that they lack regulation, they don’t have to do a good job, they may have odd cost-plus stipulations to they contract and they are paid a lot more, at a time when the U.S. deficit and debt have gone up astronomically.  Private contracts are also often given to companies that have had connections with political campaign or in securing government posts.  Is it that different from what Blagojevich did?  If one is outlawed, shouldn’t the other also be?

If a large and powerful country has this type of a private contracting process, and is using a similar contracting process through its State Department programs throughout the world, how will other companies compete?  Flat out bribery.  It’s what Siemens seems to have done.  Bring in suitcases full of cash (it would be interesting to know if what the currency was – US Dollars, Euros) and arrange for drops to certain government officials in key positions that are able to push through the legislation or contract to be profitable to the corporation.  Is it that different from the private contracting process?

We need to move past partisan based finger-pointing because both major U.S. parties have been involved in similar scandals.  We need to examine why these scandals are taking place.  It’s also interesting that most often people who are charged with crimes are either in a government post or recently have left a government post.   Often because they have intimate knowledge of how the system works, they know where it was deregulated and how it can be exploited.

Societies need systems that work.  Societies need regulation.  Think of the system of transportation that we drive on.  We have regulation and systems of conduct that are are in place when we drive on public (and private) roads.  If there is a red light, people stop.  We expect drivers to stop at red lights, and this regulation helps the system operate as it should.   Deregulation takes away rules, and allows people to drive on the sidewalk, across the yellow line and in the financial world, to make their own systems of accounting.  Driving is something that many people participate in and know about, the financial world, however, is not one what we know a lot about, but one that affects us all.

We would hope that we would have leaders that would safeguard our interests, but the system has been engineered to favor a select few, at the expense of many.   Laissez-faire is a fancy word for less government control or deregulation.  Perhaps we should take a look at the destructive indicators and nature of deregulation that has guided U.S. policy for the last few decades as we look toward solutions.

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Deregulation and its Evils Political Finance and the Supreme Court Thoughts on the U.S.

Should Corporations Have More Rights Than People?

November 12, 2008 – 9:52 pm

If ever there has been a time to discuss corporate politics, that time is now. It is disgustingly appalling that our lawmakers largely did not know about certain changes that continue to be made and inserted into policy and law by the current Bush Administration. There was a recent change to tax code 382, that apparently most lawmakers and representatives did not know about. This has already had massive effects on our economy.

Treasury Secretary Henry M. Paulson does not seem to be creating policy for the  good of the American public. The Bush Administration is successfully continuing to break apart the U.S. economy because it has fallen prey to the desires of corporate profit and policy. Can this currently be denied? At a time when a large portions of the American public are facing very difficult economic times, Wells Fargo Bank has been allowed to take over Wachovia, and the Federal Reserve met on a Sunday to approve the transaction. What’s even more shocking is that Wells Fargo is being allowed huge, mammoth tax breaks, as the same time the American public paid the bill for a private corporate banking bailout. Let’s also remember that this comes at a time when news agencies have recently cut their investigative staff. This is partially why it is so very difficult to understanding what is going on. News agencies were allowed to buy up one another, and partially since they are still paying back interest on their (ridiculously large) acquisitions, (changes in government policy allowed the acquisitions to happen in the first place) and since the media CEOs and management are able to take ridiculously large salaries, there weren’t enough funds to keep the investigative journalists. These separate incidences have huge social consequences.

While I am outraged by the lack of awareness from our legislators, they are not the true cause of our problems. They are currently pawns in the system. We need to look at what entity is profiting the most from our socioeconomic and political crisis. We need to look at the system, because it has been engineered so that lawmakers have limited power and influence. Lawmakers are reacting to a system of strong, powerful corporate lobbies that have intertwined themselves with the financial, defense, insurance, healthcare and media corporations and enhanced movement from the corporate world into political administrations positions to create policy that seems to clearly not benefit the American people. We as people need to start talking about the phenomenon of corporate personhood and corporate rights versus Peoples’ rights and the common good. What would the framers of the U.S. Constitution think of our current situation? (Oh my, there so many things…)

We need to start educating ourselves and the American public needs to begin talking about these issues. Here are some links to information.

The U.S. Economy – The link will take you to This American Life and will enable you to listen to a radio broadcast on the economy from Chicago Public Radio. Oct 2008

A Quiet Windfall for U.S. Banks – This link will take you to a Washington Post article. Nov 2008

Fed Approves Wells Fargo’s Takeover of Wachovia – This link will take you to a Bloomberg article. Oct 2008

We as People need to start learning about and talking about these issues. The financial bailout is a symptom of the direction that we are headed in and unfortunately, our tax dollars will be offered as financial bailout candy unless we begin looking at causes in order to adequately address these complex financial, social and political issues. (Reaganomics is a good place to start. What are the underlying assumptions of Reaganomics? Learning this will start to untangle this very tangled web.) So then, should corporations have more rights than People? Who was the Constitutions written by and for? How does it start? What entity does currently policy seem to benefit most? Where are our tax dollars going? Why do we pay taxes? (Usually people pay taxes to toward things that benefit society like to build and maintain roads, schools, infrastructure, healthcare – well, not so much in the States… in other countries they do though.) What entity does our healthcare system currently benefit the most? People or profit? Ask the same question to all the other things that taxes go toward. For example – should school taxes go toward people or profit? Then move onto roads and all the other things that taxes are used for. And so on and so forth. Why is the United States so very different from all the other developed democracies? They all also have capitalism, but their policy is very different. Something to think about…

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Deregulation and its Evils Media

A Letter to Mr. Rush Limbaugh

November 2, 2008 – 4:03 pm

I’ve been driving across the U.S. screening the film “Considering Democracy”. It’s a large country and at times, I’ve turned on the radio to take a break from the music that I’ve heard over and over again. I listened to an AM conservative radio talk show and was really amazed by what I heard. So, I’m writing a letter.

Dear Mr. Rush Limbaugh,

I was listening to your radio show as I was driving across the country. As I listened, I realized that you are very good at creating divisions in the American public. Some of the political advertisements were also spinning information in a misleading way, while other information consisted of lies. I love America and I think that you’re twisting the use of the U.S. Constitution and using the love of country against those who questions unconstitutional actions by the Bush administration and speak out about it. Please stop, because by creating emotional, hateful divisions, you’re hurting and dividing the United States. America is filled with good, hardworking people who are being misled by what you say. I know that you’re getting paid a lot of money, to be more exact, 38 million dollars a year ($38,000,000) or 400 million until the year 2016, but please stop dividing us. In essence, you have benefited by increased media consolidation because your show is syndicated on Clear Channel. You also benefit by the Bush administration tax policy because really rich guys like you aren’t paying as much tax as a high tax bracket used to pay, and really, should pay. I did some quick math, because it’s really hard for me to comprehend making $38,000,000 dollar a year. If you take the weekdays and two additional weeks for vacation, that’s 50 weeks, times 5 weekdays per week. That’s 250 work days, to be divided into $38,000,000, which equals $152,222 dollars per work day that you make for doing what you do. Interesting.

I hope that you’re healthy and no longer taking the prescription drugs OxyContin/Hydrocodone/Vicodin. If you’d like specifics about how you create divisions, spread fear, hatred and lies, I have some written down, but would also listen to more of your programming and give you examples.

Thank you,

A loyal and concerned American

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Deregulation and its Evils Thoughts on the U.S.

The Branding of the U.S. Brain

August 14, 2008 – 8:22 pm

The film has been screening and really good questions are being asked in the Q&A sessions. They also help to jog my memory and think back to the times when traveling outside of the States and making the documentary.

When I was traveling and taking interviews for the documentary “Considering Democracy” a lot of really interesting bits of information and conversations happened after the camera had been turned off. One of these interesting observations had to do with the socialization of Americans. One person found it interesting that Americans often refer to objects by the brand name rather than referring to the object name. This struck me as an interesting observation, and there’s some truth to it. For example, I often hear people call for a Kleenex, rather than a tissue. In restaurants, people often order a Pepsi, or Coke, rather than a cola. Some people like Coke better, some people like Pepsi, but when the restaurant carries the other choice, usually the cola orderer usually ends up, first rolling their eyes, or cringing, then usually ends up ordering the other choice. I don’t think I’ve ever heard a person order just a cola. There are other examples. Do people ask for lip balm, or Chapstick? So how did it get this way? Just an interesting thing to think about.

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Deregulation and its Evils Lobbyists and Corporate Power

Rights of Individuals and Rights of Corporations

May 31, 2008 – 8:15 pm

Respond to this theoretical situation: There is a community of 10,000 people and an outside corporation comes into that community and decides to make a 15,000 head hog farm in the middle of the community, right next to the river that also supplies water for the community. Under current laws, who has more rights, the community of 10,000 people, or the corporation with a lot of hogs run by three well connected people?

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