Teaching banks to fish
It is a common assumption among the Republican faithful to assume that Democratic criticism is universally disingenuous and unfair, on those rare circumstances that it is not entirely fact free. This opinion is not without a basis in fact, as one has only to read the editorial page of nearly any newspaper in America to discover a glaring example of Democratic dishonesty. The Democratic Party is, for the most part, the party of the evil and the party of the stupid; not for nothing is it primarily made up of an alliance of useless, overeducated academics with uneducated dimwits lacking either high school diplomas or productive employment, and all too often, both.
But the maleficence of one political party does not necessarily convey beneficence on the part of the other. And the fact that the greater part of the purpose behind the accusation of Republican support for corporate welfare is a defensive one meant to justify the Democratic support for individual welfare does not mean that the accusation is not an accurate and well-deserved one.
Republicans are against individual welfare because it cripples the very individual it is meant to help. They like to repeat the aphorism that it is better to teach a hungry man to fish than to give him a fish to eat, because once he knows how to fish then he can provide himself with a meal whenever he wants one. They also know that if the hungry man knows that he will be given a fish whenever he asks, he has no motivation to ever learn how to fish or spend any time fishing. They believe in allowing individuals to suffer the consequences of their own actions – and they are right to believe this.
It is very strange, then, that Republicans so readily reverse themselves when the matter concerns banks and money rather than men and fish. For corporate welfare cripples the very corporations it is meant to help. It is better to teach a profit-starved bank to earn profits rather than to fork over unearned revenue, because if a bank is capable of earning a profit, it can earn one in the future. If a profit-starved bank knows it will be provided cash whenever it looks like it is going to make a loss, it has no motivation to ever learn how to make a profit or spend any time modifying its structural flaws. When it comes to banks, Republicans believe in preventing them from suffering the consequences of their own actions.
One of the great financial fictions is that Wall Street is the center of global capitalism. This is a total misconception, as Wall Street is not, and has never been, a free market. There is literally nothing free about it. Now, it is even less free, even more centrally controlled, as the Fed's recent actions in putting federal finances on the hook for the Bear Stearns bailout has launched a discussion on the need to extend banking regulation to Wall Street institutions. The New York Times succinctly described the salient issue:
The Fed's involvement highlighted what many experts see as the growing disparity in regulation between Wall Street firms and commercial banks. Commercial banks submit to greater regulation, partly in exchange for the privilege of being able to borrow from the Fed's discount window. But starting last week, Wall Street firms were getting the same protection without subjecting themselves to additional scrutiny.
– March 23, 2008, New York Times
It isn't right that Wall Street firms should get the same protection as commercial banks without submitting to the same banking regulations, of course, from a free-market perspective. It isn't right that any banks or Wall Street Firms should be receiving special protection against failure from either the Federal Reserve or the federal government. It should be obvious to even the most economically illiterate individual that this corporate welfare cannot be expected to turn out any better than individual welfare; moreover, it is far less justifiable by any rational metric. The sooner the inefficient banks fail, the sooner the financial system can stabilize. Propping up weak sisters like Bear Stearns and creating additional moral hazard is only going to increase the risk that the system will eventually suffer a catastrophic failure of a magnitude that it cannot survive.
The United States is fast approaching an interesting juncture in which the nation will be forced to choose between rebuilding its wealth with a functional free-market system or sinking under the weight of an increasingly dysfunctional, centralized economic system. For decades, the powers that be in Washington, D.C., and New York have favored the latter, which benefited them in the short term at the price of collective devastation in the long term. Unfortunately, the long term appears to be upon us at last. Therefore, it would behoove both Republicans and Democrats to learn from the mistakes of the other side and realize that government welfare of any kind is a fatal trap for both recipient and donor.
It is a common assumption among the Republican faithful to assume that Democratic criticism is universally disingenuous and unfair, on those rare circumstances that it is not entirely fact free. This opinion is not without a basis in fact, as one has only to read the editorial page of nearly any newspaper in America to discover a glaring example of Democratic dishonesty. The Democratic Party is, for the most part, the party of the evil and the party of the stupid; not for nothing is it primarily made up of an alliance of useless, overeducated academics with uneducated dimwits lacking either high school diplomas or productive employment, and all too often, both.
But the maleficence of one political party does not necessarily convey beneficence on the part of the other. And the fact that the greater part of the purpose behind the accusation of Republican support for corporate welfare is a defensive one meant to justify the Democratic support for individual welfare does not mean that the accusation is not an accurate and well-deserved one.
Republicans are against individual welfare because it cripples the very individual it is meant to help. They like to repeat the aphorism that it is better to teach a hungry man to fish than to give him a fish to eat, because once he knows how to fish then he can provide himself with a meal whenever he wants one. They also know that if the hungry man knows that he will be given a fish whenever he asks, he has no motivation to ever learn how to fish or spend any time fishing. They believe in allowing individuals to suffer the consequences of their own actions – and they are right to believe this.
It is very strange, then, that Republicans so readily reverse themselves when the matter concerns banks and money rather than men and fish. For corporate welfare cripples the very corporations it is meant to help. It is better to teach a profit-starved bank to earn profits rather than to fork over unearned revenue, because if a bank is capable of earning a profit, it can earn one in the future. If a profit-starved bank knows it will be provided cash whenever it looks like it is going to make a loss, it has no motivation to ever learn how to make a profit or spend any time modifying its structural flaws. When it comes to banks, Republicans believe in preventing them from suffering the consequences of their own actions.
One of the great financial fictions is that Wall Street is the center of global capitalism. This is a total misconception, as Wall Street is not, and has never been, a free market. There is literally nothing free about it. Now, it is even less free, even more centrally controlled, as the Fed's recent actions in putting federal finances on the hook for the Bear Stearns bailout has launched a discussion on the need to extend banking regulation to Wall Street institutions. The New York Times succinctly described the salient issue:
The Fed's involvement highlighted what many experts see as the growing disparity in regulation between Wall Street firms and commercial banks. Commercial banks submit to greater regulation, partly in exchange for the privilege of being able to borrow from the Fed's discount window. But starting last week, Wall Street firms were getting the same protection without subjecting themselves to additional scrutiny.
– March 23, 2008, New York Times
It isn't right that Wall Street firms should get the same protection as commercial banks without submitting to the same banking regulations, of course, from a free-market perspective. It isn't right that any banks or Wall Street Firms should be receiving special protection against failure from either the Federal Reserve or the federal government. It should be obvious to even the most economically illiterate individual that this corporate welfare cannot be expected to turn out any better than individual welfare; moreover, it is far less justifiable by any rational metric. The sooner the inefficient banks fail, the sooner the financial system can stabilize. Propping up weak sisters like Bear Stearns and creating additional moral hazard is only going to increase the risk that the system will eventually suffer a catastrophic failure of a magnitude that it cannot survive.
The United States is fast approaching an interesting juncture in which the nation will be forced to choose between rebuilding its wealth with a functional free-market system or sinking under the weight of an increasingly dysfunctional, centralized economic system. For decades, the powers that be in Washington, D.C., and New York have favored the latter, which benefited them in the short term at the price of collective devastation in the long term. Unfortunately, the long term appears to be upon us at last. Therefore, it would behoove both Republicans and Democrats to learn from the mistakes of the other side and realize that government welfare of any kind is a fatal trap for both recipient and donor.
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