A front-line report from Tim Carney:
While much of the occupiers’ anger at the “banksters” was typical talk about “greed,” the gripes almost always included something about undue influence. Anthony Hassan, an out-of-work construction worker from Norfolk, Va., sounded a common note, pointing out that bailed-out banks “take some of the money we’ve given them, and they hire lobbyists.” An organic farmer who traveled down from Vermont who called himself Mack (and would not give me his full name) said “we’re at a point where the people with the most money have the most influence.”
They’re right. It does undermine our democracy and harm our economy when hiring a former Senate majority leader, for instance, can be the best investment a company ever makes. Wealthy special interests do dictate policy too much, regardless of which party is in power. I don’t know who made the sign under which I slept Sunday night, but I agreed with its thrust: “Separation of Business & State.” The back read “I can’t afford a lobbyist.”
My agreement with these folks went no further, however, than a common diagnosis of the problem. Their proposed solutions — more campaign finance restrictions and curbs on the freedom of firms to lobby — showed disregard for the freedom of speech. They also don’t seem to understand that getting government more involved in the economy always gets business more involved in government. Outside the small minority of Ron Paul supporters at the park, none of the occupiers saw smaller government as the answer to cronyism and corporatism.
Hard for people who want handouts to be for smaller government. In that, they are diametrically opposed to the Tea Party.
The greedy go where the money is, and the corrupt go where the power is. #OWS lives in a fantasy world where all it takes to keep power from falling into corrupt hands is a law requiring the powerful to wear white hats.
Every single aspect of “Big Business” that is reviled ad nauseum … is exacerbated when morphed into a “big business” with monopoly power, sovereign immunity, eminent domain, and the legal application of force.
The general “fix” for the newly formed “lack of impartial oversight” is a new, separate layer of government specifically tasked with that job. And the first time there’s a scandal … well, let’s add a -new- layer of over-oversight.
Until the sheer intertia of so many layers not working in perfect sync gives us people on ‘the pointy end’ that have absolutely zero fear of personal consequences. We’ve had this problem before, yet somehow the solution is always to put another layer on top.
Lobbying is protected by the first amendment, but I confess that I have not been able to wrap my mind around the concept that money = speech.
I do think there are a couple of ways to make the situation better, though: first, dramatically simplify the tax code, thereby limiting the need for lobbyists.
Next, allow only those who can vote for a candidate to contribute money to their campaign. That wipes out direct contributions coming from businesses and unions.
Note: this comment is not from your proprietor, but Ken Murphy. Why WordPress refuses to change the name, even after editing multiple times, is beyond me.
This libertarian is looking forward to heading down to the Occupy Dallas site this weekend. Rather than cast aspersions on the protestors’ ignorance on the interwebs, I’m going to go down there see if I can edumacate them a bit on just how it was that their (our) country has been pillaged and looted. Made sure to pick up some sidewalk chalk so I can diagram what’s going on, as well as some water and a brush to clean up afterwards. My sign (purchased from a small, local business) says “Naked CDS, Naked Short, Naked Greed”.
Before folks go and get worked up, I actually have zero problem with Credit Default Swaps written on an owned bond or loan. They do have a place in the market, as a hedging instrument for an instrument that one owns. My serious, serious issue is with naked transactions. Having insurance on someone else’s asset introduces perverse incentives into the market place. It’s even worse in a trigger event. Here’s why:
Let’s say that PubCo has a $100Mn investment-grade debt in the market. Maybe in the form of a bond, more likely in the form of a loan. FinCo has financed the debt, but is a bit concerned about the ability of PubCo to pay back the loan. So they go to InvBank to swap out the risk of repayment in a default of the credit. InvBank finds an insurer, InsCo, that is willing to underwrite the risk, and brokers the deal.
Ten month later, PubCo goes into bankruptcy, and FinCo is an unsecured creditor (a/k/a idiots), so they make a claim on the triggered swap. InsCo pays FinCo $100Mn, and everything’s hunky dory.
Let’s say that InvBank decided that, you know what?, we can probably sell more of these CDS. So they did. Let’s say 30 more contracts in addition to the initial one that went to FinCo. So there are 31 CDS contracts out there, 30 of them naked. When PubCo files for bankruptcy, $3,100Mn of cash flow is triggered. If one of the CDS sellers is unable to fund their contracted obligation, all of the other obligations to which that unable seller is a party are also triggered for immediate settlement via a process called cross-default. After careful calculation of the net amounts due to/from the unable seller, let’s say that careful risk management means that they end up receiving $500Mn from various counterparties. If any of those various counterparties are unable to fund their obligation, all of their contracts then go into default.
The process can quickly cascade to unmanageable proportions (and almost did) requiring brobdingnagianly massive cash flows in the market in a very short time. The farther the process proceeds, the harder it is to find the liquidity to settle up, which only serves to accelerate the process.
And thanks to every American citizen’s best friend, Phil Gramm, derivatives get special treatment in bankruptcy, having a special class of contract consideration that moves them ahead of even 1st-lien secured lenders as far as settling the estate goes. Do people have a reason to be annoyed? I’d say the case is pretty solidly in the Yes category, even if they don’t understand why they should be upset or how we’ve all been played for chumps. And don’t even get me started on naked shorts, which send false information to the market. Or the idiots in Congress (all of whom I’ve voted against since I refuse to vote for any Republican or Democratic candidates anywhere on the ballot anymore) who enabled the looting and pillaging. (contract disputes are supposed to be settled in court, not the halls of Congress!)
This libertarian knows exactly why he’s protesting. (when he can)
“Having insurance on someone else’s asset introduces perverse incentives into the market place. ”
Um, can I take out insurance on Green Bay #80 Donald Driver staying healthy, say, until the first week in February? Can I take out insurance on the Packers winning their next game?
What you describe, Mr. Murphy, sounds like legalized high-stakes gambling with Other People’s Money.
Yes, everybody, the OWS protestors are all stupid 60’s retreads with dumb demands to “tax the rich.” But to dismiss them all as being crybabies is short sighted and missing how much Mr. Obama and his pals are mixed up in Wall Street.
“Anarchists for Statism.”
Yes, this OWS protest is not just the simple minded (although they play a starring role.) Ken Murphy, via Rand, shows that the level our government is out of control could lead to massive hardship and death. Infrastructure is more than bridges, it’s the logistics that keeps us all fed. When that happens, who will those left alive turn to for help? The same politicians that killed most of them off.
I am just shocked that there is so little understanding that those with the power to do something about it don’t. A military coup is not totally impossible (with the mental vertigo it would cause many.) They not only are sworn to defend the constitution but also believe in vows and have the equipment and training to do something about it.