Decoding: The Myth Of A Free Market System

2008-09-23
By DeAngelo Starnes

I don’t know about you, but I get depressed, and pissed off, every time I hear economic news.  I’ve witnessed first hand from business school in the Eighties until now the negative impact of market deregulation on the common person.  I never believed that deregulated markets would abide by an honor system that would benefit anyone but a few.  Deregulation is a Reagan Trickle Down tactic that did little to benefit the masses in this country.  And as Barack said, we are witnessing the final verdict of that theory. 

Hopefully, you didn’t sleep through the nationalization of AIG, the world’s biggest insurance company, or Fannie Mae and Freddie Mac, our country’s largest guarantors of mortgages, or the bankruptcy of Lehman Brothers, one of the world’s largest investment banks, or the bailing out of Bear Stearns, a major player in the securities market.  If you were asleep, you slept on $320 billion of taxpayer dollars of bail-outs.  Then the Government proposed another $700 billion in relief to Wall Street. 

That’s not a misprint.  Over the last couple of weeks, the federal government committed over a trillion dollars to people who bet and crapped out.  A trillion dollars.  Let that sink in.  Not a million.  Not a billion.  But a million million dollars. Of relief to people who advocate they want the Government out of their business.  Of relief to people who advocate the mantra let the Market police itself.  Of relief to people who say they need relaxation of rules so they remain “competitive.”

Over the past twenty-eight years, they got what they wanted.  Because the bribes they gave to Congresspeople and the White House netted them deregulation after deregulation.  And it was equal opportunity bribery because Democrats and Republicans sold out for deregulation.  The final straw being the repealing of the Glass-Steagall Act that was supposed to prevent this kind of thing from happening in the first place.

Haven’t heard of the Glass-Steagall Act?  That was the New Deal legislation passed in reaction to the Great Depression to prevent speculation on the market that led to the massive bleeding we see on the market now.  The banks that took yours and my deposits were restricted from using those deposits on the markets.  In other words, they couldn’t gamble with our money.  Specifically, they were forbidden from playing in the securities, insurance, and real estate games.  In exchange for that prohibition, deposits were insured up to a certain amount.  Money that wanted to play went to investment banks.   There was no insurance there because if you wanted to gamble, you gamble.  It was the whole risk/reward notion.

Problem for the common person is that retirement money went on the market.  Mortgages were big on the market.  In fact, the promissory notes we signed were played to get more money for these investment banks.  And those notes had to be insured.  And the commercial banks weren’t gonna sit on the sidelines with all that money on the market, so they got in the game – thanks to the repeal of the Glass-Steagall Act which was spearheaded by McCain’s economic advisor Phil Gramm.

And then there’s now.  Lost money begging for help.  And who do they turn to?  You and me via the Government. 

Socialism is a bad word but look at what’s happened this past summer.  With $85 billion, AIG, world’s largest insurance company, just got nationalized because the federal government now owns an 80% stake.  With at least $205 billion, Fannie Mae and Freddie Mac, backers of at least 80% of the nation’s mortgages, have been trusted by the Government.  With $30 billion, Bear Stearns, a major player in the securities market, got help from the Government to prevent it from going under.  In a free market, you go down when you lose your bets.  The House doesn’t loan you money to cover your losses so you can keep playing.  But in this so-called free market, the House covered the losses.

I ain’t mad about that.  I agree that allowing these financial institutions to go down would have been catastrophic.  But don’t be hypocritical about it.  Because it’s the people that need help, too.  And if you can find a trillion dollars to help the bettors on Wall Street, you can find some money to help the strugglers on Main Street.

And that’s the argument now.  The bribers want this $700 billion to go through at warp speed – no questions asked.  That’s bulls**t.   Tie that relief to relief for me and you.  Because they’re trying to blame us for the problem.  We’re the consumer but we’ve been induced to consume the product they’re selling.  Don’t induce and then blame while you’re getting the bail-out.  Bail me out, too.

As I’ve said on these pages before, everyone’s got to eat losses.  You loaned money for inflated properties, then you’ve got to eat the lost value.  Lower the principle of the loan and freeze interest rates.  We’ll repay and you get your money.  But you can’t say I need relief because the neighborhood lost value.  That was our collective bet.  I shouldn’t be in the position of losing with no relief with the House covering your bet.

What’s more, it’s un-constitutional.  The Preamble institutes a duty on the federal government: promote the general welfare.  Not promote the crapped-out on Wall Street.   But all of us.  Our collective tax money is going into this thing.  Contact your Congressional representative and remind them, you need help, too.

One more thing: please educate yourself about this mess.  And pass it on to your friends.  Because Obama or McCain will be severely restricted once they get into office.  They want the $700 billion to get passed with no questions asked.  That’s not good enough.  I’ve learned that when someone wants a deal pushed through quickly, it ain’t good for you.  Let’s make sure the money helps everyone – Wall Street and Main Street.

They used the word “correction.”  That should worry you.  Because when have you heard the word “correction” and it didn’t mean an ass-whuppin’.  We’re getting that.  Do we need another one?

DeAngelo Starnes is a writer and attorney living in Denver. He is a regular contributor to ebonyjet.com.