Since the early days of the Republic, the people of the United States have been wary of the aristocracy. The colonists fought the American Revolution to win their freedom from a European aristocracy which abused power and took advantage of colonial commerce for their own personal gain. From the beginning of this great democratic government, a struggle for power has ensued in which those of great wealth have sought and succeeded at dominating and controlling commerce. Our history offers many illustrations of wealth being used for political and personal gain to the detriment of the people.
The consolidation of power in the form of banks is not a new idea. A quick study of history will reveal that President Andrew Jackson (for all his shortcomings) opposed big banks, especially the Second Bank of the United States. Jackson felt that big banks consolidated too much power with the ability to control and corrupt. Jackson also felt that easy money created a false economy that could be manipulated by those controlling the banks. Despite warnings that his actions would cause serious economic problems, Jackson used his executive power to break up the Second Bank of the United States and distribute assets to twenty-three (23) state banks.
Throughout his presidency, Andrew Jackson waged a battle with the Second Bank of the United States and the American aristocracy. He felt big money led to corruption, selfishness, scandal, and mismanagement that sought to influence elections, pay off lawmakers, and control the nation’s economy. Jackson believed what history has too often confirmed, big money leads to the marshalling of power and influence by a few institutions and interests seeking to profit without regard for the people or the nation.
Today, we operate from an archaic set of principles. Our laws governing monopolies and trusts fall far short of the laws needed to protect the interests of hard working men and women in this country. Big banks such as Citicorp/Citibank, Chase, Bank of America, and J.P. Morgan are out of control. These megabanks have the power to manipulate the market - which is far from a free enterprise system and leads to corruption and abuse.
The “too-big-to-fail” banks represent a tyranny of the indispensable. These institutions have created a network of banks that provide services involving hedge funds, pension funds, mutual funds, and every imaginable pool of money. This interconnectedness caused the feeling that they needed to be bailed out for fear that a failure of one would cause a chain reaction of failures which would irreparably damage the economy.
The problem with the Troubled Asset Relief Program (TARP) is that while it shored up these megabanks, it did not cause these institutions to change their abusive practices. During 2008, the companies that received bailout money spent $114 million on lobbying and campaign contributions. These companies received $295 billion in bailout money. Sheila Krumholz, executive director of The Center for Responsive Politics, said of this information, “Even in the best economic times, you won’t find an investment with a greater payoff than what these companies have been getting.”
On top of this, TARP did not resolve unemployment, strengthen the economy, restore consumer confidence, or result in a miracle recovery. Banks that received bailout money paid their top executives nearly $1.6 billion in salaries, bonuses, and other benefits in 2007. Even though it has been promised that a cap is set on executive pay at companies that received bailout money, these companies are simply deferring compensation for unlimited stock options. And so, the big banks just get bigger, the CEO compensation remains obscene, and things remain the same.
A society that allows financial institutions to become “too big to fail” runs the risk of becoming enslaved to those institutions. Instead of a democracy, our government becomes - in essence - an oligarchy. In such a system, the elected officials become beholden to the big money interests because they rely on them for campaign finance and resources. In attempting to address the financial issues and concerns of the public, the elected officials appoint experts from the banking and financial world to make recommendations regarding their own existence. This is tantamount to putting the fox in charge of the hen house.
What needs to occur is a two-phase approach to the banking dilemma faced by this country. The first phase needs to involve strict oversight and regulations that create an environment in which banks and mega-corporations are required to downsize according to established size limits. These size limits must be based on establishing a level playing field that serves the best interest of the people. The second phase involves the creation of a Consumer Protection Regulatory Agency with far-ranging authority of enforcement impacting banks and mega-corporations in bringing about and maintaining a competitive marketplace.
While the focus must always be on the idea of a free marketplace, we must recognize the fact that the current instability of the system is the result of deregulation. History supports the belief that megabanks and mega-corporations result in corruption, abuse, and excessive profiteering at the expense of the people. The purpose of regulation must be to level the playing field to foster competition, establish consumer fairness, and eliminate greed and fraud.
Megabanks are just the beginning. Our government must take steps to break up mega-corporations and establish national consortiums that allow small businesses to purchase goods at the same price as larger competitors. These actions on the part of the government will cause a resurgence of small business ventures in small communities across this country. This resurgence of small business ventures will lead to jobs and a reemergence our smaller communities. This approach will effectively strengthen the economy from the bottom-up.
It is the people of this great nation - not the social elites - that must be the force in our government! It is naïve and foolish to believe that social and economic elites will look after the best interest of hard working men, women, and their families. We must insist that our government of, for, and by the people act in the best interest of the people. We can do this by remembering that nothing can prevail against the resistance of public opinion.
~Bill
