Friday, March 27, 2009
Height of absurdity: Gov't seeks help financial execs to sustain its own creation!
After weeks in which the White House was often sharply critical of excesses at financial companies, the president wants to adopt a more collaborative approach.
“We’re reliant upon them to help rebuild our economy,” said senior adviser Valerie Jarrett. “It would be very unnatural if we didn’t engage them and have a direct opportunity to pick their brains and look to the future.”
The comment above is absolutely insane. The very same people who nearly destroyed our economy are being consulted on how to fix it now!
I've said this a million times, if not more: The banking system is a construct of the government. Banks exist in the form they do purely because of government edict. The government "funds" banks by virtue of guarantees on deposits. Banks have lifelines to the Fed to preclude runs. And the government tells banks what assets they can own and those assets are deemed only to be the safest.
Without those conditions, the banking system would look like it did in the 19th century--a totally unregulated universe of money changers and financial intermediaries.
Those 19th century style financial "operators" still exist in the form of investment banks, finance companies and other intermediaries, however, the commercial banking system is, to some degree, a quasi branch of the Federal Governemnt.
The notion that the Federal Government cannot fix its own creation is like saying the Department of Defense would have to hire private mercenaries to "fix" the U.S. Army. It is insane! Yet, this is exactly what is happening.
Rather than allow the intermediaries of the financial sector to go down the tubes as a result of their bad decisions and instead, sustain the banking system in the form it currently exists (which is easy to do), we are doing the exact opposite. The banking sector is being destroyed because our leaders do not understand it is an entity of their own creation, designed to serve a public purpose by extending gov't subsidized credit to the private sector.
In place of a perfectly viable banking system, Tim Geithner is about to resurrect these financial intermediaries who were so destructive to the economy and no one says anything. It is beyond insanity!!