The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism, Part 1
The revolving door between Washington and Wall Street allows people attracted to power and skeptical of free markets to dominate economic policy for their benefit.
Yet Treasury Secretary Timothy Geithner believes they can regulate us with perfect wisdom:
Treasury Secretary Timothy Geithner vowed the Obama administration would try to avoid choking off economic growth as it implements the financial-regulatory overhaul enacted last month and pursues new reform measures.
In his first public appearance before Wall Street executives since the Dodd-Frank bill was signed July 21, Mr. Geithner said the administration would eliminate old "rules that did not work" even as federal agencies are writing the more than 200 new rules required by the regulatory overhaul.
Mr. Geithner said the changes were needed to curtail "too much freedom for predation, abuse and excess risk," but said it should still seek to "safeguard the freedom, competition and innovation that are essential for growth."
Mr. Geithner believes in the “just right” Goldilocks philosophy of regulation. I question that any central planner would have the wisdom to supplant the decisions of millions of economic actors without negative consequences. One might say this is a form of arrogance associated with (almost) absolute power.
"Some Provisions of the Act Are Good"
When we evaluate the Act it would be a mistake to look at its individual parts rather than its whole. To look at one provision and say, “well that sounds reasonable” is a form of political diversion that only serves to obscure the fact that the thousands of provisions in this Act taken together vastly enlarge the power of the federal government and reduce individual freedom. That cannot be good.
I will say that some of the provisions, in light of the Wall Street-Washington Financial Complex’s system of crony capitalism, may actually reduce some risk that we taxpayers will eventually have to pay for. But that ignores the power and influence of Wall Street and its friends within government to influence rule-making to suit their needs (“regulatory capture”).
This revolving door between Washington and Wall Street allows people attracted to power and who are skeptical of the ideals of a free market, to dominate economic policy for their benefit. One way to say this is that it creates a partnership between the financial sector of the economy and the government (which is the controlling partner in this relationship). In the 1930s this type of political system was greatly admired in Washington. Today this system has evolved into “crony capitalism,” an oligarchic structure maintained by the Wall Street-Washington Financial Complex to perpetuate itself.
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