More of the same

In a December interview, incoming House Financial Services Committee chairman Spencer Bachus said “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks."  Bachus later tried to clarify that what he meant was “regulators should set the parameters in which banks operate but not micromanage them.”  The second quote sounds a lot better, but I think it's just a softened version. The former is what we'd expect to hear from any Fox News talking head, and from any right-wing politician if he/she were to turn off the filter that typically shapes public statements.

We have seen the consequences of setting Washington in the position of serving the banks:

• US banks (and other entities, like AIG's financial services arm) took on risk far exceeding their capacity to handle it, and some began to fail
• US equity markets plummeted, decimating individual investment portfolios and retirement accounts
• Property values fell sharply and millions of Americans lost jobs or had hours reduced
• US taxpayers spent well over $1 trillion (in the form of newly-issued government debt) to stabilize the financial system
• US investment banks were profitable in 2009 and are expected to be again in 2010. 

Mr. Bachus believes that the regulatory framework in place during the last five years was appropriate- banks were able to act without restraint, and the government rescued them when they got into real trouble.

Much reporting has been done to expose the lack of oversight of trading in mortgage-backed securities, credit default swaps and activities in general of certain financial entities.  I'm not saying anything new here. But what can we do about it?  Sure, we can elect different representatives in the future, but catastrophes can happen quickly and have effects that last for years or decades to follow.  I think we'd all better increase our personal savings, as it's only a matter of time until the next crisis and we'll each need some cash socked away to weather it.

But what about those who have no income or are barely squeaking by, and have no ability to build a financial cushion?  Too bad, according to Mr. Bachus and friends.  In their view, government exists to serve corporations, not constituents.  I disapprove.

Footnote: I've been wanting to write a post about this ever since mid-November but didn't hear the right supporting quote until today, in an NPR piece.  Here's a transcript that's well worth a few minutes to read.