Back in January, when the House of Representatives passed a GOP-led bill that crippled Wall Street reforms, I thought back to an earlier post of mine. In that post I wrote about Wall Street gaining so much control over Congress that it has effectively assumed the prerogatives of the state. Worse, like France's Louis XIV, Wall Street now acts as if it is the state. It's time to update that post.
During his reign as the King of France (1643-1715) Louis XIV is said to have remarked, "L'État, c'est moi" ... or "I am the State." The implications were clear: Bestowed with the divine right to rule, as head of state Louis XIV could draw on the resources of the nation to do what he wanted because his best interests, it was believed, served France's best interests.
There were no countervailing powers to speak of domestically. Merchants vied for royal favors. Commoners sought out the benefits of the royal touch. Because there were few checks on his actions, whether he actually uttered the words "L'État, c'est moi" or not, Louis XIV was the French state.
Fast forward almost 300 years and we find ourselves in a not too dissimilar - albeit twisted - situation. Today our Too Big To Fail (TBTF) financial institutions can draw on the resources of the state, almost at will. This has especially been the case when they make poor decisions. From legislated bailouts and long-standing subsidies, to trillion dollar market guarantees and relentless tax breaks, Wall Street is running the show in Washington.
We should kid ourselves no longer. Wall Street effectively owns the state.
The ability of our TBTF institutions to push Congress around, and to secure what they want after making a mess of things, is clear from this past winter's GOP-led legislation. From delaying the Volcker Rule (again), to watering down private equity rules and loosening rules on derivative markets, Wall Street is acting as if the U.S. Congress is staffed by their errand boys. As I discussed at the end of chapter 10 in The Myth of the Free Market:
Think about it. Wall Street now has the power to raise revenue (from bailouts), tax our resources (through subsidies & write-offs), and to secure favorable legislation (from legal protections to off-shore gimmicks and other market guarantees).
Worse, they can now scare off legislation designed to reign in their excesses because members of Congress are afraid of Wall Street's moneyed wrath. Citizen's United has helped to insure this reality. Campaign donations withheld, or sent to political opponents, is a powerful weapon.
It really doesn't matter how many times the President or members of Congress say "never again." We all know they're lying to themselves, and to America.
Under the current mind-set, any TBTF financial institution can tax the resources of the state to serve their interests. While American families saw their homes and jobs go up in smoke during the 2008 market meltdown Wall Street and our TBTF banks were rescued and showered with taxpayer-backed credits and loans.
The threat of economic meltdown has become a politically accepted form of financial extortion for America's financial sector. This helps explain why we've embraced market subsidizing debt and other market activities that do little more than extract wealth from the economy, while putting the nation deeper into a debt-drenched mud pit.
The demands of Wall Street, and their TBTF financial institutions, have moved beyond the control of the modern nation-state. In many respects, Wall Street can now declare "L'État, c'est moi" ... and perhaps even "l'état est le mien."
- Mark
During his reign as the King of France (1643-1715) Louis XIV is said to have remarked, "L'État, c'est moi" ... or "I am the State." The implications were clear: Bestowed with the divine right to rule, as head of state Louis XIV could draw on the resources of the nation to do what he wanted because his best interests, it was believed, served France's best interests.
There were no countervailing powers to speak of domestically. Merchants vied for royal favors. Commoners sought out the benefits of the royal touch. Because there were few checks on his actions, whether he actually uttered the words "L'État, c'est moi" or not, Louis XIV was the French state.
Fast forward almost 300 years and we find ourselves in a not too dissimilar - albeit twisted - situation. Today our Too Big To Fail (TBTF) financial institutions can draw on the resources of the state, almost at will. This has especially been the case when they make poor decisions. From legislated bailouts and long-standing subsidies, to trillion dollar market guarantees and relentless tax breaks, Wall Street is running the show in Washington.
We should kid ourselves no longer. Wall Street effectively owns the state.
The ability of our TBTF institutions to push Congress around, and to secure what they want after making a mess of things, is clear from this past winter's GOP-led legislation. From delaying the Volcker Rule (again), to watering down private equity rules and loosening rules on derivative markets, Wall Street is acting as if the U.S. Congress is staffed by their errand boys. As I discussed at the end of chapter 10 in The Myth of the Free Market:
It’s at this point [America's financial institutions] have the power to “raise revenue” by imposing on the state ... taxing it's resources through credit extensions, bailouts, transfer payments, and favorable legislation, among others. This type of control and influence over the state ... is akin to the systematic poaching of state prerogatives. History and common sense tell us this should not happen. Recent developments, however, tell us it is now an accepted practice that raises few eyebrows.
Think about it. Wall Street now has the power to raise revenue (from bailouts), tax our resources (through subsidies & write-offs), and to secure favorable legislation (from legal protections to off-shore gimmicks and other market guarantees).
Worse, they can now scare off legislation designed to reign in their excesses because members of Congress are afraid of Wall Street's moneyed wrath. Citizen's United has helped to insure this reality. Campaign donations withheld, or sent to political opponents, is a powerful weapon.
It really doesn't matter how many times the President or members of Congress say "never again." We all know they're lying to themselves, and to America.
Under the current mind-set, any TBTF financial institution can tax the resources of the state to serve their interests. While American families saw their homes and jobs go up in smoke during the 2008 market meltdown Wall Street and our TBTF banks were rescued and showered with taxpayer-backed credits and loans.
The demands of Wall Street, and their TBTF financial institutions, have moved beyond the control of the modern nation-state. In many respects, Wall Street can now declare "L'État, c'est moi" ... and perhaps even "l'état est le mien."
- Mark
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