In a recent speech to the Mortgage Bankers Association, Sen. Ben Sasse — a freshman Republican from Nebraska — jokingly accused his colleague Elizabeth Warren of wanting to remove all risk from the economy. Presumably he means that Warren wants to insulate ordinary people from risks like mortgages with unsustainable payments relative to their unexpectedly reduced income, or negative equity in homes they’re making payments on because of a bad housing markets.
But he should get a Nobel prize in chutzpah for accusing Warren of wanting to eliminate risk, when he was speaking before representatives of the industry that gave birth to the phrase “too big to fail.” The federal government spent hundreds of billions bailing out the banking industry under the TARP plan, in order to save them from the consequences of their own foolish risk-taking. The TARP program, under both Paulson and Geithner, was aimed at preventing deflation of the rentier classes’ assets by buying up bad mortgages at face value. That’s basically identical to what Alexander Hamilton did in the first Washington administration, paying off Continental war bonds at face value despite the fact their market value had declined to a tiny percentage of that and most of them were held by investors who’d bought them at a very low price from their original holders. Of course, even though it was just fine for the government to bail out the banks at taxpayer expense, it was totally not OK to attach conditions to the aid, like marking the mortgage principals down to current market values, or limiting CEOs’ bonuses. See, that would be interference in the free market.
It’s decidedly odd for Sasse to talk as though eliminating risk is a bad thing, when socializing corporate risks and operating costs and privatizing profit is the main thing the capitalist state does. New Left historian Gabriel Kolko coined the term “political capitalism” to describe the 20th century regulatory-welfare state. Political capitalism is “the utilization of political outlets to attain conditions of stability, predictability, and security — to attain rationalization — in the economy.” That means political action to restrict price competition to manageable levels, enable big business to plan on the basis of long-term predictable expectations, and create a rational political economic environment in which business can obtain “reasonable profits” in the long run.
The entire industrial landscape takes the form it does because the state — either under the aegis of the permanent war economy or “progressive” programs like the creation of the civil aviation and Interstate Highway systems — assumed so much of the investment cost and risks of new industries, and enforced anti-competive regulatory cartels by such means as the ICC Act’s restrictions on price competition and the state-facilitated pooling and exchange of patents.
The state, in short, is — as Marx described it over a century ago — the executive committee of the capitalist ruling class. Socializing cost and risk, so that the corporate interests in charge can collect guaranteed monopoly profits, is what the state does. No one should know that better than Sasse and the bankster hogs who paid $100 a plate to belly up to the trough and listen to him. But I guess it only counts as “removing risk,” in Sasse’s view, when it’s done on behalf of the little people.
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