“Bank of America,” reports CNNMoney, “has reached a $3 billion agreement with Freddie Mac and Fannie Mae to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp.” In 2008, BofA bought Countrywide, which wrote many of the subprime loans that became the focus of the financial crisis, and with it exposure to the government sponsored-enterprises’ legal claims regarding those loans.
The settlement may appear a meaningful forfeit for BofA, some kind of win for “the public,” but its technique for extracting interest from productive society is fully intact and undisturbed by the state’s little suit.
Among the critical, if perhaps counterintuitive, insights of the free market Left is that, to attain economic justice for the worker as contemplated by the socialists, we must move in the direction of true economic freedom, not against it. Free markets made up of the profusion of exchanges that self-governing people might engage in would subvert today’s system of state-capitalism, an extortion scheme allowing middlemen to get between labor and the consumer (who, in any market, are largely the same group).
It’s easy to be deluded by the constant insistence of the state and its corporate media that American capitalism is a free market, that it is — save for a few negligible disturbances — the essence of the program counseled by Adam Smith. But Smith was called in his day (as we free market Leftists are now) a radical, morally offended by the rentier class of his era’s British mercantilism. Contrary to Smith’s “obvious and simple system of natural liberty,” Murray Rothbard has accurately described the current condition in the United States as “the new recrudescence of statism and mercantilism as ‘progressive’ corporate statism.”
Hardly original, the American capitalism embodied by, for instance, Bank of America is merely the latest permutation of statist economic engineering. This kind of labor exploitation is less visible than its antecedents, but no less real. Although arguably subtler and more attenuated, it steals from labor all the same, “compensating” a banker class with wealth deserved by those who are actually productive.
The machinery of exploitation is hidden from most Americans and is less ugly in appearance than in true character. But consider the friend we all have who, swearing that his roads are fastest, recommends shortcuts without fail every time he gets in the car. His suggested route zigs and zags, looping and turning for twice the time necessary, but he maintains that your straight line would have been no more efficient.
Now imagine that you and your friend have a passenger in the car, the consumer of your driving service, and that you are paid to transport him from point A to point B. Although your friend’s method has just cost the passenger twice as much and subjected you to twice the labor, the friend demands a high fee for his tip, for the knowledge of his “shortcut.” This is like the interest that lending institutions like Bank of America receive when, operating through the power of the state, they make options for housing (among other things) so scant that we’re largely at their mercy.
So while you did all of the driving — and the passenger was screwed for twice the appropriate fare and made late for his appointment — your friend slept comfortably and let the meter run, content to collect for his “valuable contribution.” The friend did nothing but freeload on your work, drawing his wealth out of your service to the consumer, but now — if you argue that your way would have been more direct — you’re met with the challenge of proving the merit of a course of events that never happened.
Bank of America executives can continue to extol their golden parachute culture as an essential feature of free enterprise, to reiterate that — though it’s difficult for us little people to understand how much they bring to the table — their business savvy is invaluable. Like the friend in the car, though, today’s banks are just helping to gum up the gears. Our free market is nothing like the “crippling web of controls, taxes, and monopoly privileges” that Rothbard reasoned against, and our idea of property is nothing like the state’s fraudulent legal contraptions.
While he understood the word “capitalism” differently (and thus opposed our view at least on its own semantic terms) Ludwig von Mises related our argument, writing, “Capitalist private property is the … negation of individual private property.”
Settlements between giants like Fannie, Freddie and BofA are non-stories. The structure they used to bilk the country is left in place for the next hustle, and productive behavior is ultimately on the hook. Our only recourse is to invest not in their stock and their economy, but in the voluntary institutions that move us out of state-control and into a real free market.