Reuters reports that “[a] deeply divided U.S. investigative panel issued a scathing critique of the culture of deregulation championed by Former Federal Reserve Chairman Alan Greenspan, saying the government had ample power to avert the financial crisis of 2007-2009 and chose not to use it.” The story details an apparent intra-panel conflict between “pro-reform Democrats and anti-reform Republicans,” conveying the impression that the former favor a sober prudence whereas the latter supported an untamed free market.
While wrongly inculpating “deregulation” for the crisis, the Commission got something right in determining that the financial crisis was an “avoidable” result of “human action,” and in accusing the “captains of finance and the public stewards of our financial system.” Although it’s unimaginable that any thoughtful person could look at the financial and banking sector in the lead up to the crisis and perceive a lack of state regulatory involvement, that’s the state’s de facto official history of events.
The related falsehoods — that Republicans favor anything remotely similar to a free market and that Democrats are all that standing between us and the GOP’s dog-eat-dog version of laissez faire — are belied by the fact that, as articulated by Kevin Carson, “both major parties are state capitalist to their very core.” In the United States, the schema that the big banks operate within positively runs over with elaborate legal requirements that exist not to “manage risks” but to form an impenetrable stockade around financial services.
The institutions that Reuters and “objective, bipartisan” government panels would have us believe loathe regulation for ruining their runaway free market actually campaign actively for bureaucratic rule-making. And their reasons are simple enough, revolving around the need to prevent genuine competition from weakening their status as the state’s Chosen Ones. Such competition, the sort that’s fully unobstructed and allows no one the privilege of coercive law, would pull the rug out from under the unearned and undeserved supremacy of the big banks (and this idea of “too big to fail”).
To portray Alan Greenspan of all people as a champion of deregulation confirms either the complete illiteracy of the mainstream media on these issues or else its active complicity in furthering statist myths. The idea that a Federal Reserve Chairman could, in that capacity, authentically advocate for a of free market is internally inconsistent. “In contrast [to a truly free market in banking],” taught Murray Rothbard, “the essential purpose of central banking is to use government privilege to remove the limitations placed by free banking … ” (emphasis mine).
Monopolist banksters undeniably enjoyed free rein to run their ruses on an unsuspecting public, but this failure to “set prudent standards” was enabled and authorized by just the kinds of regulations that our corporate media regard as a panacea.
Most people readily understand how the added costs of tariffs quite literally erect barriers to competition from without. A bit of the same principle is at work in the state’s tampering with the inbuilt tendencies of freed markets. The arbitrary requirements of the state for various licenses and permits, and its enforced floor on the amount of dollars stowed away, add formidable costs to banking and prevent smaller-scale competition from springing up. It would take an army of lawyers to hack through the jungle of red tape strewn around the financial services industry.
The crisis was a result of what Rothbard called the “chronic desire by the banks to be subsidized and cartelized more effectively,” and it shouldn’t surprise us. The solution is not some new plug in the U.S. Code dreamt up by pretend populists like Chris Dodd and Barney Frank, but the structural protections of a marketplace that’s open to the public. When we dispense with the pay-to-play system of rules and regulations, we’ll have the kind of consumer protection we deserve.