Small government people beware: given the state of the financial
markets in the wake of a tremendous banking deregulation failure, there
is no escaping an expansion of the government's role in financial
markets.
Last week, the Treasury Department gave additional
recommendations for reforming the existing financial system, but the
implementation of those recommendations will be left to the next
President and Congress.
To no one's surprise, Senator Obama has
called for tighter government oversight of the financial system,
mortgage industry, and many other sectors of the economy. While
Republicans have chastised Obama as a Big Government, modern day Robin
Hood that robs from the rich (those making over $250,000) to give the
poor (95 percent of Americans) via his tax plan, his views on
regulating the banking system more heavily are now being echoed by the
Republican party.
Yesterday, while addressing a crowd at the
Montgomery County Community College, Senator McCain promised to
increase regulation of the banking industry and help struggling
homeowners pay their mortgages. The plan was met with lukewarm
enthusiasm, unlike his economic stimulus plan - a bundle of tax cuts for those investing in the stock market.
Regardless
of the outcome of the Presidential election, what's clear is that
Americans are angry over the financial quagmire the country is in that
necessitated the government's injection of cash and partial ownership
in the financial systems. In every event of this magnitude, someone or
something must be blamed. Today, the suspect is unchecked capitalism
and the titans of industry whose entrepreneurial geniuses led the
country right into a Roman-esk fall from grace. And like the Romans of
old, those to blame will be strung up and put on display for all to see
and despise.
That translates to greater government oversight and
transparency into their perceived shady dealings and more heavily
monitored transactions in credit swaps and mortgage sales.
“We now have a collective anger, disgust, over our whole financial
system and it’s obvious we’re going to get a regulatory backlash,” Robert E. Litan, an economist at the Brookings Institution who has studied financial and regulatory issues for decades told the New York Times. “And we know it’s going to come in a big way in 2009.”
Litan
foresees big government coming to other industries as a sort of
spillover effect from a pro-regulatory environment. According to Litan,
voters currently see large corporations as "animals" that "need to be
put in their cages.” Under this analogy, Uncle Sam plays zoo keeper
while "Joe six pack" passes by their cages and snarls back. The only
question left is, just how many animals will be caged and how tight
those cages will be?
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