Is there anything we should learn from the Banking Crisis in NYC?

#1 Big Banks are a bad idea

This seems to me unlikely to be what we should learn. If the rest of the world had Big Banks, and we had none, it would put USA at a serious disadvantage in world markets.

#2 Laissez-Faire Capitalism applied to Big Banks is a bad idea.

This seems plausible as a possible lesson we might learn. I’m talking here about the Capitalism wanted by Reagan, Bush I, Bush II, Phil Gramm, Milton Friedman, CATO Institute, U.S. Chamber of Commerce, Ayn Rand, and the Deregulatory Zealots. We might decide that for big banks there’s no capitalism like regulated capitalism, and there really should be regulators, and they really should do their jobs, not just watch porn on the internet (like SEC regulators did).

#3 Government of Laws and not of Men needs to be Moderated to a Degree for Big Banks.

We already have begun to explore what “Government of Men” would be like in the person of Ken Feinberg who did a creditable job on the compensation of the 9/11 victims, and on employee compensation at the Big Banks, and most recently on the Gulf Oil spill victims. When Ken gets commissioned by the AG he has unfettered discretion and can’t be fired by the AG or anyone else. It’s absolute power. It’s the government of men (and not of laws).

This approach may be what’s needed on Wall Street and throughout the financial industry. The big banks and mortgage companies take every new law, assign 1000 teams of lawyers to it, broken down by sections, and within 6 to 8 weeks they find 10,000 ways to completely avoid, circumvent, and engineer around the law so it has absolutely no impact on them apart from minor shifts in their business model.

The way this could stop is if the USA had some sort of Star Chamber Magistrate in charge of monitoring what goes on in the financial industry and issuing injunctions to put an instant stop to sleazy, smarmy, rotten, unacceptable conduct as soon as it appears. These injunctions would not be based on violations of law, they would be based on the unfettered discretion of the Star Chamber Magistrate. Whatever he/she says all players in the industry have to do, or be closed down, by the full force of the US government. Rule of men sometimes works when rule of law fails. Lincoln knew this. He knew that he had to declare Martial Law and he had to be the source of injunctions that could not be disobeyed. We may need something like Martial law to control Wall Street, Payday Lenders, and the Mortgage industry. 2000 page bills out of Congress are extremely unlikely to have any impact whatsoever. Washington writes 2000 pages, New York assigns 1000 lawyers, every lawyer gets 2 pages, and comes up with 200 ways to work around the law, in about 12 weeks, so the Big Doorstop mostly just gives sore backs to Law Library employees — it has no actual effect on the financial industry, or on the Evil-Doers therein (except for Skilling, who now says he should get out of jail, and Lloyd Blankfein who walks down Park Avenue giving everybody raspberries and bronx cheers and yelling — Look, I’m not in jail!).

In ancient Egypt, a very conservative culture, if three of the Great pyramids at Giza suddenly fell over and crushed a few hundred thousand people, somebody in the Phahrao’s office would probabaly have asked, “Are we doing anything wrong, should we consider making some changes in how we do business?” I’m just asking —- How about us — is there anything we should learn from our Economic Collapse on Wall Street?

Andrea