Re-Regulate The Banks

By Rod Dreher • June 11, 2012, 9:29 AM

As a social conservative, I have never understood the fetish among conservatives for deregulation, especially deregulating banking and finance. I’m not in favor of regulation per se — the less of it we can get by with, the better off we are, as a general rule — but the reality of original sin (that is, the human capacity for corruption and moral weakness), especially when it comes to wealth, requires safeguards that can only be put in place by the state. I have told here before a story related to me by a former senior international banker, who said he realized near the top of the bubble, while at an ultra-posh banker’s conference, that things were going to end very badly. Why? Because all that money had made them mad. It unnerved him so much, seeing how Scrooge McDuck levels of money had destroyed the common sense of his colleagues, and made them think that they were invulnerable. What he saw shook my banker friend so profoundly that it made him return to the practice of his Jewish faith. He felt he had looked into the abyss. He told me that after that, he took steps to protect his money from the crash he knew would soon be coming, and was one of the few members of his circle who didn’t suffer huge losses when it did.

Anyway, the free-market University of Chicago economist Luigi Zingales is now calling for the return of Glass-Steagall. Excerpt:

The separation between investment and commercial banking also helps make the financial system more resilient.

Neftali/Shutterstock.com

After the 1987 stock market crash, the economy was unaffected because commercial banks were untouched by plummeting equity prices. During the 1990-91 banking crisis, securities markets helped alleviate the credit crunch because they were unaffected by the banking crisis. By contrast, in 2008 the banking crisis and the stock market crisis infected each other, pulling down the entire economy.

Last but not least, Glass-Steagall helped restrain the political power of banks. Under the old regime, commercial banks, investment banks and insurance companies had different agendas, so their lobbying efforts tended to offset one another. But after the restrictions ended, the interests of all the major players were aligned. This gave the industry disproportionate power in shaping the political agenda. This excessive power has damaged not only the economy but the financial sector itself. One way to combat this excessive power, if only partially, is to bring Glass-Steagall back.

Why don’t leaders among social conservatives and the Religious Right speak out against avarice and its fruits, of which the unchained power of the big banks is a particularly bitter one? Lust isn’t the only deadly sin, you know.

Posted in Economics.

44 Responses to Re-Regulate The Banks

Lord Karth says:

June 11, 2012 at 10:01 am

Mr. Dreher writes: “Why don’t leaders among social conservatives and the Religious Right speak out against avarice and its fruits, of which the unchained power of the big banks is a particularly bitter one? Lust isn’t the only deadly sin, you know.”

First, it doesn’t make for good television. Most of our public “discourse” takes place via the Idiot Box, and television is simply not equipped to address abstract issues at all well.

Secondly, most of their constituents (and indeed, most Americans) are pig-ignorant of matters economic, nor are very many of those constituents willing to learn. Issues of taxation are difficult enough to talk about without the MEGO (My-Eyes-Glaze-Over) effect kicking in after 45 seconds or so, and that is an issue that affects virtually everyone directly. Banking rules ? Glass-Steagall ? Those things are so abstract as to actively bore any non-specialist in the matter; it’s simply easier to go after the sins of the flesh. Computerized embezzlement is one thing, but howzabout the
hot babe the Congressman was caught with ??

(Another, somewhat more prosaic illustration of the point: what did more people get exercised about during the Clinton Administration: perjury and possible contempt of Congress—or Miss Monica’s stained dress ?)

Third, getting rich in and of itself is not, by and large, seen as bad/immoral by most people. In fact, I would say that most Americans would like to be rich themselves some day. It’s a matter of tailoring the message to the audience, Mr. Dreher; if you’re in a very competitive environment, you can’t really afford to go hitting your target audience where they live. This is why “divorce = sin” does NOT come up often as subject of sermons in the churches I have attended in the last 25 or so years.

Contrary to popular belief, Americans are NOT a very religious people; they go to church mostly because it’s the thing to do, when they go at all. The “Church of St. Mattress” is very popular on Sundays. In such an environment, the last thing a churchman wants to do is alienate his audience before he has a chance to preach to them. Which is why he (collectively speaking, that is) will tend to stick to safe, relatively harmless subjects that he knows will go down easily.

I’m sure that most Americans could stand with a few more lectures on greed and avarice (not to mention gluttony), but they’re not likely to get them. Those preachers that do so will find their organizations reduced to being, shall we say, as poor as church mice ?

Your servant,

Lord Karth
carlo says:

June 11, 2012 at 10:07 am

Zingales, not Gonzales (he is an eeyetalian)
MH - Secular Misanthropist says:

June 11, 2012 at 10:08 am

I think the short answer to your question is that in theory conservatives fear the state and its capacity for corruption. So they try to limit its power to keep it weak. However, in practice this often degenerates into a different center of power and corruption.

But doesn’t this post undermine some of your previous statements that it’s liberals who fail to recognize the moral weakness of man?

As an aside someone non-religious can recognize man’s capacity for corruption and moral weakness. But would tend to think it exists because it is adaptive. An individual can achieve out-sized rewards for undersized efforts when they get away with it. So the goal is trying to prevent the conditions where it is adaptive.
Rebecca Trotter says:

June 11, 2012 at 10:13 am

I always say that the problem with the regulations we have is that rather than preventing anyone from screwing everyone over, we just require that they disclose exactly how they’re going to screw you over first. And document exactly how it’s done. Conservatives need to itch their anti-regulation itch by going after state regulations and licensing requirements. That’s where the real choking regulations are. But at this point, I doubt that any politician is going to start advocating for real regulations on the financial sector. We have lost control of the machines, I am afraid.
Charlieford says:

June 11, 2012 at 10:26 am

A little late.

But “Amen!” nonetheless.
Al-Dhariyat says:

June 11, 2012 at 10:27 am

It’s Tribalism, right? Better to be silent on an issue like this rather than risk losing to those d*mn dirty liberals by speaking out. And no doubt, enough conservatives have come to believe the gospel of the unfettered, unregulated free market.

(And yes, I freely acknowledge that Liberals close ranks and succumb to tribalism as well).
MWorrell says:

June 11, 2012 at 10:30 am

Libertarians have an irrational belief in the inherent goodness of the populace. Democrats have an irrational belief in the inherent goodness of the government. Republicans have an irrational belief in the inherent goodness of the markets. It’s the foundation of their respective ideologies, not a fetish.

In other words, only Christ is the answer to the human problem, not politics. At best, politics is sin management, and those three ideologies just argue over which sins to manage.

Yes, we need regulation, but it is not the answer because the regulations are administered by people just as corrupt as those they seek to regulate. I think we just swing back and forth, trying to escape the inevitable.
Turmarion says:

June 11, 2012 at 10:53 am

Contrary to popular belief, Americans are NOT a very religious people; they go to church mostly because it’s the thing to do, when they go at all. The “Church of St. Mattress” is very popular on Sundays. In such an environment, the last thing a churchman wants to do is alienate his audience before he has a chance to preach to them. Which is why he (collectively speaking, that is) will tend to stick to safe, relatively harmless subjects that he knows will go down easily.

As much as I usually disagree with Karth on most issues, I have to hand it to him and say that he’s nailed it here.

MH: But doesn’t this post undermine some of your previous statements that it’s liberals who fail to recognize the moral weakness of man?

Maybe it’d be better to say that liberals and conservatives are each better at or more attuned to recognizing different kinds of moral weaknesses?
reflectionephemeral says:

June 11, 2012 at 11:13 am

“Why don’t leaders among social conservatives and the Religious Right speak out against avarice and its fruits, of which the unchained power of the big banks is a particularly bitter one?”

Because of asymmetric polarization, It’s a particular problem for the right, with the as Mann & Ornstein describe. GOP ideas that were mainstream three years ago– cap and trade, individual mandate, the EITC– are now derided as socialism. Richard Lugar was attacked in ads because he cooperated with Democrats to reduce the amount of loose nuclear weapons-related material. The GOP literally hates Democrats more than they fear nuclear weapons in the wrong hands.

We’re in a polarized environment, with no tolerance of leftward deviance within the GOP. That’s the culture. The enforcement comes from groups like the Club for Growth and Norquist’s Americans for Tax Reform.

In the wake of the successful primary challenges of steadfast conservatives like Bob Bennett and Bob Inglis, plus now Lugar, all Republican officeholders know that broaching any remotely thoughtful ideas could cost them their jobs.

So, no one on the right will address this issue (or any other issue, really) in any kind of coherent or consistent way that goes beyond a sentence or two of talking points.
Josh Brown says:

June 11, 2012 at 11:43 am

Reading about your friend describing his experience as gazing into an abyss reminds of the difference in Doctor Who between The Doctor and The Master. As a rite of passage, time lords must gaze into the space-time vortex. The Doctor peered in and fled. The Master kept gazing into it. He went mad.
Orthodox says:

June 11, 2012 at 11:57 am

The banks and the government are so intertwined that you cannot separate the two. You need a Ron Paul-style approach of reforming the monetary system. If gold was operating alongside fiat currency, it would restrain both the government and the banking system.

Human Freedom Rests on Gold Redeemable Money

And what about the Pope? Is he chopped liver?
CK says:

June 11, 2012 at 12:04 pm

The most important regulation would be such that no court would enforce a callable loan (ie a demand deposit with a bank) while fixed term loans were lent out simultaneously. This is the inherent instability caused by Anglo-Saxon fractional reserve banking, affirmed erroneously by the common law, and rightly rejected as irrational under Roman-continental law.

A new volker rule or glass stegall type regulation would do nothing to cure such instability which did reign in US markets regardless of glass stegall.
CK says:

June 11, 2012 at 12:12 pm

Also, with respect to regulation, conservatives should favor regulation ex post (after the fact of an issue) rather than ex ante (before the fact of an issue). The common law and the court system is a mechanism of after the fact regulation which allows for all sorts of activities to occur and only rectifies events that have been brought to the court.

Ex ante regulation prevents all sorts of activities from occurring, usually to the benefit of particular entities (large corporations) and the detriment of the rest of society (ie consumers). To see this in action look no further than the recent financial regs that have come out through Dodd Frank. Under these regs, small mom and pop mortgage originators have been decimated to the advantage of the big banks. Prior to 2008 60% of such originations came from smaller entities. Post Dodd Frank it’s less than 10%. Now the consumer can enjoy all the unlocalized and centralized choice of the big banks.
Wesley says:

June 11, 2012 at 12:14 pm

MH – Secular Misanthropist: But don’t most social conservatives support a hawkish, interventionist foreign policy? So why wouldn’t they be more critical of the financial sector and other big business interests? And by the way, I’m a social conservative who supports a hawkish, interventionist foreign policy and is also critical of the financial sector and other big business interests. But I still generally have conservative views on economics.

Turmarion:When you say that “liberals and conservatives are each better at or more attuned to recognizing different kinds of moral weaknesses” you should differentiate between social conservatives and libertarians. I think on economic issues,which are the most important in politics, social conservatives have taken their cues from libertarians and are usually afraid to speak out against libertarians on these issues, even if they disagree.

Both the Republican and the Democratic Parties are in bed with the financial sector. Some of the largest donors to both Romney and Obama have been the big banks. I don’t know why Rod and others like him thought that Obama would be tougher on the big banks than a Republican president would be. The Dodd-Frank financial reform law doesn’t really go after the big banks, who have helped to write the regulations, but hurts smaller and community banks who didn’t help cause the economic crisis. It has been reported that the reason that the Obama and Holder Justice Department hasn’t really gone after the big banks is because many of the Justice Department’s political appointees used to be white collar defense attorneys who did work for many of the big banks. This compares to the Bush administration during the Enron scandal when hundreds of FBI agents were assigned to the case. I think that there are many politicians in both parties who want to go after the financial sector, but don’t because big finance is the most politically connected industry.
sdb says:

June 11, 2012 at 12:16 pm

It just isn’t true that leaders of the religious right (broadly construed) don’t speak out against greed (or other sins not related to lust). It’s just that those articles in World Magazine and Christianity Today don’t make it to the top of Drudge or get highlighted by USA Today. This complaint is incredibly unfair and an obvious case of selection bias.

As far as Glass-Steagall goes, there are thoughtful non-libertarian social conservatives that are expert in corporate law who remain exceedingly skeptical of such regulations. I’m thinking in particular of Stephen Bainbridge. Apart from a few kooks, no one is arguing for market anarchy – nearly everyone recognizes the need for some level of regulation. But there are tradeoffs – often the regulations intended to fix the problem make things worse. Consider Bainbridge’s reaction to Obama’s speech on financial regulation back in 2008:
http://www.professorbainbridge.com/professorbainbridgecom/2008/03/parsing-obamas-financial-regulation-speech.html

Obviously just because Bainbridge disagrees doesn’t mean that Zingales is wrong, but the fact that two very knowledgeable experts in this area come to different conclusions should give one pause about advocating one proposal or the other (or at least about condemning those who don’t jump on the bandwagon).
MH - Secular Misanthropist says:

June 11, 2012 at 1:21 pm

Turmarion said “Maybe it’d be better to say that liberals and conservatives are each better at or more attuned to recognizing different kinds of moral weaknesses?”

Probably true. Especially when it is coupled with the human inability to recognize our own blind spots. The result is both sides seeing the other as not recognizing human obvious failings.
JohnE_o says:

June 11, 2012 at 1:37 pm

As a social conservative, I have never understood the fetish among conservatives for deregulation, especially deregulating banking and finance.

What’s to understand? The big money folks who contribute to their campaigns want deregulation, so the guys who get elected by those folks push for deregulation.

And if they don’t, the big money guys put someone else in next time.

Rod, maybe you are just being rhetorical with questions like this, but do you seriously think that politicians go into office, or stay in office, because they are working for the good of the country?

Start with the assumption that they are there to provide benefits for the people who pay for their campaigns and the whole system makes a lot more sense.
Church Lady says:

June 11, 2012 at 2:07 pm

“Why don’t leaders among social conservatives and the Religious Right speak out against avarice and its fruits, of which the unchained power of the big banks is a particularly bitter one?”

Who do you think is financing these people and their organizations, including the GOP itself?

Follow the money.
Johnny F. Ive says:

June 11, 2012 at 2:07 pm

Usury used to be a huge no no. The problem with deregulation is when the bank does bad then the government bails it out. There is no risk of punishment. A laissez-faire liberalism economic system is something that companies strut around proclaiming that they want but when things turn bad they want a bailout.

Can our Congress come up with something like the Glass-Steagull Act? Many of them helped remove it. A different generation had the good sense to enact it. I wonder what Mr. Dreher thinks about the Fed.
Justin St. Giles Payne says:

June 11, 2012 at 2:13 pm

Gold IS a fiat currency, unless you believe (for some strange reason) that they’ve stopped mining it right out of the ground.
cecelia says:

June 11, 2012 at 2:49 pm

yeah – agree with Lord Karth on this one. But – hasn’t that pretty much always been true – doesn’t it describe many people but not all? Sensible decisions have been made in the past – after all – Glass Steagall was passed originally. So what has happened to that class of Americans with common sense and civic duty? Have they all become ideologues or crazed Wall St bankers?
Geoff Guth says:

June 11, 2012 at 3:15 pm

MWorrel makes the observation that libertarians believe in the populace (or the individual), liberals believe in government and conservatives believe in markets.

I think that requires a bit more nuance. I’m not sure, for instance, that it’s fair to say liberals believe in government. Perhaps some genuinely do (those on the far left, the real socialists, certainly do). But rather, I’d say liberals believe not in the inherent value of government in and of itself, but rather in its potential to restrain the bad actions of markets and individuals.

Consider it this way: where should the centers of power be in the country? In dictatorships, it’s generally located in the military or police. In communist or (to a lesser extent) socialist countries, it’s located in the government, usually an unresponsive bureaucracy. In capitalist countries, it’s located in wealth.

What all of these interests, physical force, money, regulation, is that the individual, on his or her own, stands little chance against their untrammeled power. Liberalism, at its best, seeks to even those odds a bit. To that end it will balance those interests, or even pit them against each other, in such a way that none of them is too strong.

The danger, however, has always been that the powers that be will align together to advance their own interests and defeat the liberal project. Hence Eisenhower warning against the military-industrial complex, or more recent concerns about regulatory capture and unbridled campaign finance spending. These represent ways that power evades the kinds of restraint that liberalism places on it. Glass-Steagall is an excellent case in point.

I think it’s also worth pointing out that there are other loci of power that get trampled in this struggle. Unions are an obvious case in point, but churches, too, have power, and they have, at times, been useful allies (especially, most recently, and somewhat perversely, for wealth). That’s why you don’t see churches going up against their allies, even when they’re not acting in very Christian ways. When a church worries more about its temporal influence than its spiritual mission, then you end up with situations like this one.
Pete S says:

June 11, 2012 at 3:19 pm

Rod, more bank regulation is a great idea, but even if it is brought in there is no guarantee that it would be enforced anyway. The only regulations that seem to have any teeth to them now are those that provide barriers to entry to any new business. Existing business owners have a pretty sweet deal – limited regulations for them, high hurdles for new competitors to cross, and a political class depending on their contributions to get or keep their jobs.
Turmarion says:

June 11, 2012 at 3:27 pm

Josh, the Doctor Who reference reminds me of the Jewish tale about Rabbi Akiva:

The rabbis of the Talmud regarded the mystical study of God as important yet dangerous. A famous talmudic story tells of four rabbis, Azzai, Ben Zoma, Elisha ben Abuyah, and Akiva who would meet together and engage in mystical studies. Azzai, the Talmud records, “looked and went mad [and] Ben Zoma died.” Elisha ben Abuyah became a heretic and left Judaism. Rabbi Akiva alone “entered in peace and left in peace.”

Unfortunately, the financial equivalent of an Akiva doesn’t seem to have arisen yet.
Charles Cosimano says:

June 11, 2012 at 3:43 pm

I matters of economics the Pope is of less value than chopped liver. You can eat chopped liver.

Lord Karth is right. You preach against greed and you preach to an empty megachurch. And those places look funny when they are empty.
J says:

June 11, 2012 at 3:46 pm

The big picture political context here is that the Republican Party represents the forces opposed to social democratization in an era where this is the central domestic dispute.

There were three huge obstacles to this when the dispute began in earnest in the late Eighties or early Nineties. These were established (mis)orderings of social rights, political or cultural divisions that formed a political (mis)order, and an established economic (mis)order. Each is individually fatal to establishment and functioning social democratic institutions.

We spent the mid/late 1990s arguing mostly the social rights order with conservatives dominating. But the 2000s saw the social democratizers- aka liberals- slowly win the field.

We spent the 2000s arguing the political/cultural order, with conservatives dominating initially as per usual. But stopped and now in slow retreat on that front also.

The late 2000s saw battle engaged in earnest on the third and final front, about the economic order. The conservative side starts off, as usual, with the initial advantages. And will exploit these to probably peak in 2013-14 in the form of an initially triumphalist Romney Presidency elected with 51% of the popular vote, 51%ish Republican majorities in Congress, Republicans dominant at the state level (though already past peak), plus the Roberts Supreme Court. For a moment it will seem like decisive victory to its adherents and feel that way for a few months as they push back on all fronts. Then the relentless erosion will set in.

Why doesn’t the Republican Party see any need to do any real moral leadership? That’s easy. In his sober moments the average Republican considers Democrats to be reliably morally grounded and law abiding and thus his basic rights secure. That makes it possible for him to focus on the arguments in favor of particular privileges which interest him more. Moral arguments for privileges are always weak at bottom and easy for opponents to turn around, so best to use them sparingly and never rely on them.
Rich says:

June 11, 2012 at 4:25 pm

Not to be too cynical but perhaps it is because what the Republican establishment (I won’t say “conservative” because it is anything but) really cares about is money – getting it, keeping it – pure and simple. It isn’t a new idea but some have claimed that social issues are simply effective tools with which the cynics manipulate truly conservative voters.
pjsmoov says:

June 11, 2012 at 4:32 pm

Adam Smith supported some regulations on banks and he, rather than Ayn Rand, should serve as a guide for Republicans. Recently Jon Huntsman proposed several reforms—cap bank size and reduce leverage—to eliminate the threat from too-big-to-fail financial institutions. I’d love for Romney to adopt these reforms but I’m not holding my breath. The other Republicans just seem to want Dodd-Frank rescinded. It’s apparent to anyone who’s paying attention that taxpayers are subsidizing speculation on Wall Street and both parties essentially support crony capitalism. Even tea party candidates are in tune with Wall Street.

I also tend to agree with Lord Karth on this. There was a reason why white southern ministers opposed to segregation were unwillingly to challenge the views of most members of their congregations. But, considering that so many Christians believe whatever their pastors tell them, there is an opportunity here. Most people already don’t think highly of Wall Street and I’m not sure that those who are religiously inclined can find much justification for things like high-frequency trading and the existence of the unbelievably massive and opaque derivatives market (at least $500 trillion and perhaps $700 trillion). Tell pastors that Wall Street firms and others make money betting on whether their congregants pay their credit cards and mortgages on time and you might change minds.
MH - Secular Misanthropist says:

June 11, 2012 at 4:45 pm

Wesley, it is true that conservatives tend to be hawks. This frankly mystifies me as intervening in the affairs of other nations seems anything but conservative. You would think they would be more in the “avoid foreign entanglements” school of thought.

It might be a legacy of the cold war which made both US political parties fairly hawkish.
MattSwartz says:

June 11, 2012 at 5:34 pm

The facepalm element here has me risking serious self-injury.

The issue is not “regulation” vs “de-regulation.” Right now, there are thousands upon thousands of pages of regulations, more than there ever were back in the past before “de-regulation” rhetoric became popular.

The issue is not how many regulations there are, or even how strict they seem to laymen. The issue is who writes them and (more importantly) who enforces them. Maybe some of you have heard the expression “revolving door?” Because right now, the rules of banking are written and enforced by people who are taking a year or two off from the executive branches of big banks or the lobbying agencies that serve them. That’s it.

Banking regulations need to be simple. Simple enough that congresspeople can write them on their own. Simple enough that high-schoolers can enforce them (perhaps as some sort of open-source civics project). It’s the complexity and the complicity of the big government regulators that have created the current climate in banking. We need to fire all of them, set up a framework of strict, simple rules, and let the rest up to the courts.

Anything less is just rhetoric.
JonF says:

June 11, 2012 at 6:14 pm

I’ve said this before: Glass-Stegall was iconic of Depression-era banking regulation, and its repeal was iconic of the ill-fated casino economy of the 00s. I can understand why people focus on it. However leaving GS in place would have done not one scintilla of good in preventing the mortgage bubble and bust, and the subsequent meltdown.
As in war, there’s a mistake known as fighting the last war. Glass Stegall as an antidote to the present day financial mess is the equivalent of using a smallpox vaccine against HIV.

And let me add my kodos as well to Lord Karth for really hitting the bull’s eye with his leading comment.
Church Lady says:

June 11, 2012 at 6:24 pm

“Gold IS a fiat currency, unless you believe (for some strange reason) that they’ve stopped mining it right out of the ground.”

Exactly.

Gold is actually the original Keynesian economics.

There’s an old saying among Keynesians, that during economic hard times it’s a good idea for the government to pay people to dig holes in the ground, and then fill them back up, just to stimulate the economy.

Well, that’s exactly what gold mining is. Gold is itself an essentially useless substance. We only use it as a currency because we have agreed that it’s valuable – which is just what we do with fiat currencies. But in reality it’s just a dense, shiny metal that does no one any good (though with some modern uses in electronics).

Somehow, when people go out into the mountains and dig holes in the ground, and come back with this shiny gold stuff, people think they’ve actually created new wealth. They haven’t. They just dug holes in the ground, like the Keynesians, and convinced other people to pay for it. And in a strange way, that does end up stimulating economies. But not because gold is somehow “real money” whereas paper currencies as “fiat money”. They are all fiat currencies, made of different materials.

When the Spanish went to the New World, invaded and conquered and destroyed the native peoples and their civilizations, all to dig holes in the ground and bring back shiny metal to sit in their vaults or trade with other people, they didn’t actually increase the world’s wealth. They actually just spent a lot of effort digging holes in the ground in distant places. They could have spent that manpower and material on something a lot more useful and less destructive. But the fiat value of gold made it economically feasible to do. Why not make it economically feasible to spend our efforts on something less destructive, and actually valuable? Bringing back the gold standard wouldn’t do that. Designing our financial system to encourage the most productive use of our capital and debt would be a very good idea, however, and that means protecting the world from the ravages of those merely seeking to capitalize on the fiat system itself, rather than produce real wealth.
Wesley says:

June 11, 2012 at 6:35 pm

MH-Secular Misanthropist: The Old Conservative Republicans like Robert Taft and Calvin Coolidge were isolationist and non-interventionist. Before the United States entered into World War II, the most hawkish American politicians were conservative Southern Democrats, whose political heirs make up the base of the modern Republican Party, and moderate Northern Democrats like FDR. Conservative Republicans were generally isolationists until the attack on Pearl Harbor and far left Democrats were isolationists until Germany invaded the Soviet Union, which they admired.
Liam says:

June 11, 2012 at 7:09 pm

Re: simple rules.

Simple rules tend to be coarse, and people often want the benefit of them without the costs. That’s one reason that, over time, regulation tends to get more complex. Just think about capital, insurance and transparency/reporting requirements, which can be simple on paper. See the resistance to them. Think about the resistance to having binding shareholder votes on executive compensation. Think about resistent to forbidding loan originators to slice, dice and julienne fry loans to secondary security holders. Those would simplify thing.

A really simple solution: eliminate or weaken the corporate shield against shareholder liability. (Want to put a value on it? See how much the value of shares drops if such a thing were to occur. That shield is a creation of government, not a natural state of the market. Big Government arose as a response to Big Business; consumers and market participants are voters, and voters-government is PART of the market.)

Relying on the courts: that means allowing private rights of action, and robust class actions. Even more lawyers, OK?

Most people don’t realize how insurance and reinsurance is as much a regulator as government. If something’s not really insurable, then its scale should be severely limited. Derivatives insurance turned out to be largely fictional (the magnitude of this financial panic creation was amplified many times by this dimension of it; subprime loans are normal fare in the latter half of a boom, but things like credit default swaps made things much much worse; I remember well taking minutes of skeptical mutual fund trustee meetings discussing their limits before the Panic).
Matt says:

June 11, 2012 at 7:59 pm

Why don’t leaders among social conservatives and the Religious Right speak out against avarice and its fruits, of which the unchained power of the big banks is a particularly bitter one?

Speak to whom? The banksters are mostly atheist liberals who care nothing for either social conservatism or the RR. The average man on so-called “main street” has no significant connection with any of it. Now the greed of wanting other people to pay your medical bills is something they might need to hear about.
sdb says:

June 11, 2012 at 8:19 pm

The lazy assertions on this thread are infuriating. Social conservatives support deregulation because their funding comes from bankers? The last election, the Obama campaign got more from investment banks than the McCain campaign as I recall. Over the past 20yrs, it looks like the two parties have been more or less neck and neck:
http://www.opensecrets.org/industries/indus.php?ind=F07++

It simply isn’t true that the GOP is uniquely bought and paid for by the bigbanks. There are meritorious reasons for opposing SOX or the return of glass-steagall that have been thoughtfully presented. These advocates might be wrong on the merits, but it isn’t because they are merely partisan hacks. Ignoring knowledgable conservatives on these issues, then lamenting the state of conservative discourse because of clowns on Fox News is intellectually dishonest.

As far as Lord Karth’s pronouncement that pastors don’t preach against greed (which so many accept at face value), I’d like to see some evidence. I know for a fact that materials by Dave Ramsey, Ron Blue, and Larry Burkett are all quite popular in sunday school classrooms across the country. Say what you want about Dave Ramsey et al. but their anti-big bank, anti-credit cards, anti-debt, anti-living beyond your means, anti-conspicuous consumption isn’t exactly “greed is good”. But maybe sunday school materials don’t count…what about megachurch pastors:
Here’s John Piper -
http://www.desiringgod.org/resource-library/sermons/lavish-giving-loving-guests-living-christ
Here’s Ortberg (previously of Willow Creek)
http://awaken.me/2010/01/money-john-ortberg/
Here’s Tim Keller:
http://www.preachingtoday.com/illustrations/2011/march/6030711.html
Here’s Rick Warren:
http://library.generousgiving.org/page.asp?sec=72&page=487

I’m sure there is plenty to criticize with each of these pastors, and I wouldn’t be shocked to learn that more than a few are hypocritical. This isn’t a scientific survey, so perhaps these examples are outliers. But the assertion that preachers don’t preach on greed for fear of emptying their congregation isn’t obviously true.
MH - Secular Misanthropist says:

June 11, 2012 at 8:33 pm

If the religiosity in the US is a mile wide and inch deep, and religious leaders fear challenging their members prejudices given that they can go elsewhere.

How is religion different from a consumer product?
Mitchell Young says:

June 11, 2012 at 9:16 pm

” Better to be silent on an issue like this rather than risk losing to those d*mn dirty liberals by speaking out. ”

My understanding is that contributions from the ‘FIRE’ “industries” — finance, insurance, real estate — go heavily to the Democrats. In 2008, from a quick look at the data at ‘Open Secrets’, finance dominated the contributions both to McCain and Obama, but Obama got much more of their dough.

Places were bankers live — Connecticut, Marin County California — are usually heavily ‘blue’.
Wesley says:

June 11, 2012 at 9:21 pm

MH – Secular Misanthropist: This also ties in to what I wrote in my first comment. A hawkish, interventionist foreign policy hasn’t always been the norm in the Republican Party. This came about because of the foreign policy realities of the Cold War and the influx of hawkish conservative Democrats into the Republican Party during and after the Vietnam War.

But a laissez faire economic policy has been the norm in the Republican Party since the late 19th Century. Conservative Southern Democrats were often distrustful of Northeastern financial and industrial interests, especially the railroads, because they were often harmful toward farmers. But just as conservative Democrats began coming in waves into the Republican Party, the country as a whole was moving rightward on economic issues, partly as a reaction to the Marxist-leaning New Left of the late 1960s and early 1970s. So conservative Democrats didn’t really bring their distrust of Big Business into the Republican Party.

But I don’t know why conservative Republicans, at least social conservatives, wouldn’t have some distrust toward financial and other Big Business interests. If they are distrustful of Big Government, then they should also be distrustful of Big Business. This doesn’t mean that they should become socialists or even progressives, but social conservatives should have a healthy distrust of Big Business. This would differentiate social conservatives from libertarians on more than just social issues and show that social conservatives really do believe in the moral weakness of man.
Don Quijote says:

June 11, 2012 at 9:48 pm

Tell pastors that Wall Street firms and others make money betting on whether their congregants pay their credit cards and mortgages on time and you might change minds.

Real Conservatives pay their bills on time unlike those DFHs, therefor there is no real reason to change the rules…

Conservatism never fails, people fail Conservatism.
Siarlys Jenkins says:

June 11, 2012 at 10:11 pm

Excellent analysis! I nominate Rod Dreher to replace Joe Biden as Barack Obama’s running mate! I’m serious. This is the kind of outside the box thinking we need to get America on the right track.
Church Lady says:

June 11, 2012 at 10:13 pm

” Social conservatives support deregulation because their funding comes from bankers? The last election, the Obama campaign got more from investment banks than the McCain campaign as I recall. Over the past 20yrs, it looks like the two parties have been more or less neck and neck:”

You got half of the equation right. Democrats have supported the corrupt financial system because they are funded by bankers also, just like the GOP. Both parties are bought and paid for on this issue. They doesn’t mean the GOP isn’t, or that conservatives (and that includes social conservatives who have any impact on the national scene) aren’t entirely in the pocket of big business and the finance industry.

Maybe the Demos are slightly better, or their supporters in the financial world are slightly more liberal or willing to accept financial regulation. But only slightly.
JonF says:

June 12, 2012 at 7:39 am

Re: Social conservatives support deregulation because their funding comes from bankers?

The leaders of the SoCon groups are themselves plutocrats, CEOs of God, Inc. They naturally identify with the rest of the oligarchial 1%.
Jake Meador says:

June 12, 2012 at 1:21 pm

Read Brad Gregory’s The Unintended Reformation and, in particular, his chapter on “manufacturing the goods life.” Starting in the early modern era, we rebranded “avarice” and called it “benign self-interest.”