Rewarding the Perpetrators

An excellent article in August's Harper's Magazine describes how we got into the current financial mess and anticipates what the next one will be like.  Thomas Frank in "The Age of Enron" traces the 2008 financial meltdown and ensuing recession back to the attitudes toward open markets and against deregulation that led to Enron's disgraceful collapse.  What amazes me is the support that this "free market" philosophy still gathers as embodied by the large number of Tea Partiers elected in 2010 and currently holding sway in the Republican congressional majority.  The nation elected people with the same failed political philosophy that got us into the mess. 

Frank lists five elements of the current and future corporate scandals and financial crises:

• Deregulation "either by law or by the de facto dumbing down or hacking back of the supervisory offices of government".  This culminated in the Commodity Futres Modernization Act of 2000 that is at the heart of the current problems.  This act created "regulatory blind spots not only in energy derivatives but also in credit swap defaults".  It was the later that was directly responsible for the 2008 collapse.
• The short-circuiting, buy-off, or capture of the private sector's oversight mechanisms.  Enron blazed the trail here but there are plenty of other examples - for example, credit-rating agencies giving "worthless mortgage-backed securities their seal of approval".
• The next scandal will "display the truculent culture of the trading floor."  The Tea Party movement was started by a business reporter from the floor of the Chicago Board of Trade.
• "Unconsciuos journalistic perversity" that has in the past applauded the worst offenders before these collapsed and "kept politicians" who write the regulations Wall Street's way.
• The final (and most important feature) of the next scandal/collapse is that "we will not get it".  As Frank puts it:  "We will convince ourselves that these terrible things happened to us because markets are not free enough - that our only mistake was in not carrying our campaigns for deregulation or tax cuts to their logical conclusions.

With the Citizens United ruling ensuring unlimited corporate cash to conservative political candidates and with Republican governors' efforts to disenfranchise by means of the new "poll tax" (i.e., identity cards and other registration obstacles) voters who normally vote for (pro-regulation) Democrats, the next financial crisis is just around the corner.

And after the next collapse, you can expect the Tea Partiers and the corporate shills to be elected and re-elected because we are that ignorant.