Wall Street's Connection to Main Street Has Divided Us
Now that a connection between Main Street and Wall Street has been made, responsibility has to be taken by the powerful entity which has made the other entity even more powerless. by KLH
(liberal)
Tuesday, October 11, 2011
Today presidential hopeful and current frontrunner Mitt Romney admitted that Wall Street is connected to Main Street. While not a Republican, I totally agree with him on that and I think that is what many of us have been saying all along. So the sins of Wall Street are being paid for by Main Street and even with my limited economic knowledge, I now understand that the market plays a large part in the stability, or currently the instability, of the economy. That being said, now that the Wall Street connection to the rest of America has been established I think that is enough justification for there to be regulations. When two entities are connected, regulations (i.e. rules) are made so that both sides benefit from and are protected within the relationship while having the maximum amount of freedom to do what they want.
The unrestricted buying and selling has allowed a small percentage to get very rich while those same actions can get someone laid off which can result in not being able to pay one’s bills and can lead to foreclosure, bad credit, etc. The bad credit makes it hard to even get a halfway decent job and the cycle continues. So when Republicans say that the Occupy Wall Street protests are divisive, I say “we were divided a long time ago and Main Street didn’t even realize it.”
The freewheeling Wall Street was acting in ways that were for some time unknowingly unraveling the economic fabric of our society. The stability ensured by the middle class and programs for them and the less fortunate are now being sacrificed because those on Wall Street did not care about how maximizing their already huge profits would affect their fellow man. And even though a presidential candidate can suggest seceding from the Union, those that have paid for the Sins of Wall Street are being looked at as un-American when they exercise their right to peacefully assemble.
Now it is clearly known what has happened and as people were becoming aware of its undoing, they voted in senators and congressmen at the state and federal levels who promised to “strengthen the middle class” and “grow the economy” but all we have gotten is voter suppression laws, homophobia, restricted reproductive rights, Islamaphobia, budget cuts that are not getting us out of this recession and possibly a law that can prosecute an American for using pot anywhere in the world. Whew! That last one is going to really help me sleep better at night. There is also a brewing plot to dismantle Medicare and Social Security as we know it…and like it. The really scary thing to me is that many people still think that these politicians are looking out for the working man and will probably vote for them again.
A world-wide transaction tax has been proposed and I support it. Most people believe a very small rate (below 1% per share) would be sufficient and if it makes the market more stable, I can’t be against it. I know that easy credit given to those on Main Street has been a common factor cited by many as part of the downfall, and although I do not have it completely figured out, I can only conclude that subprime loans and obtaining huge credit lines with ease was done in hopes that someone on Wall Street was going to benefit since they are the more powerful entity.
The flip side of this in my mind is this; how is Wall Street going to continue to benefit if Main Street is left behind in tatters? My guess is that Wall Street is working on a global level in terms of their buying and trading but what happens if their unchecked behavior continues will they end up screwing everyone else around the world? We already are seeing signs of an economic slowdown in China and Canada and parts of Europe, a continent that has become the world’s official economic harbinger. Corporations may see the rest of us as disposable labor, but we are also invaluable consumers (right Netflix?) and if the majority of people in industrialized countries cannot consume their products anymore or choose not to, where does that leave companies and ultimately Wall Street? Because Wall Street and Main Street are connected, one side’s catastrophe will eventually be the other’s undoing. Wall Street has done their part in destroying Main Street but it’s only a matter of time before the damage ravaged upon the Main Streets of the world will catch up to them. And this time there will be no one to bail them out.
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Posted By: Walt
Date: October 11, 2011 07:16:46 AM
Like so many on both the left and the right, you are confused about the nature of regulation. You believe in the unstated assumption that regulation places limits on the ability to do harm. In reality, regulation licenses and grants approval to do harm. It only limits the size and membership of the class of people who are legally licensed and permitted to engage in harming others for profit.
The difference between regulation and prohibition is that prohibition makes something illegal for everyone, whereas regulation makes something illegal for some but not for others. In other words, regulation creates different classes of people and organizations, and those who are granted the so-called "right" to harm others while simultaneously denying that same "right" to others put the lucky few in a tremendous position of advantage over the the rest. This is the essence of the Wall Street / Main Street connection.
More specifically, the nature of that connection is one of legalized theft. It starts in the banks. Banks are the only kind of business on earth that are permitted by law (regulation) to lend out money that doesn't belong to them without the permission of the depositors to whom that money belongs. This creates a long chain of events that inevitably leads to default unless regulated or prohibited. People like you choose regulation, so various obstacles are placed in the way to make it more difficult for default to take place. But because regulation permits some to continue to harm others while denying this same "right" to everyone else, banks are permitted to continue to lend money that doesn't belong to them. This effectively transfers the risk from the banks to the depositors and ultimately to society as a whole. From the point of view of someone who invests in legalized theft, this is an ideal scenario. Investors of this kind are constantly looking for ways to make big profits without being responsible for incurring the risks because they use the law to effectively transfer the risk to someone else, usually you and me.
This is the inevitable result of regulation. It's regulation that makes this kind of transfer of risk possible, and it's regulation which continues indefinitely the pattern of allowing some to get rich by harming others.
So you should think twice about your support of regulation.
Posted By: Bill Gee
Date: October 11, 2011 08:17:34 AM
Walt,
I agree - when the banks and the largest corporate entities control the regulatory process itself, it is the smaller firms that are squeezed out of existence or they are denied to exist at all.
For example, when the first "mark-to-market" rules were written by the Financial Accounting Standards Board (FASB), accountants from AIG, JP Morgan, Goldman Sachs, etc. were given most of the power to create the new rules. As many in the securities valuation business know, reporting securities at Fair-Value can be a costly process, especially when dealing with complex derivative products that are traded outside of normal market channels. So what these guys did was they instituted a "materiality threshold" for the level of disclosure that was needed. If an entity had over $100 Billion in invested assets, then they were not required to disclose the same level of pricing and risk details than companies that held under $100 Billion in invested assets. The idea was that the impact on a few bad investments wouldn't affect the "going concern" of such a large entity, so why disclose it? In reality, what it did was it provided cover for AIG and other Investment Banks to hide hundreds of billions of dollars in questionable assets that didn't blow up in their faces until the 2008 Financial Crisis!
Therefore, before we start proposing new regulations on the financial industry, the first thing we need to do is to kick the corporate robber-barrons out of the regulatory bodies altogether. Then while we're at it, we need to kick them out of the Federal, state and local governments as well and we need to end their ability to influence government officials by making it illegal for them to get involved in the election process.
Then we'll see where the cards fall. We may find that we don't need any new regulations at all.
