USA, the Land of Crises — Sex Instead of Supervision
Two Crises, One Cause: The Monitoring of Companies in the United States Has Completely Gone to Rack During the Republican Administration and Has Not Only Enabled a Financial Crisis, but Also the Oil Spill in the Gulf of Mexico.
Whoever ponders the commonalities of the oil spill in the Gulf of Mexico and the financial crisis at Wall Street runs the risk of losing grip on reality; one could philosophize about the probability of the almost impossible, about the deceptive appearance of statistical forecasts and about the hubris of human risk management.
But the parallels are much more concrete. The bitter truth is that many officials in responsible supervisory agencies prefer searching the Internet for porno clips to looking over the shoulder of investment bankers and oil managers. The neglect of American civil servants connects both crises much more than any other pattern that could be found during a trip down abstraction lane. The financial crisis and the oil spill are the results of a gross violation of state responsibilities; a violation, however, that happened with intent and arose from ideological calculations. Thus, the violation was not an accident and did not result from carelessness. It was politically intended.
The Republicans, who ruled Washington until the end of 2008, had blind faith in the self-regulation of markets. Bureaucratic obstacles were deliberately smoothed out to exhaust all potentials for growth. While financial institutions were allowed to bring an increasing number of complex derivatives on the market, authorities permitted oil companies to drill deeper and deeper and did not waste a single thought on the “what if’s.”
Security Has Its Price
What if a major financial institution collapsed? What if the honorable Mr. Madoff turned out to be a fraudster? What if an explosion shook up an oil rig and oil lines sprung a leak? At first glance, disguised in an enticing academic getup, the belief that companies would take extra precautions against potential crises out of self-interest arises. This belief can lean on the impressive theoretical framework of the orthodox liberal economy, but it rests on assumptions whose simplicities do not fit into the realities of a globalized world economy. Without a doubt, companies have no interest in financial crises and oil spills; instead, they are competing with each other and have to fear being put out of business by their rivals if they act too cautiously. Security comes at a price, and whoever pays it gets the short end of the stick if the government does not enforce standards.
Failure of the Inspectors
The administration under George W. Bush refused to see reason. Regulation authorities were condemned to idleness and those inspectors who took their jobs seriously were worn down. Particularly gone awry was MMS, the natural resource supervision department. Employees of MMS did not just leave it at the consumption of pornographic material on government computers: they went to bed with employees of BP, Exxon and others; they dined at their companies’ expense; some were addicted to drugs. The stock exchange supervision agency, SEC, acted a bit more orderly, but its failure was still no less than that of MMS: Madoff’s Ponzi scheme only leaked out once he ran out of money, and Bear Stearns’ and Lehman Brothers’ ill-fated business ventures remained concealed from the SEC.
President Barack Obama has to enforce the return to basic governmental functions, politically and culturally. He has made some progress concerning the SEC: the agency has regained its self-esteem under new leadership and has even dared to sue the powerful investment bank Goldman Sachs. Nuisances at the MMS continue, however. The president, who appeared helpless over the last few weeks, now has to demonstrate strong leadership. He certainly cannot count on any help from the opposition. The Republicans have continued to radicalize, driven forth by the fundamentalist Tea-Party-Movement. Nothing bears witness to this as much as the comment that Rand Paul, the founder of right-winged government critics and Republican candidate for the Senate, made about the oil spill: “Sometimes accidents happen.”
Whoever ponders the commonalities of the oil spill in the Gulf of Mexico and the financial crisis at Wall Street runs the risk of losing grip on reality; one could philosophize about the probability of the almost impossible, about the deceptive appearance of statistical forecasts and about the hubris of human risk management.
But the parallels are much more concrete. The bitter truth is that many officials in responsible supervisory agencies prefer searching the Internet for porno clips to looking over the shoulder of investment bankers and oil managers. The neglect of American civil servants connects both crises much more than any other pattern that could be found during a trip down abstraction lane. The financial crisis and the oil spill are the results of a gross violation of state responsibilities; a violation, however, that happened with intent and arose from ideological calculations. Thus, the violation was not an accident and did not result from carelessness. It was politically intended.
The Republicans, who ruled Washington until the end of 2008, had blind faith in the self-regulation of markets. Bureaucratic obstacles were deliberately smoothed out to exhaust all potentials for growth. While financial institutions were allowed to bring an increasing number of complex derivatives on the market, authorities permitted oil companies to drill deeper and deeper and did not waste a single thought on the “what if’s.”
Security Has Its Price
What if a major financial institution collapsed? What if the honorable Mr. Madoff turned out to be a fraudster? What if an explosion shook up an oil rig and oil lines sprung a leak? At first glance, disguised in an enticing academic getup, the belief that companies would take extra precautions against potential crises out of self-interest arises. This belief can lean on the impressive theoretical framework of the orthodox liberal economy, but it rests on assumptions whose simplicities do not fit into the realities of a globalized world economy. Without a doubt, companies have no interest in financial crises and oil spills; instead, they are competing with each other and have to fear being put out of business by their rivals if they act too cautiously. Security comes at a price, and whoever pays it gets the short end of the stick if the government does not enforce standards.
Failure of the Inspectors
The administration under George W. Bush refused to see reason. Regulation authorities were condemned to idleness and those inspectors who took their jobs seriously were worn down. Particularly gone awry was MMS, the natural resource supervision department. Employees of MMS did not just leave it at the consumption of pornographic material on government computers: they went to bed with employees of BP, Exxon and others; they dined at their companies’ expense; some were addicted to drugs. The stock exchange supervision agency, SEC, acted a bit more orderly, but its failure was still no less than that of MMS: Madoff’s Ponzi scheme only leaked out once he ran out of money, and Bear Stearns’ and Lehman Brothers’ ill-fated business ventures remained concealed from the SEC.
President Barack Obama has to enforce the return to basic governmental functions, politically and culturally. He has made some progress concerning the SEC: the agency has regained its self-esteem under new leadership and has even dared to sue the powerful investment bank Goldman Sachs. Nuisances at the MMS continue, however. The president, who appeared helpless over the last few weeks, now has to demonstrate strong leadership. He certainly cannot count on any help from the opposition. The Republicans have continued to radicalize, driven forth by the fundamentalist Tea-Party-Movement. Nothing bears witness to this as much as the comment that Rand Paul, the founder of right-winged government critics and Republican candidate for the Senate, made about the oil spill: “Sometimes accidents happen.”
None of this is true. First, it was the Democrat Administration under Clinton which repealed the law holding banks accountable for their actions. That was the Glass-Steagal Act. Second, in no case can a corporation be punished, which is exactly why they were created, so the idea of holding them accountable is sheer fantasy.
If you wish to fantasize, do it in private, and wash your hands afterward.