We're Deep In The March Toward Economic Socialism

Of course, it’s being done under the guise of the dual mandate, gifted to the Federal Reserve by our Congress a few decades ago. You know, the dual mandate that says, besides price stability, the Fed is tasked with manifesting full employment, too.

Forget that that’s an abdication of fiscal policy, an abdication by our Congress and American leadership (what’s that?).

Just realize that it was a gift to the Central Bank to cover the butts (print money) of their banker constituents when they (the greedy bankers) get themselves into trouble with their moneyraking schemes.

Banks are facing billions in lawsuits. They’ve already paid out billions.

Bank of America just settled a class-action suit for $2.4 billion. What was the suit about? BOA executives misled shareholders at the time of the financial crisis. Forget the specifics; was there a single bank in America that didn’t mislead the public and their shareholders at the time of the financial crisis? Not a one.

And the Fed? Did they mislead the public? Of course they did. But they can’t be sued.

So, the Fed is making sure the banks have the money they need, the liquidity they need, to deal with ongoing litigation, litigation that won’t end any time soon.

And about those capital ratios…

Basel III was supposed to increase the equity capital ratios banks have to maintain. What happened? The benchmarks have all been raised, but they are far lower than all the academics and prudent regulators wanted.

The main equity capital ratio was supposed to be between 7% and 11%, with the consensus being 10%. We got 7%. How? The U.S. Treasury Secretary and the head of the Office of the Comptroller of the Currency undermined the Basel Committee’s intentions and teamed up with the French and Germans to lower the ratio.

How do I know? It’s in “Bull by the Horns,” the new book by Sheila Bair, the former chairman of the FDIC. (Read it.)

Here’s one excerpt: Bair wrote in a memo after an Aug. 6, 2010, meeting with Geithner, “Why do we keep making banking policy to accommodate weak institutions? Keep hoping our relationship will improve, but this was a new low.”

Socialized risk is killing the free market “clearing” mechanisms that would have made our pain coming out of the financial crisis really bad. But they’d also put us much farther along in the healing process than we are now.

Instead, today, we’re deep in the march towards socialism, with the central bankers of America and the world leading the charge.

And if this isn’t cut out like a cancer ought to be, our economic future will be subject to a constant nagging fungus – the fungus of failed capitalism.

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