Investment banking giant Lehman Brothers is about to file bankruptcy. Merrill Lynch is putting the finishing touches on a forced sell out to Bank of America. Insurance giant A.I.G. is frantically reorganizing to try and avoid implosion.
This wave of failure can be laid at the feet of George W. Bush and the Republican Party, for failing to properly regulate business. Conservatives love to rail against the regulation of business--until businesses fail from the lack of it. Then they demand bailouts, corporate welfare that they then condemn as "socialism."
Here's what arch conservative Ben Stein had to say about the current Wall Street fiasco:
Then there is that aspect of the war against Washington in which candidates — very often, my fellow Republicans — rage against the machine of regulation. Indeed, this is a constant refrain of the conservatives I call my pals. Regulation is stifling growth and entrepreneurship, they say.Yes, American taxpayers will foot the bill for this latest evidence of the incompetence of George W. Bush and the Republican Party. I hope they remember that when they cast their ballots this year.
With respect, I don’t see it. Look at the major debacles in the economy in the past quarter-century. The junk-bond scandal of the 1980s was largely a result of a failure of regulation. The tech boom of the 1990s and the subsequent bust were greatly facilitated by a lack of regulation over fiduciary behavior by underwriters and investment banks. The problem was not too much regulation, but far too little.
OR look at the current financial madness caused by wildly imprudent lending by major banks and investment banks. Basically, a major piece of deregulation, the Gramm-Leach-Bliley Act, overturned most of the laws that had kept commercial banks and investment banks separate. This made it much easier for monster-size banks to lay down enormous bets on the direction of housing prices.
When these bets turned out to be wrong, the losses to the banks and their stockholders were staggering. (Naturally, those who approved these wagers left, if they left at all, with monster-size severance. You and I will pick up the monster-size bill in many different ways.)