Tim Carney says Goldman is using the GOP and the Democrats for a one-two punch to game regulation reform, just like the drug companies and AHIP did on the health care bill:
At least three times in Goldman’s conference call Tuesday, spokesmen trumpeted the firm’s support for more federal control.
Vague public calls for “reasonable regulation,” of course, are often little more than smoke. But Goldman’s annual report explicitly endorsed stricter federal capital and liquidity requirements. Goldman reported on the conference call that it holds 15 percent “Tier 1 capital,” meaning it is very liquid and not very risky. Goldman can play it safe, you see, without needing a regulation. But regulations prevent smaller competitors from taking the risks needed to compete with Goldman (and every competitor is smaller).
It’s a game that nobody plays as well as Goldman, but all the big banks will have a hand in crafting this “reform.” Consider the recent flap over the $50 billion resolution fund in the Senate bill. Banks didn’t like the resolution fund, because it would be capitalized by a bank tax. Republicans rightly attacked the bill for institutionalizing bailouts, but focusing on the $50 billion was a bit of a distraction. Some leading Democrats are now ready to back away from the $50 billion and the bank tax, which just means that we now have unfunded implicit bailouts. The banks win.
So, just as drug companies and insurers used Republicans to kill the public option before using Democrats to mandate insurance and subsidize drugs, big banks are using Republicans to kill a bank tax while using Democrats to erect barriers to entry, to institutionalize bailouts, and to restore confidence in Wall Street.
He’s right, of course. They carve up all the stuff they don’t like, and task the GOP with demagoguing “socialism” and “fiscal irresponsibility” The Democrats get “regulation” that freezes out competition. Whoever has the “majority” gets to pick up the check.
Carney hits on a very important point — in this new world order of supercorporations who earn their phantom profits by investing in politics, it is the “small businesses” who are being stifled and frozen out. Building a better mouse trap no longer matters, because the Acme Mouse Trap Company is writing legislation that makes it impossible to sell yours. Acme can build the shittiest mouse trap in the world, and never have to innovate, because their market is protected, their failures are subsidized and they pay no taxes. That gives them more money to plug back into the political system, and the cycle begins again.
It’s sucking the life out of the very businesses that generate economic growth and create jobs. In the health care bill the generic drug makers got the shaft on biologics so PhRMA could enjoy endless IP protection, which they demanded in a show of brute political force. It will not only keep health care costs sky high around the world but limit access to important new drugs developed with taxpayer money that are thus rendered free from generic competition. Medicare subsidies were set at the level they were because that’s what the average WalMart worker makes, and the Waltons very much wanted to keep their family money and let taxpayers pick up their health care tab.
Likewise, Wall Street banks profit at the expense of state banks and (in the case of Aurora) the hedge funds. And until the “small businesses” recognize that their interests are separate and distinct from the supercorporations who are sucking them dry by gaming the political system, it will only get worse. Democrats and Republicans merely play their respective parts in a competition for corporate patronage. And in the end, the banks as Carney says won’t have to “capture” any regulatory agency — rather, they are “born in the custody of the businesses they regulate.”