The Fallacy of “Financial Reform”
B.J. Lawson is a candidate for the House of Representatives in North Carolina’s Fourth District. To learn more about his candidacy, please visit www.lawsonforcongress.com.
We’re being treated to legislative bread and circuses with the recently-passed financial “reform” bill. Putting aside the irony of a “Consumer Protection Bureau” being housed in the Federal Reserve, whose shareholders are the largest banks while also being tasked with regulating the largest banks… we’re being distracted by these “reform” efforts in the face of the largest looting operation in American history.
Here’s how it works: in our world of “global ZIRP” (zero interest rate policy), banks get to borrow from the Federal Reserve at essentially zero interest. But instead of making loans to Main Street based upon those borrowings, banks are buying Treasury debt hand over fist to finance our massive deficit spending while pocketing 2-4% interest on the backs of American taxpayers.
Wouldn’t you like the opportunity to borrow at zero and lend at 3% to the federal government? Sure beats working for a living.
Henry Blodget wrote two excellent articles on the racket a few months ago: How to Make the World’s Easiest $1 Billion, and The Fed’s “Exit Plan” is Just Another Secret Gift to Wall Street.
Herein lies a fundamental problem with our financial system: the federal government cannot “regulate” the banks. The federal government needs the banks, especially as our government debt becomes less attractive to foreign lenders.
The federal government is the lender and spender of last resort in our Keynesian nightmare. Without banks’ willingness to buy up our government’s exponentially-increasing debt using newly-created credit from the Fed, Washington’s ability to buy votes, dispense corporate welfare to its campaign donors, and keep the masses entertained with signs trumpeting stimulus projects comes to an end.
We might as well let meth addicts regulate meth pushers.