I’ve been suffering from an ear worm for the past few days. Every time I read the headlines, I hear President Gerald Ford’s voice in my head. He’s always saying the same thing, too:
A government big enough to give you everything you want is a government big enough to take from you everything you have.
Pithy, isn’t it? Sometimes a pithy saying obscures the truth or means nothing at all. But there are some pithy sayings that go to the heart of the issue — and with this one, Gerald Ford nailed it.
Right now, the government wants to take away private control over money. Barack Obama phrased it as “reform,” with the government over seeing even those banks he concedes are “best-managed”:
“JPMorgan is one of the best-managed banks there is,” Obama said during an interview on ABC’s “The View”, which will air on Tuesday. “Jamie Dimon, the head of it, is one of the smartest bankers we got, and they still lost $2 billion and counting.”
According to the president, if even a bank as well-managed as JPMorgan could make an error this glaring, other banks are susceptible to similar blunders.
“You could have a bank that isn’t as strong, isn’t as profitable, managing those same bets and we might have had to step in,” Obama said. “That’s why Wall Street reform is so important.”
Elizabeth Warren was more direct:
The era of self-regulation on Wall Street needs to end now, Elizabeth Warren says.
The Democratic candidate for Massachusetts Senate told CBS News Monday that America has to say “no, the banks cannot regulate themselves.” The comments were made in reference to JPMorgan Chase’s $2 billion trading loss on Thursday.
“Regulation” is not the same as the system we have now, which is a series of rules governing banks (and more on those rules later). The regulation the Obam-ites envision really means central control of America’s financial systems, with the government calling the shots. If they didn’t envision more government control, we’d be right back at our rules-based system.
As for the rules-based system (I promised I’d get back to it), that in itself is a laughable disaster. There are too many rules, and they are too poorly written. I’ve worked on banking related litigation and can tell you that, between the Code of Federal Regulations and the various state rules (a) nobody can get it right and (b) there is room for enough loopholes to make all the rules mere tools for those bent on nefarious behavior.
The government is promising order yet once it takes control over the banks, what’s to stop it from simply nationalizing the system? Once the banks become indistinguishable from the government, we won’t have stability. Instead, we’ll have reprise of what happened with social security. Aside from being poorly managed, the government simply raided the “lock box.”
Yes, banks make errors. Yes, big banks make big errors. The smart solution is to have a few rules that are unbreakable — easy to follow; easy to police — rather than to trust a government that says, “We’re just here to help.”