We often despise referees in our sports. But if NFL players used their fat paychecks to pay officials to stay off the field, while contending that they could officiate themselves, we'd laugh at the insanity and keep our ticket money in our wallets.
The only thing such a setup would ensure is that the best cheaters would prevail. Because a sport that abandons objective rule keeping encourages dirty play. Without rules, the dirtiest will gain an edge.
We look at third-world governments and recognize this. Many nations have lax rules that would make us cringe. And many have bribery systems in every day life. I remember traveling by train in eastern Europe. Men in uniform came through demanding a "tax." We asked for an explanation. It was, they said, a "tax on the tax." We knew we were getting ripped off. These men were just taking advantage of us, but we didn't want to get booted from the train in a foreign land. We paid up.
I believe our nation works on bribes, too. But it's a more sophisticated system. And if we break down into Republican vs. Democrat bickering yet again, I think we miss the point. Our lawmakers in Washington in both parties are more beholden to their contributors than their constituents. Of course, this is said so often it's become cliché. But I don’t think it’s as much a matter of moral lacking in individuals as it is systemic truth. It’s the way the political game is played.
But I think it's ultimately this dubious back-scratching relationship between Washington and Wall Street that led to our economic collapse. And I fear that our public is too divided politically to demand action on the profound conflict of interest in this relationship.
Our financial sector more than doubled over the past 20 years, even as our manufacturing nosedived — save home construction. Isn't that curious? This was due primarily to the fact that Washington lawmakers eliminated rules for their Wall Street contributors. That's surely a yawner of a statement. But think about it. This is the equivalent of football squads paying referees to get lost. The resulting chaos in the money game on Wall Street — and yes, it is a game — can't be a surprise.
Both Republicans and Democrats supported this. The reason? Well, it's hard to say "no" to a man stuffing your pocket with cash. If the guy forking money to you says he is smart enough to play without solid rules, don't you want to believe him?
Of course, proponents of financial deregulation touted it as a way to "encourage financial innovation." But I believe "financial innovation" is — at least in many cases — a fancy way of "making something out of nothing." With Washington's blessing, Wall Street leveraged huge amounts of cash with no collateral to support it. What developed was a huge game of "shadow money," people trading what's not really there, a risky form of gambling that imperiled the economy. The easy housing loans were fuel for this trading. Those loans were made, then they were grouped with other debts and sold. People were making all this money trading the same shaky loans over and over again. They were ultimately trading all this value that really wasn’t there.
Our major financial institutions that participated in this reckless system were bailed out, despite their actions, by the same Washington lawmakers who took their contributions and enabled them to play fast and loose with the rules.
Now, the bailouts are infuriating for sure, but they at least stopped a run on the banks by depositors. The FDIC is now running out of money, even though they’ve only had to save some small banks. If major banks went under, there’s no way the FDIC could have sandbagged that flood of panic. So, the bailouts were utterly disgusting and terribly unjust to all of us, but I understand the logic, given the possibility of a total banking meltdown.
What I don’t understand is the lack of momentum now for actual reform of the finance industry. After all we’ve seen, do we still want to put blind trust in Wall Street to live without solid rules? If we say yes, I think we are in the same boat as the Bernie Madoff victims. Fact is, we put our retirement money on the line for reckless gamblers. The nation, both Republicans and Democrats, ought to shout that we’ve had enough of that. We want real rules that establish fair play. We want a system that doesn’t reward deception and excessive risk taking.
I’m worried though, that the everlasting left-right fight is too exciting and too much a part of our current national character for us to really notice the bigger picture that transcends party squabbling. I fear that we’ll be duped again.
Zach Mitcham is editor of The Madison County Journal.