The Cooper Union SpeechMar 31st, 2008 | By Jonathan Golob | Category: Economics
Have you heard Obama’s Cooper Union Speech? You should.
The key except:
A free market was never meant to be a free license to take whatever you can get, however you can get it. That’s why we’ve put in place rules of the road: to make competition fair and open, and honest…
I think that all of us here today would acknowledge that we’ve lost some of that sense of shared prosperity. Now, this loss has not happened by accident. It’s because of decisions made in board rooms, on trading floors and in Washington. Under Republican and Democratic administrations, we’ve failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practice. We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both. Nor is this trend new. The concentrations of economic power and the failures of our political system to protect the American economy and American consumers from its worst excesses have been a staple of our past: most famously in the 1920s, when such excesses ultimately plunged the country into the Great Depression. That is when government stepped in to create a series of regulatory structures, from FDIC to the Glass-Steagall Act, to serve as a corrective, to protect the American people and American business.
Ironically, it was in reaction to the high taxes and some of the outmoded structures of the New Deal that both individuals and institutions in the ’80s and ’90s began pushing for changes to this regulatory structure. But instead of sensible reform that rewarded success and freed the creative forces of the market, too often we’ve excused and even embraced an ethic of greed, corner cutting, insider dealing, things that have always threatened the long-term stability of our economic system…
Partial deregulation of the electricity sector enabled (inaudible). Companies like Enron and WorldCom took advantage of the new regulatory environment to push the envelope, pump up earnings, disguise losses and otherwise engage in accounting fraud to make their profits look better, a practice that led investors to question the balance sheets of all companies and severely damaged public trust in capital markets. This was not the invisible hand at work. Instead, it was the hand of industry lobbyists tilting the playing field in Washington as well as an accounting industry that had developed powerful conflicts of interest and a financial sector that had fueled over-investment. A decade later we have deregulated the financial sector and we face another crisis. A regulatory structure set up for banks in the 1930s needed to change, because the nature of business had changed. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework. And since then we’ve overseen 21st century innovation, including the aggressive introduction of new and complex financial instruments like hedge funds and non-bank financial companies, with outdated 20th century regulatory tools. New conflicts of interest recalled the worst excesses of the past, like the outrageous news that we learned just yesterday of KPMG allowing a lender to report profits instead of losses so that both parties could make a quick buck. Not surprisingly, the regulatory environment failed to keep pace. When subprime mortgage lending took a reckless and unsustainable turn, a patchwork of regulators were unable or unwilling to protect the American people.
For someone like me, a total wonk, this is an enrapturing; it’s just so damn Keynesian. It would be hard to write a clearer, more succinct or compelling dissection of our present financial fiasco.
Any person willing to make the difficult historical connections, to appropriately share the blame for the present crisis’s origins, to see and relate the ugliest truths about our present economic crisis–in midst of a vicious campaign no less–deserves some respect.