Financial Reform: Institutionalizing the “Bailout”

July 15, 2010 - PRLog -- Contact:
Jennifer DeSanctis-Narby
Communications Director               
Staten Island Libertarian Party
jennifer.narby@statenislandlp.org                              
Financial Reform:  Institutionalizing the “Bailout”

The Wall Street Reform and Consumer Protection Act (H.R. 4173) currently working its way through the Senate, will soon land on the President’s desk, and yet there is no reform in sight. The political and banking establishments want us to think that by passing this financial reform bill, the bailouts will be ended, excessive risk taking will be eliminated, and Americans will be shielded from the potential instability of the marketplace.  None of this is true, and it must be recognized why.

To begin, most Americans are against bailouts.  They understand the risks inherent in business, many from personal experience.  They know that when their own businesses fail, there will be no bailout.  Good business decisions are rewarded with profits, and bad business decisions are punished with losses.  This fact is rooted in both liberty and common sense.  People must be free to succeed or to fail on their own merits.  

Though Americans are against bailouts, and have been promised reform that will end the practice, this bill will do the opposite.  Like it or not, the Federal Reserve is the central bank of the United States, and the “lender of last resort.”  This means the Fed will continue to lend to favored political interests and foreign governments, such as Greece, when no one else will.  The entire purpose of the Fed is to create new money and lend it to insolvent institutions.  Under this legislation, the practice will continue with a new level of official secrecy.  

The tool that will be used to institutionalize the bailout process will be the Financial Stability Oversight Council.  Through the council, the government and the Federal Reserve (note they are not the same thing) will have the ability to break up large companies, regulate individual companies, and require companies to operate under strict Federal Reserve supervision, among other highly intrusive and utterly unprecedented powers.

Politicians only understand a few things.  One of them is money, and another is a vote.  This is why, in order to maintain the status quo, the bailout process must be even more secretive moving forward.  The political and banking powers will not risk angering the American people as they did in 2008.  The continued dominance of the Washington and banking establishments depends on the people being unaware or indifferent to what is happening to our country.  In the opinion of politicians and bankers, the window of transparency must remain closed, lest we discover the true corruption and ineptitude taking place. It is for this reason that the Federal Reserve audit was stripped from the bill at the last minute, despite the original legislation having over 300 cosponsors (H.R. 1207).  

In the end, it is the American citizens who will get stuck with the tab as the Federal Reserve continues the “lender of last resort” policy.  Responsible Americans who work hard and try to save money will end up paying the price for the excesses of the political and banking classes.

As the Federal Reserve continues to lend unabated to foreign governments and Wall Street banks, the money supply will be continually expanded, and the value of the dollar will continue to fall.  The dollar is diluted as the Fed creates money out of thin air to lend its powerful friends. Drastically higher prices and interest rates are the predictable outcomes of such policies.

If these dangerous actions are left unchecked, we should expect that the day will come when the dollar plummets and we experience a currency crisis.  In history, all paper currencies, such as our dollar, have fallen to zero value.  We should not expect a different outcome, as Washington is repeating old-age mistakes with their reckless monetary policy.

[The author, Tom Vendittelli, is a candidate for Congress in New York’s 13th district.  This is the second of a three part series on financial reform.]

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