Wall Street No Longer Believes in Capitalism

It is amazing to see that Wall Street is so willing to throw ideals of capitalism under the bus. We are being told that the problem with the current financial sector is that there is about a $1-3 trillion worth of "toxic assets" on their books. But "toxic assets" is only a fancy propaganda way of saying bad investments. The toxic assets are simply assets that the banks paid too much money for and now can't sell for a good price.

The foundation of capitalism was summed up by Adam Smith as "Everything is worth what its purchasers will pay for it". Yet America is being told to now ignore that principal. The market is willing to purchase these "toxic assets" at about 25 cents on the dollar. By definition that is their true value. The banks don't want to sell their "toxic assets," not because they honestly think they are worth more than 25 cents on the dollar because if they did, they would be forced to acknowledge that they are bankrupt.

The banks want us to ignore the principles of capitalism now that they are no longer working to their advantage. Their hope is that the government will allow itself to be ripped off by purchasing the "toxic assets" for more than they are worth (by the definition of free market economics: what the market is willing to pay for them). Or by insuring a pricing floor individuals willing to purchase the "toxic assets." People who buy the "toxic assets" would make a profit if the assets gained value, and the government would pay them if they lost value. This would only perpetuate the tails-you-win, heads-we-lose mentality which ruined the market.

The simple problem with the major banks is that they are already bankrupt, but neither the banks, Wall Street, Barack Obama, or Tim Geithner want to admit it. Any plan put forward to deal with the "toxic assets" without taking over the banks involves the American tax payers absorbing their trillions of dollars in losses for them. There is no such thing as a "toxic asset," only a bad investment. The banks made plenty on them, and now they want the government to buy them at twice their real value.

Deregulation: An Insult to Capitalism

The Republican's irrational push for complete economic deregulation is an insult to one of the nation's founding principles: capitalism. Capitalism has succeeded while other systems have fallen by the wayside for one simple reason: greed. Other economic/political systems have tried to ignore or eliminate greed, but not capitalism. Capitalism accepts that greed and ambition are inherit human qualities. Since they can't be eliminated, they should be exploited to produce prosperity.

While greed unleashed has a huge potential for good, it is still greed: the sin which is also the root of evil. Greed is a strong draft horse. If left to its own devices on the farm, it would destroy the crops. It needs to be put to the yoke and guided to get work done. The secret is the make the yoke as light has possible and make sure it does not choke the beast.

Anyone who has studied history should understand the insanity of deregulation for the sake of deregulation. It was the unregulated, profit-at-any-cost labor market that gave the world the slave trade. The unregulated food market gave us Sinclair's The Jungle and recently, poisonous Chinese baby formula. The unregulated capital market is that of the mafia loan shark.

There are great reasons to reduce some regulations. Foolish or overbearing regulations can unnecessarily cripple businesses. They can even drive segments of the economy into the black market. But regulation is necessary to produce trust and broad prosperity in society. To ignore the need for regulation is the ignore the reason capitalism works. The system is powered by greed, and greed will always encourage people to cut corners, run scams, and cheat. The Republican party should stop pushing for deregulation and work towards balanced regulation.