Apply Compensation Recovered from Financial Sector to Rebuilding Our Infrastructure

The purpose of the financial sector is to manage and encourage the nation’s flow of capital for beneficial uses. To obtain this service the nation has dedicated trillions of dollars to the industry. The sector, however, has lost or wasted a significant portion of these funds in a constant search for its own profits. This mismanagement has resulted in a major catastrophe for the nation and great harm to the lives of millions of citizens. Minimum operation was only partially returned to the completely disgraced system by the Government providing large injections of funds and guaranteeing the solvency of the major banks.


If the principles of capitalism had been applied at least six major banks would have been allowed to fail. The Government, in a tough decision to make, concluded that such widespread failure would present such a shock to the economy that we would enter a full fledged depression equal to or worse than any every experienced. They were in a position where they had to support incompetence to prevent a greater negative.

I cannot judge the wisdom of this decision. A complete breakdown was avoided. The banks are now making profits as usual but the nation still struggles with massive unemployment and lack of investment. Because of the recession and the associated loss of revenue we cannot even find the political courage for essential investing in the nation’s infrastructure.

In July 2110 the Dodd-Frank bill was passed to correct many of the financial sector operations which lead to this catastrophe. Having been saved by the Government intervention you would think that the industry would be despite to make amends and correct its’ errors. Instead it is spending large sums with lobbyists to prevent the laws effective implementation and to allow continuing with their operations and profit motivations unchanged.

There is no business sector that is held in less regard by the public than financials. The financial sector morally owes the country serious compensation to even allow it to continue to exist as currently structured. This is compensation that could be directly applied to infrastructure improvements and the associated employment.

The country needs it now.

Is Washington Serious About Financial Reform?

On December 31, 2010 we reviewed an article in BusinessWeek that discussed the progress on the financial reform bill (aka Dodd Frank) As you remember, the bill passed in July 2010 and was our country’s effort to bring our financial sector under control. The bill as passed had very little clout. Developing the actual standards was passed on to the government regulatory agencies such as the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission ( CFTC). The report confirmed that in the face of the banks and lobbyists very little were happening. The bill was very weak leaving many loopholes still in place.


BusinessWeek seems to be one major media that is following up on this very serious issue. They have just released another update "Starving the Regulators". This article reports the astonishing fact that cost cutting is going to reduce the staffs of the regulatory agencies charged with finalizing the rules. Progress will be further slowed and actually stop in several critical areas. The governing elite create an 11 trillion problem, and then reduce the resources charged with preventing another. The situation is summarized in this quote from BusinessWeek.

The reform of financial regulations has slowed down because of the underfunding of the SEC and CFTC. The Dodd-Frank reform requires 243 new rules, 67 one-time studies, and 22 recurring studies. Yet in the face of these requirements, the CFTC is considering laying off staff. The SEC has had to delay establishing an office to oversee the credit-rating agencies. On the other hand, the Consumer Financial Protection Bureau has hired staff and is focused on making credit cards more consumer-friendly and eliminating 80 percent of the mortgage paperwork needed to purchase a home.

It should be noted that the one agency meeting its schedule is the new consumer protection agency whose establishment was bitterly fought by the financial sector.

The encouraging experience is that BusinessWeek is devoting resources to following this issue. In doing so they are performing a great service to the productive sections of the economy, who are their primary customers. Unlike the financial sector the rest of the economy would greatly benefit from a reformed financial system.

We must remember that the financial sector is different from the general business community. The primary products are basically funded and guaranteed by the government. It was meant to be a service to the productive business areas. Once they began to focus on their individual profits they have become a real liability for the rest of the economy. The current lobbying blitz against reform is aimed at protecting their own profits.

Tea Party, this is really important. Why isn’t the rest of the media active about this situation?