Excellent - But who is going to lead the charge?
Well, not the current GOP leadership, that’s for certain.
As I look into the ranks of Republicans in office and running for office, I don’t see one person who really, deeply “groks” the current state of the financial markets, the banking system, the exchanges, etc and the scandals that have completely penetrated our financial system to the very foundations.
For example, if you lined up the entire GOP Congressional delegation AND all the candidates currently running, and you asked them “How does High Frequency Trading work - from where the machines are installed to how bids are stuffed and profits are made?” you’d get back hundreds of blank stares.
That’s the problem in the GOP today. It isn’t a problem that cannot be solved. Look at how many doctors (MD’s) are in the GOP ranks, which if the leadership will listen to them, should give the GOP an edge in healthcare policy debates. The GOP has plenty of accountants and businesspeople in their ranks. This is a problem of recruitment. The GOP needs to think like a national party and they need to say “OK, out of X senate/house seats we want to win, we need a talent portfolio of X so many MD’s, Y businesspeople, X financial people, N accountants, M engineers,” etc. Too many people in the GOP are allowed to occupy seats because they think it is ‘their turn.’ if the GOP really wants to lead from the front, they need to create their own cadre of policy wonks in the legislatures of the states and in Congress, and not rely on these pinheads from “think tanks” in the beltway.
Currently, the only person in the Congress I can point to who knows his butt from a warm rock about the scandals in the markets is Ted Kaufman, D-DE, who was appointed to fill Biden’s seat and who chose to not run again. Because he expressed his intent to not run for his appointed seat, no one (on either side) deemed it important to listen to him. And the “financial reform” bill shows this - most of Kaufman’s ideas were dropped on the cloakroom floor.
In general, I think the GOP’s leadership has far too little understanding of what a “free market” really is, and they fail to understand that, as long as we have the Federal Reserve, there is no free market in finance. The yield curve is partially controlled by the Fed, and that’s a huge component of what makes money for the finance sector. The secrecy with which the Fed hands out money at the discount window is another, and the various swap programs the Fed undertook in 2008 are other anti-free-market examples. If a bank approaches the Fed and says “Uh... we screwed up. We need to draw on the discount window... tonight!” that’s useful information in the free market. It tells the market that the senior management of that bank is utterly incompetent, their common stock should be shorted, their bonds sold and their credit rating slashed. Instead, the Fed keeps this information secret.
Ergo, there is no free market feedback mechanism to keep the bankers in line.
So the GOP should stop pretending that there is, and get on with writing coherent regulation to keep these idiots on Wall Street from burning the world down around our ears, ala Iceland.
I’ve thought about running for state-level office more than once, but every time I go to GOP meetings and listen to their agenda on spending, I can’t handle it. I have to contain my wrath and simply leave the room. When I talk to many Republicans about finance, I can see their eyes glaze over and roll back in their heads. They just clearly don’t understand the breadth and scope of the problem, and nostrums like “lower taxes” and “less regulation” are not going to solve the problems in the finance sector. Most of them don’t understand actuarial mathematics. They’re well-intentioned people, their morals and principles are absolutely in the right place... but they’re *so* far behind the curve on financial problems, it isn’t funny.
At this point, the GOP is in need of so much fundamental education on the topic before they can even understand the problems, it seems to be a task akin to cleaning the Augean stables. Someone needs to clean away 30 years of accumulated ignorance of how the financial markets have changed since the mid-80’s when Drexel started CDO’s in the junk bond era, and work forward from there. As Volcker has said on more than one occasion (and we shouldn’t discount what guys like Volcker say just because he’s a Democrat): “The most important financial innovation I’ve seen in the last 25 years is the automatic teller machine.” Volcker then went on to pooh-pooh most all other “innovations” on Wall Street as being nonsense. As Volcker pointed out, we had a great economic recovery in the 80’s without CDO’s and credit default swaps, yes? So... what have these products bought us? That’s where the GOP needs to start: demanding Wall Street justify the need for the “products” they want to create.