Devout Laissez-Faire Reagan Appointee Declares Failure of Capitlism.

Aside from greed, stupidity, and corruption, it's clear that today's economic meltdown has much to do with a general lack of transparency, deregulation of the financial system, excessive leverage, the financial engineering of overly complicated and opaque securities, compensation mechanisms that in the words of James Surowiecki, "even when people recognized the possibility of dragons, they decided it was in their short-term interests (even if it wasn't in their company's interests) to run the risk of getting incinerated anyway", and a blindly or naively optimistic view of free market capitalism that ignores the inevitability of market imperfections.

Despite all the evidence, many of the conservatives are trying to market their own version of why our financial system crashed, and that is that the crash is actually the fault of government regulation. However, there are a few "free market" cheerleaders who have reversed their Panglossian ideas about laissez-faire economics. One of those men is Ronald Reagan appointed, Judge Richard Posner, author of A Failure of Capitalism The Crisis of '08 and the Descent into Depression

The conservatives believe the depression is the result of unwise government policies. I believe it is a market failure...Without any government regulation of the financial industry, the economy, would in all likelihood, be in a depression. We are learning from it that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails. The movement to deregulate the financial industry went too far by exaggerating the resilience—the self-healing powers—of laissez-faire capitalism.

The depression has hit economic libertarians in the solar plexus because it is largely a consequence not of the government’s overregulating the economy, by doing so fettering free enterprise, rather innate limitations of the free market.” -- Judge Richard Posner, appointed to the US Court of Appeals for the Seventh Circuit by President Ronald Reagan in 1981, and one of the nation’s most prolific legal defenders of free-market economics.

I greatly admire Judge Posner's willingness to rethink some of his fundamental beliefs about free market capitalism, however, after listening to Robert Reich, who I respect immensely, and the Judge discuss it on Tom Ashbrook's On Point radio show, I'm not sure he (Judge Posner) is fully convinced.

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Institutionalized Criminality and Right Winged Free Market Ideology

Is free-market economics, free, when the price of money is manipulated? Does free-market economics include allowing banks and corporations to grow so big that they cannot fail?

Over the years, the Federal Reserve, consisting of a few wealthy bankers, meet in secret to set the price of money (interest rates), and control and direct the money supply with absolutely no oversight. Doesn't this fly in the face of the free market?

Then, to top it off, in the last year alone, the Federal Reserve has taken on even new powers. The "invisible" hand seems to be quite visible.

So, having established that "free market" economics the right proclaim is the answer to all of life's problems isn't as free as they say it is, where does institutionalized criminality fit into the picture?

Just take a look at what's happening to the corporate "criminals", in large part, responsible for this crisis. Is anyone facing prosecution? No, because they have not broken any laws. Why? Those laws have been systematically removed over the last 35 years. Or to put it another way, the greedy, "profit at the expense of the people" actions that have damaged our society far more than the all of street crime combined, were legalized, in the sense that none of the actions are against the law. Hence crime incorporated itself into our well-established system. At the same time, the laws and penalties for crimes committed by those of us not so well off have increasingly become much more stringent.

This process of embedding corporate governance that would eventually lead to and provide fertile ground for corporate "crime" to flourish as part of our financial system began when Ronald Reagan started to apply the 1960s' grassroots tactics to destroy FDR's new deal when elected Governor of California and then, President of the U.S. in 1980. Reagan foresaw that his interpretation of what a "free market" economy is (Reaganomics) could not exist in a framework of law and order that required rules, regulation, and enforcement. He had to change things.

Reagan's true power to implement his vision came not from an iron fist, rather from his ability to camouflage his motives and agenda with a benign and grandfatherly persona. How could such an affable, likable man create mean-spirited policies that subsidized the wealthy on the backs of the poor? Just try imagining Mr. Rogers as a serial killer. It's just not possible, or is it?

Anyway, Mr. Reagan went to work galvanizing Americans, by using simplistic and deceitful rhetoric, charm, and subliminal messages. He encouraged we the people to worship at the alter of the almighty cash register, and to become the best consumers we could be. Revering wealth and the wealthy - picture Robert Schuller's $19.5 million Crystal Cathedral - while at the same time, hardening our hearts to those less fortunate, lead to the gradual elimination of social safety nets, and chipped away at the "New Deal", which steadily increased the gap between the richest and the poorest Americans.

But why make Ronald Reagan the primary villain? After all, he's such a hero to so many. Well, without Ronald Reagan's vision and leadership, deregulating the economy and disenfranchising the poor may not have spiraled out of control to accommodate his form of "socialism" for the wealthy thinly disguised as "laissez-faire" capitalism.

So, as we witness the collapse of right winged free market ideology, it becomes apparent that its success depended on institutionalizing crime, or as some may prefer, the institutionalization of cheating and greed. However when you consider the immense damage that has resulted, not only in the United States, but all around the world, the only word that comes close to describing what went on for the last three decades is crime, pure and simple. And since this form of crime cannot be prosecuted, it appears it was most definitely institutionalized so that former President Reagan's beatific vision could materialize for those who deserved it, the filthy rich.

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Too Big Too Fail and the Future World of Bail Outs.

Do current Wall Street bailouts by our federal government make subsequent "Too Big to Fail" (TBTF) policy inevitable? Will future TBTFs, therefore, set up taxpayers and future generations of taxpayers for an imminent cycle of escalating taxes? And what about the current bank failures? First Washington Mutual, and today, Wachovia Bank whose stock plummeted 83% in the past two years through last week, failed. Will all of this lead to huge TBTF banks, with its structure created from a house-of-cards and its location centered in Tornado Alley?

If we're left with fewer and fewer bigger companies, competition is reduced, prices tend to be higher, and yes, we will have even more of this TBTF problem. How can we avoid moral hazard when we continue to rescue Wall Street from their destructive behavior? We will be giving bankers even less incentive to practice thrift and sound business practice because they know they are TBTF.

Lack of responsibility and accountability are intrinsic to this financial crisis, yet our government seems to gloss over this issue as usual. We have assumed the liability of Fannie Mae and Freddie Mac's guaranteed $5.4 trillion of mortgage debt, yet this enormous amount will not be included in the budget. Do we hear anything about the $5.4 trillion? Nope, only the $85 billion. Once again, the department of smoke and mirrors is called in to create the illusion of trustworthiness.

We have to hold our government accountable, not the other way around. The only way we can achieve this is to trust ourselves, face the reality of our own situation and that of our neighbors, recognize the imperative of living within our means, and address the fundamental imbalance of what we want and what we can afford...a tough lesson, I know first hand. Once we obliterate the smoke and mirrors in our own life, we can obliterate it from government.

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