Let The Size Fit the Need

 So Americans do not trust their government (Pew Research).  Americans are dissatisfied with BIG government, but when a story such as the one Reuters released yesterday regarding the alleged ABACUS deal by Goldman Sachs, what opinions have we Americans?  Has our government grown too large?  The numbers from the Government Accounting Office (GAO) indicate a downsizing over the past decade (especially under the Bush administration) not an up sizing.  A very close look at the history of our government over the past ten to fifteen years will disclose that our government has by no means grown.  It has shrunk.  And by government, I mean the meat and potatoes, the regulators, the civil servants, the movers and shakers, the signers of certificates, the inspectors of meat, the overseers of every day business in America,  in short, those people who make certain that the laws that are passed in this country get enforced.

Thomas Frank, in his book The Wrecking Crew, describes in great detail the systematic dismantling of the type of government mentioned above by Republicans.  He refers to it as "the age of political vandalism" and it amounted to an all out attack on those parts of government dedicated to regulatory oversight of business in America.  I have probably oversimplified, so I highly recommend that anyone reading this who has an interest in this subject read this gentleman's book.  His words gave substance to suspicions that had nagged at me for many years.    

When I read a story such as this one released by Reuters, I have no doubts about Mr. Frank's assessment of the decimated state of government's regulatory arm.  I also have no doubts that our current President and his Secretaries of the various Department have their hands full with task of rebuilding a seriously damaged system of checks and balances in health care, labor, environment, and without a doubt in finance.

The news of the U.S. Security and Exchange Commission's (SEC) intent to charge Goldman Sachs and an executive of fraud could not be better timed, nor could a better example exist to bolster the argument that government, far from being too large, has been downsized to such an extent that the industry of finance has been allowed to run amok on Wall Street and their unrestrained exploits have ravaged our economy, and left Americans struggling to stay financially afloat.

The SEC will tackle a case that lays at the heart of many of the financial woes beleaguering our nation.  In a related article, Reuters describes how the scam allegedly took place.  I recommend readers of the article pay particular attention to the list of players.  Notice how a giant bond insurer, AKA Management LLC, whose reputation was upstanding enough to convince a German bank, IKB to take a risk of $150 million on sub prime loans bundled into bonds, took a huge hit, and had to be reorganized financially in August of 2008. If one looks up the website for ACA Financial Guaranty Corp. one can peruse any one of several Financial reports, and discover how many of insurance ventures were affected by the damage inflicted to its parent company.  


How could all of these financial instruments been allowed to operate on such a broad plane, and to have had shared so much information between institutions once forbidden to interact?  Had this information been shared in this manner just a few decades ago, there would have been no question that security fraud had been committed.  Had our government been fully staffed, fully funded, backed by relevant legislation and fully functional could this have occurred?  Perhaps, but the conditions that allowed it to occur would not have been allowed to exist much less flourish as it did under the Bush administration and a Republican dominated Congress.  While no capital seems to have trickled down from Reagan's dream of unregulated business and industry, the damage from it certainly has.  When we rant indignantly at the increases in our insurance policies (health, life, auto), perhaps we should pause to consider how the alleged Goldman Sachs scam may have played a role.   Read the financial reports, follow the connections, and the picture grows a bit clearer.   

The Gramm-Leach-Bliley Act of 1999 will be discussed in the coming months for its part in the debacle of big finance.  It is the legislative mechanism that allowed, more than any other, the intermingling of financial entities to such an extent that, what once constituted security fraud had become the accepted way of doing business in the twenty first century.  My advice to those eager to understand the battle about to take place in Washington over finance reform would to read this Act, and do a little reading on the history of financial conditions that existed before the crash of Wall Street on October 28, 1929, and the subsequent finance reform that occurred prior to that historic event.   


Why must government be BIG or SMALL?  Why can it not simply be sized to fit our needs as a nation?  We must be able to accurately gauge the need of government to intervene in affairs of national defense, commerce, trade and industry, and that in itself requires a certain participation of government.  We the people have a voice in our government, but we must also have eyes and ears as well.  We must be willing to take a long, hard look at the principle players and conditions that truly help or hinder our progress and stability as a nation. We must not give in to the urge to simply bark at the shadows, but to put our noses to the ground and sniff out the true enemy to our health and our prosperity.