Paul B. Farrell: New mutant American capitalism has no moral compass

[marmar]

Financial innovation is Wall Street's new 'soul sickness'
Commentary: New mutant American capitalism has no moral compass

By Paul B. Farrell, MarketWatch


ARROYO GRANDE, Calif. (MarketWatch) -- Could our headline just as easily read: "Financial innovation: Wall Street's biggest con game?" How about: Rip-off? Joke? Oxymoron? Maybe "Wall Street's big lie?" Or something darker: "Financial innovation: Wall Street's deadliest sin, greatest evil, even soul-sickness?"

In fact, they all fit. Each reveals Wall Street's dark side: Why are they at war to keep financial innovation secret, hidden, without public transparency? And why is Wall Street spending millions on lobbyists to kill financial-regulation reforms? Why? Because Wall Street rakes in tens of billions of dollars annually from their financial innovations, gambling in the shadowy $670 trillion global derivatives market. And Wall Street does not want government, investors or competitors digging into their "financial weapons of mass destruction," as Buffett calls them.

Remember, financial innovation is just a Wall Street code word. Translated it simply means derivatives and other proprietary secrets like the high-frequency trading algorithms used by their quants. Yes, Wall Street wants you to believe that financial innovations also help Main Street, but that's just Wall Street lobbyist propaganda to mislead the public, regulators and legislators. Remember when Washington proposed standardized mortgages as a way to help consumers? Wall Street attacked, spending millions to kill it.

Wall Street has no interest in helping Main Street. Time magazine's Justin Fox, author of "The Myth of the Rational Market," said it best in his "Curious Capitalist" column. Most so-called financial innovations are "just new ways to fleece customers or hide risk, and all major financial crises have been associated with some financial innovation." Even credit-card innovations are used against customers as marketing tools to increase fees. The truth is: Wall Street's greed-driven financial innovations fuel our bubble/meltdown cycles in many ways. ............(more)

The complete piece is at: http://www.marketwatch.com/story/wall-streets-shell-game-will-ruin-us-2009-11-10

[Political Heretic]

1. Many disagree that this is a "mutation" rather than just how capitalism works. However,

I'm still discussing, debating and exploring my thoughts on that. What I can at least agree on, is that what we have now is fundamentally broken, and more to the point - fundamentally unsustainable. It's driving itself toward implosion.

What should replace it? That's an interesting question. An alternative to capitalism altogether? What would life and commerce be like in an alternative system? Where would technology and innovation fit in, or would they be shunned. Sometimes I think questions like these require us to take a step back and engage in some philosophical discussion (as much as we may hate it) - just what do we mean by capitalism? Is it any sort of market structure? Or is it something more specific?

My primary interest has been in returning to policies that contain mechanisms for redistributing wealth from excessive collection at the top (such as 90% income tax rates on the top income earners that we used to have, when we also had an expanding middle class,) a commitment to working class needs, workers participation in company direction, anti-poverty priority, etc.

For many years wages and productivity were coupled and rose together, poverty was in steep decline, the middle class was expandning.... I'd like to return to those polices that at least partially worked, and try to build upon them in a different direction that the corporate capitalism that came to dominate from the mid 1970s forward.

[Octafish]

2. Legalized bank robbery?

They've destroyed the livelihood of an entire nation to benefit the few.

Proof is found in the ownership numbers, where the top 1-percent own, what?, 50-percent of income.

It'd be a good bet they also own the lion's share of the nation's real property.

http://www.huffingtonpost.com/2009/08/14/income-inequality-is-at-a_n_259516.html

No wonder the BFEE wants to repeal the inheritance tax.

[moondust]

3. Is it parasitism yet?

I think so. But it doesn't have to be. Some other countries seem to have a far more humane form of capitalism that benefits the many rather than the few. I think Wall Street is the underlying problem.

[DJ13]

4. This sounds accurate

"American capitalism generally, and Wall Street's mindset specifically, reflects the 234-year history from Adam Smith to Friedman, Reaganomics, Rand and Greenspan. Today however, it is resurfacing in a new disguise: Wall Street's blind obsession to kill all restrictions on financial innovations, whether in the SEC, FDIC, CFTC, or proposed Consumer Financial Protection Agency. Wall Street's cash got Obama elected, got their Trojan horses in his cabinet. Now their millions flow the opposite way, as their lobbyists sabotage Obama's financial-regulation reforms. And no matter who gets elected, Wall Street runs the game."