On Occupy Wall Street and Jon Corzine

Is it any wonder that there are protesters occupying Wall Street? (Okay, admittedly, many don’t know what they are doing there ….) The American people are fed up with the taxpayers having to continually bail out the Wall Street investment banks and the market itself. What I find ironic, however, is how these occupiers rail against Wall Street but don’t rail against the government for empowering those firms on Wall Street and don’t criticize the government for continuing to bail out those firms.

Congress and multiple administrations helped create the Great Recession, first by passing legislation relaxing investment rules that previously prohibited traditional banks from investing their own capital in speculative and high-risk investments. This opened the door that created the disaster. Then Congress passed legislation forcing banks to make bad mortgage loans to home buyers who couldn’t afford to make their payments and shouldn’t have been allowed to obtain a mortgage in the first place, creating the subprime market out of thin air, which led to the mortgage market crisis and bailout.

Let’s take one specific example of how things went wrong – the case of former New Jersey Gov. Jon Corzine (D) and his personally bankrupting MF Global. I find it ironic that the occupiers protest the nebulous Wall Street, but don’t place the blame squarely where it belongs. I mean, how can you blame a thief for stealing your wallet if you leave it on the car seat with the window open? That is, they and their big government buddies in Washington created the rules that allowed Corzine to do what he did and then they continue to fail to enforce existing laws to prevent these financial thefts. (Corzine’s MF Global allegedly “lost” up to $1.2 billion in customer funds that were supposed to be in segregated accounts.)

Many people don’t know that Corzine was head of Goldman Sachs before he became governor. Everyone knows what later happened to Goldman; the company had to be bailed out by the taxpayers (the U.S. government and the Federal Reserve Bank both pitched in) to the tune of billions of dollars on top of billions of bailout dollars to bail out firms that then paid much of those funds to Goldman Sachs.

Then Corzine becomes governor of New Jersey, and as we now know, nearly bankrupted that state too. Fortunately, the taxpayers of New Jersey fired Corzine and brought in Chris Christie, who is now fixing the problem. Following Corzine’s removal from office, he became head of MF Global, a mid-size financial firm, where in one short year he has now bankrupted that company too. What’s amazing is not only how quickly he tanked MF Global, but how he did it. Corzine did it by repeating the same exact mistakes that the other firms that got bailed out made. Instead of building up the business of the firm through hard work, he gambled the firm’s capital and customer funds by placing risky bets on the direction of European bonds. He might as well have gone to Las Vegas; the strategy was the same.

Unfortunately for the employees of what was a viable firm, they lost their jobs because of his personal folly.

And what’s amazing is he tanked the firm by following the same road map that all the other firms that got into trouble followed. And where were the regulators? Where was the Fed or the U.S. government to say, “No, enough is enough.” Financial firms and banks should not be allowed to gamble with their own capital, because that’s really taxpayers’ capital if they go belly up. If the officers of those firms want to gamble, let them gamble with their own money outside the vehicle of an FDIC or what is effectively a Fed or taxpayers “insured” company. And don’t bail them out.

And while we’re at it, they should consider banning people like Corzine from the financial industry. I mean, how much damage are we going to continue to allow one man to wreak on the financial industry and our economy? This didn’t take foresight; Corzine was reportedly told repeatedly of the risks to the firm if the bets he placed went south. His bets contained no “business purpose”; it was just outright gambling.

But like I said, why blame the thief? The real blame lies with ourselves; we continue to elect career politicians and people who have no experience in the private sector (and like Obama, who also had zero experience in running anything, let alone a government agency). Fixing this economy and preventing another financial disaster is real simple, but our elected officials don’t have the courage to take action, or in the case of the present administration, they have a different priority; in this case, their priority is to enlarge the size of the government and decrease the size of the private sector so that more people become dependent on the government for their survival and livelihood.

Remember, more people dependent on the government means more people likely to vote for politicians who want bigger government and more handouts. (How ironic that after Obama bailed out Wall Street that the street is now biting the hand that fed them; they’re leaving his camp in record numbers.)

The only way to turn this around is to elect private-sector people to hold office on a temporary basis (would 12 years be enough?). Why? Because if we elect people who know that they have to return to the private sector and that they will therefore become subject to the laws they pass, they are more likely to consider the private-sector impact of those laws. (Unlike currently, when politicians get elected and then hope to hold office for life and then exempt themselves from all the laws they pass as a matter of course.)

If politicians knew that they have to leave office after 12 years, they’d also not become beholden to the lobbying industry; ‘nough said.

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