Bruce Perens: A Vertical Market Seeks Open Standards (Datamation)

If you say so.

But with the recent crisis you have to understand that those orginizations that caused the problem are already very well regulated. They changed the terms and accounting practices to work around those laws and nobody in congress did anything to stop them.

Despite what congress with admit or any of the people from those companies will tell you that they purposely and with a great deal of thought broke many multiple laws on multiple occasions.

The trick is, you see, that the people running the federal government have a great deal of money invested into those corporations that they are in charge of regulating. So when ever you have large financial issues like this.. like the oil grab from the 70's or S&L crisis, or any of the the financial melt downs that happen regularly every 7 years or once a decade or so, the US federal government steps in and tightens down controls.

But you see the sort of beuarcracies that are put in charge of monitoring those large financial institutions are only given enough budget to operate for about 5 years or so. After 5 years they run out of money and now exist as little more then zombie government orginizations. If they actually tried to procescute the backlog of people guilty of violating tax laws or other such regulations they would be dragging people into court for at least the next 100 years, just to get caught up to were they are today.

The reason for all of this is lack of political will on the part of the politicians to actually do anything about the problems that they help create.

That's how our government works nowadays, and most others. Over the past 75 years or so they passed so many laws that nobody know all of them. Even scholars whose job is to document and research USA laws can't possibly tell you how many federal laws and statutes are out there. There are tens of thousands of laws that could put you in jail.

So what they do is only enforce the laws that are convenent for them to enforce. If they are making money from people behaving badly and are getting campain contributions then they are happy to look the other way and not provide the financials (ie: political will) to then go out and stop those people from behaving badly.

For example.. With this latest crisis began with with fair housing acts and whatnot. People felt it was unfair that it was very difficult for a statistically averge minority person to get a house compared to a statistically average white person. This is because, on average, minority people tend to be poorer. Banks will hesitate lend money for houses to poor people because poor people can't afford nice houses and won't be able to make good payments. To get a house it was much harder to prove that you could afford it by producing a large down payment, if you are poor.

So in a effort to counter the evil effects of capitalism, which ment poor people didn't have nicer stuff, the government made sure to pass and enforce laws that kept quotas on the sort of loans that banks and made sure that a certain percentage went to people that couldn't afford them, because those people tended, more often then not to be minorities.

In order to get the banks to play along the USA government agreed to insure the loans and compinsate the big lenders a bit for the money they would loose. And as return for that those lenders gave campaign contributions. In return for that then government looked the other way when lenders would trade dept and monkey around with numbers to get around laws that were established after the great depression to prevent the sort of loss of confidence that caused that problem.

That's just one aspect, of course. That alone would not cause the issue we are in now. There are lots and of other issues.

For example:

Because banks were doing bad loans and had money games in place to work around laws, and were able to get some laws repealled they realized that, in the short term, that it was profitable to give out loans to people to groups of people that they would not normally give loans for... like a person making 75 thousand dollar a year trying to buy a million dollar house.

Now.. this goes hand in hand with the distinct lack of housing avialable for growing populations.

In a effort to keep urban spraw down to a minimum and keep environmental impacts low it was very popular for governments, mostly on either coast, to make it very difficult and expensive to do new housing developments. In my neck of the woods it's very common for a development company to purchase a farmland and stick housing on it. It can take 2-3 months for a small company to build several hundred homes, including streets, electrical, pumbing, stores, and everything else to support a neighborhood. Of course this sort of capitalism is evil, building houses for people, since it's all squashes the environment and leads to urban sprawl.

So places like California make all that very difficult and expensive. Of course at the same time they are having growing populations. Fast growing populations. Plus good economic times. So you have lots of people with decent incomes looking at a rapidly shrinking housing market.

So you have a shrinking supply, increasing demand, and little ability to quickly build large numbers of cheap houses, you had massive increases in the price of housing. So people got used to buying a house, it's price going up rapidly, and selling the house a couple years later at a huge profit.

So you have a combination of government regulation inadvertanly causing massive increases in the prices of houses, combined with government regulation causing lending standards to dramatically go down, combined with the lack of political will to enforce existing regulations, caused by everybody making lots and lots of money and getting nice fat campaign contributions.

So it got to the point were a person buying a new house in a exploding market could get one with no money down, and interest-only payments. That person would buy the house with the expectations that they could turn around and sell it at a profit a year or two later.

So if your buying a house with no down, and interest only for 2 years, and you are planning on selling it in 2 years for a huge profit.. then should you buy a house for 90,000 dollars, 150,000 dollars, 500,000 dollars, or 1,000,0000 dollars? The bigger and more expensive you bought the house the more profit you made. So people ran out and bought the biggest they could possibly afford, figuring they would make big profits.

This, of course, went on long enough that it collasped like a regular old fasioned pyramid schemes.

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Oh, and did I forget to mention that all of this market activity was going a long way to sustain the economy, even in the face of massively growing government debt over the war?

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Oh, and there are several large instituations that kept things right and kept things on the level. Lots of middle sized and small sized lenders and banks.

They didn't engage in this foolishness to the same degree and they have large amounts of good capital in their control and very little bad debt to drag them down.

They behaved themselves, they did the right thing, and as a result after the predictable melt-down they should be sitting very pretty and be in a dominate position. They are trustworthy and should be doing good right now.

But they aren't. And you know why?

Because all those companies that behaved badly, that sold bad debt to each other and foreign countries, that played games, and now are risking bankrupcy... they are getting billions and billions of dollars from the government to rescue them. Buckets and buckets of money. Tens of billions, hundreds of billions of dollars for breaking the laws over and over again.

And those companies that behaved, and thus lost a lot of market share, and lost chances at making lots of short-term profits... they are getting NOTHING. They are getting no money, because they have little bad debt to sell. They are receiving jack shit and are completely and totally getting screwed over by everybody for doing the right thing.

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All of this is due to corrupt government working with corrupt financial institutions working a largely compliant and lazy population that are happy to see lots of profits, without understanding or even caring about the long term issues.

Saying that we need to clamp down on the 'free market' and the 'free market' is to blame is ignoring the fact that when you have government working together with the top 2-3 corporations in the country for the past few decades you do not have a free market.

There isn't a free market, and it has not been free for decades.