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Scott Jagow: Let's hear some thoughts from commentator Robert Reich on this mounting bailout bill.
Robert Reich: We haven't seen this much government intervention in the economy since Lyndon Johnson's Great Society. But this time it's Wall Street rather than the poor who's getting all the help.
Free markets, by definition, aren't supposed to need government support. Companies whose shares plummet are supposed to be ripe targets for takeover without government subsidies and guarantees. Firms that need capital are supposed to be able to raise it without emergency loans from the government.
So why are the free marketeers in the Bush Administration rushing to Wall Street's aid? The answer goes deeper than the subprime mess. The Street has suffered a serious decline in trust.
Yet trust is its most important asset. Financial markets trade in promises -- that assets have a certain value, that numbers on a balance sheet are accurate, that a loan carries a limited risk. If investors stop trusting those promises, Wall Street can't function.
But in the last few years, many Wall Street promises have not been worth the paper they're written on.
That's because, when the securities market was roaring, many financial players had no idea what they were buying or selling, and worse, they didn't care. Derivatives on derivatives; so-called special investment vehicles to move assets off balance sheets; credit default swaps; and of course securities backed by risky home loans. There seemed no limit to the financial smoke and mirrors.
That meant almost no limit to what was promised. And regulators looked the other way.
It worked great as long as everyone kept trusting and the market kept roaring. But all it took was a few broken promises for the whole system to break down.
What to do? Not to socialize capitalism, as is now being done. What's lacking isn't capital, it's trust. And the only way to rebuild trust is through regulations that require financial players to stand behind their promises and tell the truth, along with strict oversight to make sure they do.
We tell poor nations they have to make their financial markets transparent before capital will flow to them. Let's practice what we preach. Far better to regulate financial markets to keep them honest than to keep bailing them out.
Jagow: Robert Reich teaches public policy at the University of California, Berkeley.
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