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September 18, 2008

New Tomdispatch

link

Wall Street and Washington
How the Rules of the Game Have Changed

By Steve Fraser

What is Washington to do as the financial system collapses? Clearly, stark differences in approach as well as in public policy have already emerged. Bail-out Bear Stearns and pump up the brokerage and investment business with new lines of credit. Nationalize Fannie Mae and Freddie Mac on the backs of the taxpayer -- but let Lehman drown. Tell the financial community to save itself, after which Bank of America salutes and buys Merrill Lynch. Then, the Fed gets cold feet and decides it can't let an institution the size of the insurance giant AIG go under as well. Washington is left staring into the abyss. The old rules no longer apply...

During the nineteenth century, Washington was generally happy to do favors for Wall Street financiers. Railroad tycoons, who often used those railroads as vehicles of extravagant speculation, enjoyed subsidies, tax exemptions, loans, and a whole smorgasbord of financial fringe benefits supplied by pliable Congressmen and Senators (not to mention armadas of state and local officials)...

By early in the twentieth century, however, the savage anarchy of the financial marketplace had been at least partially domesticated under the reign of the greatest financier of them all, J.P. Morgan. Ever since the panic of 1907, the legend of Morgan's heroics in single-handedly stopping a meltdown that threatened to become worldwide, the iron discipline he imposed on more timorous bankers, has been told and re-told each time an analogous implosion looms.

Indeed, last week's news carried its fair share of 1907-Morgan stories, trailing in their wake an implicit wistfulness. They all asked, in effect: Where is the old boy when we need him?

The rest.

—Jonathan Schwarz

Posted at September 18, 2008 11:59 AM
Comments

who would have thought that having individuals holding and controlling wealth instead of corporations holding and controlling wealth would have been the preferred way of things.

it seems as though individuals take their responsibility much more seriously than the groups of people (seemingly) hiding behind corporate structures.

absolute power might corrupt absolutely, but it is more likely to occur when no one individual is responsible.

Posted by: bamboozlde at September 19, 2008 09:43 AM