OpEdNews - Page 6 of Article: "Looting of America" Author Sees Opportunity in Meltdown

Right now, 10,000 people can bet on the demise of GM. No problem. There are more than 10,000 people who will bet on the demise of GM. It's OK to do that and totally unregulated.

But anyway, the, this is the result, this game, this casino . . . Historically, one of the things I found fascinating is the idea of finance, high finance being a casino is something that has been discussed for the last 200 years. There has always been a question of, "How do you get finance to do what it needs to do in the economy without it turning into a casino? How do you separate the utility that it provides from the speculation and gambling? Where is the line? How do you do it?" Very difficult to do, and we tried, now we've just tried an experiment in virtually total deregulation and it was an unmitigated disaster. That's the lesson we have to learn here.

DS: And the . . .

LL: You can't rely on the free market to police itself.

DS: And all of those bets on the demise of GM, there clearly is some acceptance among some elites in this country of the possibility of the demise of GM, did anyone bet on the demise of AIG?

LL: Probably. But you know, we won't know because the settlements take place after the bankruptcy. That's when the money gets totaled up, the best on both sides. And a lot of them wash out.

DS: Sure.

LL: And a lot of people bet both ways, whether they went, you know, long on the stock and they used the credit default swap to go short, you know, that kind of stuff. So you don't know how it all, how much with AIG.

I suspect that, and I haven't tried to do this . . . I did it with GM. You could actually, if you Google, you can get the price of a credit default swap for GM. The last time I looked it was something like, you had to cover $10 million worth of bonds you had to pay, for insuring it, you had to pay $8 up front and then some phenomenal amount of money.

DS: Wow.

LL: My guess is there's something similar with AIG. If you want it, someone will sell it to you.

DS: So, this craziness, in this conversation you're citing deregulation and you do in the book, too, and you propose a Financial Produce Safety Commission that would actually ban products that do no good and do harm, these crazy instruments we're talking about, but the impression I get from reading the book is that you don't think we could ever regulate sufficiently to count on avoiding a repetition, and that in fact we should be charging for financing disaster insurance – a sort of tax on . . .

LL: I'll take it one step further. I'm not convinced that we have the wherewithal, let's put it this way: We now, we now know that when these financial institutions get large enough we can't let them fail. I mean, there are people out there that say, "Oh, let them go down. Let them go under.", etc., you know. They would have loved to let them go under, but, you know, we'd be in a great depression if we let them go under.

Not like, in fact it's not like letting any real company quote/unquote go under. It's like, you know, suffocating a huge, you know, a huge piece of everybody's economy when you let these big things go under.

So what do you do with them? Some people say, "Well, you should break them up into smaller entities." Well, you know, I wonder if you can really get away with doing that. I'm wondering whether ultimately they have to be regulated like a public utility. That they have to be, you have to literally regulate it. I'm not saying the government necessarily has to own it lock, stock, and barrel, but you have to regulate it for the public good. That the idea of letting these folks just, you know, pay themselves whatever they want to pay themselves, go in whatever business they want to go into, create whatever insurance they want to create, those days have to be behind us.

The financial disaster insurance is, I'm basically making the argument that two things have, maybe I did it kind of klutzily in the book, but simply put, I think I did this properly at the end of one of the chapters, two things have to happen: we have to move money from the financial sector, the bloated financial sector into the real economy, and we have to move money from the top of the income ladder, the tippy, tippy top, to the middle class and working people and the poor. Those are the two most important things that need to happen to stabilize the economy.

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