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OpEdNews Op Eds    H2'ed 5/14/10

The Return of Madcap Capitalism

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However, there was so much plunder in Bush's early days that crises resulted. For instance, Bush's political allies at Enron manipulated the energy markets of California to create brown-outs and to jack up the cost of electricity. Enron and other corporations also cooked their financial books to deceive investors.

The scandals grew so severe that even the anti-regulators around Bush were forced to temporarily reverse course and support financial reforms in the Sarbanes-Oxley Act. Bush also replaced Harvey Pitt, his first chairman of the Securities and Exchange Commission who was viewed as too cozy with the accounting industry, with William Donaldson, an old Establishment figure.

Donaldson oversaw a period of tighter financial regulations, but his days were numbered after Bush won a second term.

Donaldson stepped down in 2005, and Bush appointed Rep. Christopher Cox, R-California, a self-described "free market" advocate whose selection signaled to corporate America that the post-Enron period of aggressive SEC enforcement was over.

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During his 16 years in Congress, Cox was known mostly as a Republican hatchet man who conducted investigations that put Democrats in the worst possible light and protected GOP interests.

As the anti-regulatory fervor returned, hot-shot Wall Street operatives felt a new freedom to package and sell exotic new trading instruments that were supposed to limit risk but instead infected the world financial system with catastrophic dangers.

Cox also loosened rules for buying stocks on competing exchanges, allowing fast-computer trades to seek out the best available price, a change that some critics warned would eliminate the safeguard of human specialists who had traditionally matched buyers and sellers.

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While there were efficiencies in the new approach, there also was a lack of regulatory conformity to the system, opening the possibility that a rapid decline in a stock could cascade out of control with computerized "stop-loss orders" chasing "the best-available price" to the bottom. That could end up costing investors millions of dollars.

But there was such trust in the "magic of the market" and in "self-regulation" that many of the hazards accumulating on Wall Street weren't noticed. Indeed, many experts up to the level of Fed Chairman Alan Greenspan seemed to be wearing ideological blinders, while others simply didn't want some grumpy government regulators spoiling the fun.

The music finally stopped in mid-2008, confronting the Bush administration with the choice of either accepting a devastating collapse of the stock market or rushing in with a multi-trillion-dollar bail-out package. Bush opted for the bail-out, a position ultimately supported by the two major party presidential candidates Barack Obama and John McCain.

The financial crisis and McCain's apparent cluelessness about what to do contributed to Obama's solid victory in November. But the cost of the financial meltdown went beyond the pricy bailout. Millions of average citizens lost their jobs, their homes and their savings.

Turning on Obama

However, unlike Franklin Roosevelt who benefited from sustained public support to take on Wall Street and fight to get Americans back to work, Obama soon faced a revived right-wing movement determined to block government efforts that might alleviate the meltdown's worst consequences.

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Obama managed to pass a $787 billion stimulus bill and extended emergency loans to save the U.S. auto industry, but the Right used its media power to rally more and more Americans against him and his supposedly "wasteful government spending."

When Obama turned his attention to the most severe long-term budget challenge the soaring cost of health care congressional Republicans lined up unanimously against what they decried as "Obama-care." Democrats were forced to defeat a bitter filibuster in the Senate and pass the final legislation amid a near riot by Tea Partiers surrounding the Capitol.

Meanwhile, other long-term consequences of the Reagan-inspired deregulation continued to play out. In April 2010, an explosion in West Virginia killed 29 miners in a mine that had been repeatedly cited for safety violations but was allowed to continue in operation.

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Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Secrecy & Privilege: Rise of the Bush Dynasty from Watergate to Iraq, can be ordered at secrecyandprivilege.com. It's also available at
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