“Without Free Enterprise, capitalism is a vacuous economic
concept that is doomed to fail.”
Too Big to Fail or Just too Big?
The Free Enterprise System was built upon the concept that no business should dominate the marketplace at the expense of other businesses or the consumer. In a democratic society there are certain fundamental values that are the foundation of Free Enterprise. These values are supported by laws that maintain a fair environment for doing business and protect the individual consumer’s right to choose. The consumer’s right to choose in a marketplace free from the domination of any one business is essential in a free and democratic society (See True Free Enterprise). And, keeping a level playing field for all business in a democracy is the responsibility of government as representative of the people.
In the past, government has acted to protect the consumer and other businesses from those companies that have become too large and dominant in the marketplace. During the Teddy Roosevelt era and later during the FDR Administration, the government moved to break up monopolies and prevent the undue influence of large companies. The Sherman Antitrust Act and later the Clayton Antitrust Act provided the legislation to help protect Free Enterprise from the domination of markets by large businesses. However, with the repeal of the Glass Steagall Act during the Clinton Administration, this concern for economic protections in a democracy has been forgotten. Where are the trust busters and monopoly breakers today when we need them most? And, now, with the catastrophic collapse of the economy, a new claim has been created that some businesses are “too big to fail” because of their ties to the international banking system. How is it possible that we have sold out our consumer protection and Free Market Values in a democracy for profit and vacuous economic motives? This lapse of concern for our democratic values has resulted in the development of businesses “too big to fail” and the undermining of the entire economic process?
It is difficult to question the motives of those leaders who were determined to deregulate the Banking Industry as they claim that it was their intention at the time to create new markets for the banks. However, the result of their clear lack of concern about the implications of their actions to repeal the Glass-Steagall Act has been catastrophic. How was it possible for these leaders to forget about consumer protection and fair market practices by inviting the Banks to join the high risk, high stakes buying and selling on Wall Street? Also, in the years that followed, banks have been allowed to buy up other financial enterprises unrelated to the Banking Industry of the past and to grow unobstructed into huge financial monopolies through mergers and acquisitions. The repeal of the Glass-Steagall Act has obscured the important separation of the solid banking practices of the past with the over-aggressive and often unscrupulous high-risk buying and selling on Wall Street.
This action led directly to the unregulated use of financial engineering tools such as the CDS (Credit Default Swap) system and the sub-prime mortgage lending investment packages that became toxic with the collapse of the housing industry from the inevitable foreclosures that occurred. Banks, lending institutions and the housing market were no longer immune to the financial downfalls and abuses by the high risk investors on Wall Street. With their fortunes now tied together by toxic assets the now giant banks, insurance and investment companies were, for all practical purposes, bankrupt. However, because they are so large the government could not let them fail and has chosen the largest and most toxically-connected companies to save with a bail-out consisting of billions of dollars of taxpayer money. Now, are these banks and financial companies such as AIG really too big to fail or are they just too big? And, why can’t they be divided up and sold as parts to smaller financial companies? Most importantly, why have our leaders failed to ensure the fundamental values of consumer protection and fair market practices in a democratic society?
Teddy Roosevelt and Franklin Roosevelt both understood the importance of protecting the marketplace from the undue influence and domination of large companies. Teddy prevented forty-four companies from becoming monopolies during his administration and FDR enacted the Glass-Steagall Act to prevent exactly what has happened to the banks and financial institutions on Wall Street. The undue influence of Wall Street on our once trusted Banking Institutions has been catastrophic and has blurred the distinction between prudent banking investment and questionable high risk financial ventures. No longer are our banks able to be trusted to provide solid long term investments or prudent lending practices. And, what has happened to our leaders like Teddy Roosevelt who understood that you cannot compromise the Fair Practice Values of Democracy if you want to protect our Free Enterprise System? These are democratic values that cannot be compromised for profit under any circumstances. Hopefully, President Obama understands the importance of this fact, so, future generations will not suffer for the same lack of foresight that caused the repeal of the Glass-Steagall Act and the subsequent deregulation of business at the expense of the consumer, the economy and our entire free enterprise system.
- What are the fundamental values that serve as the foundation of the Free Enterprise System and how do they maintain a fair marketplace?
- Why are business monopolies dangerous to free enterprise and consumers?
- Why did recent leaders reject the example of Teddy Roosevelt and FDR who worked to break up monopolies and prevent marketplace dominance?
- What is the Glass-Steagall
Act and why was it repealed by
- What was the result of the repeal of the Glass-Steagall Act? How did deregulation lead to the CDS (Credit Default Swap) System and Subprime Mortgage investment catastrophe?
- What are toxic assets and how did they cause the demise of the banking system?
- What are the differences between recent leaders who have allowed businesses and financial institutions to become monopolies and the great leaders of the past such as Teddy Roosevelt and Franklin Delano Roosevelt?
- Why did recent leadership decide that some banks and financial institutions were “too big to fail.” Why is this a false idea and what can be done to change it?
- What do you think caused our leaders to compromise the values of consumer protection and Fair Business Practices that led to the unraveling of the economy?
- How can we prevent future
leaders from compromising democratic consumer protection and free
enterprise for profit and unregulated greed?
