Home > financial crisis, limited liability, moral hazard, rent-seeking, wsj > Wall Street Journal organizes financial industry’s plan to destroy market discipline, take over regulation globally – hello?

Wall Street Journal organizes financial industry’s plan to destroy market discipline, take over regulation globally – hello?

[Update: My follow-up post outlines the WSJ`s report and chief recommendations.]

I thought I’d elevate what was a side and closing comment on Stephan Kinsella’s Avatar thread, about an appalling group of articles at the Wall Street Journal, which seems to have absolutely no clue about how the financial crisis stems from a chain of   government interventions, was fuelled by a government-inflated bubble and was “intermediated” by a financial industry rife with moral hazard.

The WSJ is great at drumming up fears about a world-wide climate change cabal, consisting of everyone one who showed up at Copenhagen, blogged about it or thought about it (fears of regulatory over-reach are perfectly understandable, but nary a cui bono question about the “skeptics” industry), but just what in the heck are they trying to pull here – help to CREATE world government, directed by the same firms and regulators who brought us market opacity, arbitraged investment and capital requirements intended to backstop deposit insurance, rampant profit-taking, financial meltdown and tremendous risk-shifting (to shareholders & taxpayers)? Is the WSJ really so naive about rent-seeking, moral hazard and mission creep?

I urge everyone to take a very close look at the WSJ’s “Future of Finance Initiative” and their recent “Fixing Global Finance” report.

Here’s a copy of my comment, as noted in my prior blog post (with some bracketed additions and changes to order):

What happens abroad at the “Avatar” is pretty basic, but the same
nonsense, with taxpayers, investors and consumers playing the role of
victim, can be seen at home. Has anybody seen the jaw-droppingly
appalling report that the WSJ has run on “Fixing Global Finance”, based
on their “Future of Finance Initiative”, in which they cheerlead a
bunch of financial firms in their efforts to abandon free markets and
to structure global regulation and regulators, to be staffed by a
revolving door of themselves?

[I think I’m being fair to see this as posing a threat to markets and
freedom at least as great as what others see in the more multi-faceted
climate change muddle.]

Even Paul Volker was appalled, not at
their willingness to create more regulation, but at their unwillingness
to confront the moral hazard problems (tied to regulation of public
corporations and the financial sector) that lie at the core of the
financial meltdown. [Volker seems to overlooked the crucial role of
government in driving and feeding the moral hazard problems.] Here’s the link, for those of you who missed it:
http://online.wsj.com/public/page/future-of-finance-121409.html Property rights, corporations and government-complicit theft? Hmm.

[Sounds familiar. Maybe some of those who want to battle corporate
excesses might not be so crazy after all, even if they neglect to
understand the risks of negative consequences of seeking help from
government. And maybe someday libertarians will get a little more
serious about addressing the festering
concatenation of corporate-linked problems that are generating so much
rot at the core of our government and public company/financial company

Corporations have very unfortunately been inescapably tainted
with statism from the get-go, in ways that play out negatively both
abroad and at home. I’ve devoted a fair amount of time to examining the
entanglement of corporations and government: http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited

Our state governments were wrong to get into competition with each
other to grant corporate status to investor-owned enterprises, in
exchange for fees and later taxes. Corporate status freed investors
from down-side risk, by limiting liability to the amount of capital
contributed. This incentivized investors to encourage corporations to
embark on risky activities that shifted costs to innocent third
parties; the concentration of wealth in corporations (that now have
unlimited lives and purposes, subject to survival in the market); the
corruption of the court system that once protected third parties from
damages caused by others (by replacing strict liability with balancing
tests); and the ensuing battle over legislatures and courts to check
corporate abuses.

I will try to come back later and provide more details of the WSJ initiative/report, but for now let me note that I have relevant discussion at some of my posts on limited liability (see link above) and on “Rot at the Core“.

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