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I had a related comment on another thread earlier today. Different context, similar point. "Free Market" is a big hairy term. But, the definition of free marke

by netcan 9y ago

I had a related comment on another thread earlier today. Different context, similar point. "Free Market" is a big hairy term. But, the definition of free market that includes (or expects) all the emergent benefits attributed to free market is limited to a certain realm. Markets with barriers to entry (emergent or regulated, high fixed/marginal costs, any structure that lends to oligopoly, financialization, and bunch of other market characteristics (including interventionist policy) result in markets that are not free in that sense. There is no creative destruction, highly competitive dyanamics and such. The financial markets have never (and IMO will never) resemble the market for toiletries or music festivals. Neither will many other markets: transport infrastructure, for example, for different reasons. The free market is an abstract concept, a model. It explains some markets better than others.

dforrestwilson1 9y ago
This. The real irony about the banks is that by heavily regulating banks and explicitly backing them, we also implicitly allow this sort of abusive behavior towards customers.
- Finnucane 9y ago
  Well, no, because the problem is not the regulation, but the lack of enforcement of the regulation. And that happens because the political appointees who runt the agencies are too close to the banks they are supposed to be monitoring. If Wells is making changes to the loans without properly getting the court's approval, that's fraud on the court and clearly illegal. Getting a criminal proceeding against Wells or any of its employees requires the DoJ to agree to take action, which seems highly unlikely. During the fallout from the housing bubble, it became apparent that many loans had not been properly transferred as they were sold from one investor to the next. The result of this was that many foreclosures were brought with essentially forged papers--servicers worked overtime trying to cover up broken paper trails. The courts in some states, esp. Florida, looked the other way as this bogus paper was passed in front of them.
  - scarmig 9y ago
    In other words, regulation is a great system, except it always gets corrupted by the politics of the regulators? I'm very supportive of regulating banks, both in theory and in reality. But we can't just wish away corruption and influence. Especially since so much financial activity is highly technical and the only people knowledgeable enough to create and enforce reasonable regulations are the same as the people conducting those activities that need to be regulated in the first place. I'm not sure of the fix, here.
    - Finnucane 9y ago
      Like anything else, it's a political issue. Meaning: citizens have to give a shit about it, be informed, and be vocal about it with their representatives. Republicans in Congress just voted to roll back Dodd-Frank, and are aiming to get rid of the CFPB. Why? Because the CFPB is actually trying to protect people from shit like this.
      - zo1 9y ago
        Everyone is kicking the blame elsewhere. First, the banks, then lack of regulations, then too-much regulations, then imperfect regulations, then corruptible regulators, then finally the people that don't participate in politics. The more I follow politics, and the media in general, I am leaning towards describing the entire thing as a giant soap opera where the media only "comments" or "gossips" instead of reporting facts and assigning provable blame. Everyone just passes off blame, no one really can hold anyone else accountable, and the cycle just repeats constantly. This is a fault of the system in that it allows blame to be passed along like that. The problem never really being addressed, just half-assed by each batch of politicians so that they can simultaneously take some blame, take some credit for trying, and also not be held accountable in any way.
        convolvatron 9y ago
        ok, so we've abandoned the notion of objective truth and everything is all about the narrative. the interesting question is whether or not there ever really was a cycle where the citizenry were informed, and could collectively influence policy. even if we were just being naive, the abandonment of that model doesn't seem to have empowered the populace - seemingly the opposite.
- vkou 9y ago
  Prior to heavy regulation, we allowed the same sort of abusive behaviour, except it would be followed by a whole bunch of people, who had no hand in the impropriety, losing their life savings. If you want to give ammunition to anti-capitalist movements, I strongly endorse returning to this model. Of course, if you want to give ammunition to anti-capitalist movements, I also recommend that we continue to bail out the people who did have a hand in the impropriety.
- s73ver 9y ago
  No we don't. Nobody is responsible for this behavior except for the banks that do it. They are run by adults who are perfectly capable of taking responsibility for their actions.
  - j2bax 9y ago
    According to our president, they are just taking advantage of loopholes in the system... Anything else would be practically irresponsible?!
mmirate 9y ago
> The free market is an abstract concept, a model. It explains some markets better than others. It is also an ideal; a status to be strived-for.
- theseatoms 9y ago
  Yes. The fact that these banks are effectively branches of the federal government shouldn't dissuade us from trying to do better.
  - zo1 9y ago
    But you're not allowed to do better in the presence of the state. The regulations essentially dictate the way that you have to do things, which is the way that the banks are currently doing it. And you have very little chance of competing with them at that level.
    - asdff66asdf6 9y ago
      Hogwash. We're allowed to involve ourselves in the politics and push to update, modify, and otherwise "improve" the regulations. There's too much of a "set and forget" mentality when it comes to government. IMO, that's due to all the fear mongering over governments being bad. People feel obligated to then fight for private corporate power. These things don't just "happen". They're planned and documented in government record. We often call them laws. They are specifically tilting the playing field. Get involved and tilt them back.
      - indigo0086 9y ago
        And just how involved have we been able to get? They've proposed and passed laws with objection before even they know what is written. Many laws are effectively written by industries which they will benefit and then passed to benefit the politicians. When foul play is called out, someone unaccountable falls on their sword while the regulation that benefits cronies and stifles competition remains on the books until "the most powerful" comes along to influence change. In none of these steps are the average citizen involved. Did the average citizen vote to have laws the effectively regulate away business and consolidate power in all industries to a few companies that are in bed with the government? If so what good is empowerment when you're part of the issues.
athenot 9y ago
The definition of a trust has also changed. Before the '70s, a merger that would result in a single company owning, say, 20% of a market would be a red flag. Nowadays, you have giants in any mature industry: it's the nature of capitalism. Since I like the idea of free market, I wish the market size of any company was limited to 15%, to truly allow competition and diversity of players. However, our economy is now global, and unless all the other countries play by these same rules (which I find highly unlikely), it will be a race converging to a few giant players and the occasional disrupters.

by netcan 9y ago

dforrestwilson1 9y ago

This. The real irony about the banks is that by heavily regulating banks and explicitly backing them, we also implicitly allow this sort of abusive behavior towards customers.

Finnucane 9y ago
Well, no, because the problem is not the regulation, but the lack of enforcement of the regulation. And that happens because the political appointees who runt the agencies are too close to the banks they are supposed to be monitoring. If Wells is making changes to the loans without properly getting the court's approval, that's fraud on the court and clearly illegal. Getting a criminal proceeding against Wells or any of its employees requires the DoJ to agree to take action, which seems highly unlikely. During the fallout from the housing bubble, it became apparent that many loans had not been properly transferred as they were sold from one investor to the next. The result of this was that many foreclosures were brought with essentially forged papers--servicers worked overtime trying to cover up broken paper trails. The courts in some states, esp. Florida, looked the other way as this bogus paper was passed in front of them.
- scarmig 9y ago
  In other words, regulation is a great system, except it always gets corrupted by the politics of the regulators? I'm very supportive of regulating banks, both in theory and in reality. But we can't just wish away corruption and influence. Especially since so much financial activity is highly technical and the only people knowledgeable enough to create and enforce reasonable regulations are the same as the people conducting those activities that need to be regulated in the first place. I'm not sure of the fix, here.
  - Finnucane 9y ago
    Like anything else, it's a political issue. Meaning: citizens have to give a shit about it, be informed, and be vocal about it with their representatives. Republicans in Congress just voted to roll back Dodd-Frank, and are aiming to get rid of the CFPB. Why? Because the CFPB is actually trying to protect people from shit like this.
    - zo1 9y ago
      Everyone is kicking the blame elsewhere. First, the banks, then lack of regulations, then too-much regulations, then imperfect regulations, then corruptible regulators, then finally the people that don't participate in politics. The more I follow politics, and the media in general, I am leaning towards describing the entire thing as a giant soap opera where the media only "comments" or "gossips" instead of reporting facts and assigning provable blame. Everyone just passes off blame, no one really can hold anyone else accountable, and the cycle just repeats constantly. This is a fault of the system in that it allows blame to be passed along like that. The problem never really being addressed, just half-assed by each batch of politicians so that they can simultaneously take some blame, take some credit for trying, and also not be held accountable in any way.
      - convolvatron 9y ago
        ok, so we've abandoned the notion of objective truth and everything is all about the narrative. the interesting question is whether or not there ever really was a cycle where the citizenry were informed, and could collectively influence policy. even if we were just being naive, the abandonment of that model doesn't seem to have empowered the populace - seemingly the opposite.
vkou 9y ago
Prior to heavy regulation, we allowed the same sort of abusive behaviour, except it would be followed by a whole bunch of people, who had no hand in the impropriety, losing their life savings. If you want to give ammunition to anti-capitalist movements, I strongly endorse returning to this model. Of course, if you want to give ammunition to anti-capitalist movements, I also recommend that we continue to bail out the people who did have a hand in the impropriety.
s73ver 9y ago
No we don't. Nobody is responsible for this behavior except for the banks that do it. They are run by adults who are perfectly capable of taking responsibility for their actions.
- j2bax 9y ago
  According to our president, they are just taking advantage of loopholes in the system... Anything else would be practically irresponsible?!

mmirate 9y ago

> The free market is an abstract concept, a model. It explains some markets better than others. It is also an ideal; a status to be strived-for.

theseatoms 9y ago
Yes. The fact that these banks are effectively branches of the federal government shouldn't dissuade us from trying to do better.
- zo1 9y ago
  But you're not allowed to do better in the presence of the state. The regulations essentially dictate the way that you have to do things, which is the way that the banks are currently doing it. And you have very little chance of competing with them at that level.
  - asdff66asdf6 9y ago
    Hogwash. We're allowed to involve ourselves in the politics and push to update, modify, and otherwise "improve" the regulations. There's too much of a "set and forget" mentality when it comes to government. IMO, that's due to all the fear mongering over governments being bad. People feel obligated to then fight for private corporate power. These things don't just "happen". They're planned and documented in government record. We often call them laws. They are specifically tilting the playing field. Get involved and tilt them back.
    - indigo0086 9y ago
      And just how involved have we been able to get? They've proposed and passed laws with objection before even they know what is written. Many laws are effectively written by industries which they will benefit and then passed to benefit the politicians. When foul play is called out, someone unaccountable falls on their sword while the regulation that benefits cronies and stifles competition remains on the books until "the most powerful" comes along to influence change. In none of these steps are the average citizen involved. Did the average citizen vote to have laws the effectively regulate away business and consolidate power in all industries to a few companies that are in bed with the government? If so what good is empowerment when you're part of the issues.

athenot 9y ago

The definition of a trust has also changed. Before the '70s, a merger that would result in a single company owning, say, 20% of a market would be a red flag. Nowadays, you have giants in any mature industry: it's the nature of capitalism. Since I like the idea of free market, I wish the market size of any company was limited to 15%, to truly allow competition and diversity of players. However, our economy is now global, and unless all the other countries play by these same rules (which I find highly unlikely), it will be a race converging to a few giant players and the occasional disrupters.