American Federalism: Idaho and Massachusetts on Guns

The proverbial expression, or retort, that the U.S. is not a France with a large back yard (i.e., simply more territory), or the equivalent—to say that the E.U. is not Texas with a large front yard—is oriented to the important difference between (early) modern empire-scale unions and states (i.e., polities) thereof. An empire is constituted by many (i.e., not just a few) polities that are culturally heterogenous (i.e., different from one another). Even though since at least 1871, Canada’s provinces have stretched across a continent, the number of provinces (10) does not meet the number qualification to be considered an empire even though Quebec and British Columbia are obviously very different culturally (including linguistically). In contrast, at 27 and 50 members, the E.U. and U.S. respectively qualify on both counts—interstate cultural/political diversity and the number of states. Even though the E.U.’s linguistic interstate diversity has greatly exceeded that which existed even in 2026 among the U.S. members, U.S. has its own dimensions of cultural difference that are palpable and salient between member-states, and particular pairs of states can even be said to be divergent on specific dimensions. It may even be that the E.U. states are more homogenous than are the U.S. states on such dimensions. For example, attitudes towards people having guns—including semi-automatic machine guns, so not just guns for hunting—differ between American states substantially and more so than between E.U. states.

In October 2026, the citizens of Massachusetts were preparing to vote on a ballot question that concerns “whether to uphold a 2024 law requiring all firearms to be serialized and registered with [the government of Massachusetts] and broadening a ban on ‘assault-style’ guns.”[1] If approved, the question would “continue an array of gun restrictions passed overwhelmingly by the Democratic-led Legislature . . .”[2] At the time, Massachusetts had one of the lowest gun-ownership rates in the Union. Massachusetts was the second state, behind Hawaii, “to enact a comprehensive gun registry.”[3] In such a political culture, wherein gun restrictions had been passed overwhelmingly, it can be assumed that most people (or at least most voters) likely thought that people keeping assault-style guns at home would be absurd (and absurdly dangerous).

Meanwhile, in Idaho, “the Republican-led Legislature placed a nonbinding question on the ballot seeking voters’ advise on designating ‘the state gun of Idaho.’”[4] At the time, “(a)bout 3 and 5 Idaho adults live(d) in households with guns, which ranks among the highest rates” among the member-states.[5] Jason Monks, the Majority Leader in the Idaho House of Representatives, said, “There’s no much more patriotic in Idaho than guns—and the importance of guns in helping to found our country and settle the West.”[6] It can thus be said that a gun—even a semi-automatic machine gun—is itself a political symbol, and perhaps the most important one, in Idaho, whereas in Massachusetts guns were typically viewed at least as of 2026 as dangerous and thus to be legitimately subject to restrictions—the only question being how many and how restraining.

Clearly, “Massachusetts and Idaho are about 2,000 miles (3,200 kilometers) apart—literally and figuratively—in America’s gun debate.”[7] That debate—and more specifically the extent to which the political “centers of gravity” in the two members of the U.S. differ—is but one of a myriad of ways by which the American countries differ in the U.S., such that that union of states is indeed comparable to the E.U. in that respect, rather than being a homogenous whole whereas the E.U. states are so very different. This is a common misconception in Europe, which can be redressed at least to some degree by contrasting Massachusetts and Idaho on guns.

---

1. David A. Lieb, “Massachusetts and Idaho Put Guns on the Ballot. One Seeks to Restrict Them, the Other to Honor Them,” APNews.com, October 25, 2026.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.

The E.U. Investigates an Online Travel-Reservation Company: Consumer Protection in Hospitality

The case, or rationale, for government regulation and oversight of the “hospitality” industry (e.g., hotels, booking companies, etc.) is not merely made on the basis of monopoly or oligarchy in the industry at the expense of market competition, but also on issues concerning business ethics and managerial competence at not only hotel companies (as well as with franchisees), but also separate travel-reservation companies. The European Commission was therefore on solid ground in launching an investigation into a online travel-reservation company in 2026.

To be sure, running a hotel, with customers staying at such short intervals, is admittedly difficult, given the need for constant coordinating amid the comings and goings. This is no excuse, however, for dysfunctional management, such as in hiring incompetent or “misaligned” employees in the first place, and later retaining such hires as are discovered to have task or attitude deficiencies. Furthermore, the hotel/motel industry’s franchise model seems particularly prone to franchisees whose obsession on reducing expenses by trifling with amenities goes on as if the customers, or “guests,” do not pick up on the underlying pettiness and greed. Ending the “complimentary” breakfast at 9 a.m., for example, as some Marriot hotels were doing at the time to reduce the number of customers being able to make it in time is unethical if done to reduce expenses on the food. So too is the practice in hotel house-keeping departments to conveniently interpret the placement of a “Do Not Disturb” sign on room doors as meaning that housekeeping service is not wanted that day, even in the afternoon. Housekeepers can reduce their workload by such a convenient assumption with impunity, and lying about whether a sign is on a room’s door can be easily used to reduce a workload even more. Even in how reservations made not directly through the hotel’s company, but, rather, online using a travel-reservation service/company to get lower rates, front-desk managers of hotels are known to relegate those “cheaper” reservations to inferior rooms, such as ones near elevators and not having views. To be sure, a case can indeed be made that customers who pay higher rates warrant better rooms, or at least preference in choosing rooms, but the typical prejudice of hotel managers against “third party” reservations as being inferior can easily translate into such customers, or “guests,” feeling inferior as victims of prejudice. In short, the profit-motive is alive and well in the hospitality industry, where even extending a reservation must contend with the contractual mindset of hotel companies wherein rate for each additional night is to be maximized by demand and supply; daily expediency trumps investing in repeat business by building a customer basis and even customer loyalty. In short, loyalty does not compute in a daily revenue-maximizing, transactions-oriented managerial mentality. At least in the U.S., that mentality really got going once people could shop online for rates in the 2000s or 2010s. In short, the case for government oversight of the “hospitality” industry is an easy one to make, especially since the advent of computer technology used by the industry. The E.U.’s investigation of Booking.com, an online travel-reservations company, announced in October, 2026 should therefore not come as a surprise.

The E.U.’s “investigation into online travel platform Booking.com” came amid “concerns that it has failed to adequately address fake listings and phishing scams.”[1] A phishing scam is one in which personal/financial information of customers is extracted for nefarious purposes such as identity theft. E.U. federal authorities accused the management of Booking.com of having “underestimated the impact of fraud and unlicensed accommodation on its platform and has not done enough to prevent users’ data from being exploited by scammers.”[2] The E.U. commissioner for technology, Henna Virkkunen, said at the time that E.U. citizens “should be able to book their holidays without fear of being scammed.”[3] Additionally, the Commission was taking a look at Booking.com “because it did not clearly label as ads those listings whose providers paid for a higher ranking in search results shown to users.”[4] This charge shifts the focus from the providers using Booking.com to that company’s own management. Together, the opportunity of collusion at the expense of the “users” is high enough that government oversight was justified.

Another American travel-reservation online platform, that which was run by Super.com, was also ripe for investigation because that company operated at the time in travel, financial tech, and savings company—all of which came under the Super+ membership. How the company’s hybrid prepaid Mastercard, useful for cashback and credit-building, and the cash advances feature of the savings feature related to the travel-platform could have been examined by regulators for possible structural conflicts of interest. Even just within the travel platform itself, the company could have been accused of false advertising because once a potential customer clicks on an advertised rate, a new page comes to the fore (“checking for rates”) and often times a new, higher rate appears as the only option. In other words, one rate may be shown when a customer is deciding whether to use Super.com, Travelocity, or Priceline, but once the rate shown by Super.com is clicked, Super.com’s algorithm checks for rates! This process is inherently unethical because the initial rate shown on a list of rates shown by other travel-platform companies is shown as the rate that Super.com is offering; there should not be any need for that company’s algorithm to then check for rates, and even worse, for a higher rate to then be presented as the lowest possible in using Super.com. 

The advent of computer technology in the making of hotel reservations has heightened rather than diminished the need for government oversight and regulation. The profit-motive clearly plays a significant role in the writing of the algorithms, and this should come as absolutely no surprise because companies are profit-making machines and are thus oriented to their own financial interest. In a hotel room, a card that urges customers to reuse a bath towel because “we care about the environment” can and should be taken as a subterfuge; the motive behind the sign is exclusively to reduce the expense that the hotel pays for its linen and towels to be laundered. The appeal to caring can even be looked at as mendacious, or at least as raising the specter that a management is fine with misleading customers. An organizational culture of unethical conduct at the expense of customers can indeed be glimpsed by such small “red-flags.” “Hospitality” managements can indeed be very petty—going so far as to dilute orange juice and reduce the thickness of waffle-makers, for example, so as to reduce the costs of the foodstuffs to the hotels. Hotel and especially motel managers and franchisees can be incredibly selfishly and greedily shortsighted at the expense of repeat business. That is, the hospitality industry is rife with exploits that can and should be of interest to government officials who are oriented to consumer protection rather to the financial interests of (regulated) companies or industries whose political-campaign donations to elected representatives and candidates for such public offices can be very persuasive both in legislatures and regulatory agencies. The associated theory is called regulatory capture. In investigating Booking.com, the E.U.’s executive branch may have been resisting that, though it is possible that a more politically-connected competitor of Booking.com had been pushing for the investigation in what is known as the strategic use of regulation to gain market share and even heighten the barriers to entry by potential competitors. An effective regulatory apparatus should both investigate companies and ensure that markets remain competitive rather than become oligopolistic or monopolies.

---

1, Greta Ruffino, “EU probes Whether Booking.com Is Doing Enough to Tackle Fake Listings and Phishing Scams,” Euronews.com, 21 October 2026.
2, Ibid.
3, Ibid.
4. Ibid.

Regulatory Capture and the Public Interest: The FDA

The head of the Food and Drug Administration, Marty Makary, “resigned” in May, 2026 even though the decision had been made by U.S. Health and Human Services Secretary Robert Kennedy “and then the White House signed off on it.”[1] Although Makary had been annoyance to drug-company executives, and to that extent his removal was due to pressure on President Trump by the CEOs, his “resignation” supports the theory of regulatory capture, wherein the regulated companies control the very regulatory agencies (and regulators therein) that regulate those companies, this case shows that it is possible for an industry’s interests to be aligned with the public (health) interest. Does the alignment regarding getting rid of a particular regulator lessen the unethical quality of the broader conflict of interest between business and government?

Without a doubt, the regulated industry was unhappy with Makery and his deputy, Vinay Prasad. For example, “(v)aping executives told Trump that Makary was blocking approval of their products, including new flavored e-cigarettes seen as crucial to the industry’s survival.”[2] Additionally, Prasad was “pushed out of the agency twice in less than a year for running afoul of specialty drugmakers and groups for patients with rare diseases.”[3] He had “rejection letters or requests to run additional studies” sent to more than six drug companies on drugs for rare or hard-to-treat diseases that had previously been approved by the FDA.[4] I do not have enough information to be able to assess whether his actions were in the public interest, as it is possible that the FDA’s previous approvals had been flawed. I have more confidence in concluding that he operated against the public’s healthy in going after an established coronavirus-vaccine maker. He had “repeatedly overruled vaccine staffers to restrict eligibility for new coronavirus shots.”[5] He even refused to “even consider Moderna’s mRNA shot for flu.” Moderna “called for intervention by the White House.”[6] In an internal memo, Prasad had claimed without evidence “that the FDA had linked COVID-19 shots to the deaths of 10 children.”[7] It seems that he was going more off an ideology than science.

It seems likely that the drug-company executives red-flagged the ideological distortion as it would decrease the companies’ future sales. The only ideology that rules in corporate boardrooms is that of the profit-motive, so any competing ideology coming out of a regulatory agency would be easily flagged. In such a case, the company-specific economic interests would be aligned with the public interest because the government-sourced ideology would be partial, hence partisan, and thus not in line with a bigger picture such as can reflect the public interest. In short, any pressure that the executives could bring on President Trump to remove Makary and his deputy would be in the public interest even though it would be a case of regulated companies getting rid of government officials who regulate those companies.

In general, regulatory capture of a government agency by a company or industry that the agency regulates is unethical because it destroys the power-relationship that is required for government regulation to exist. Another way of looking at the ethical problem is by realizing that a company, and even an industry, look out for their own particular (economic) interests, whereas the public interest is a whole. To put a part before or ahead of the whole of which the part is a part is essentially to have the tail lead the dog—a part leading a whole.

Because it cannot be supposed that a part’s interests are identical to that of the whole of which the part is a part, even cases in which the two are in sync cannot justify permitting the part to call the shots for the whole—to direct the whole. Put another way, it would still be unethical for a regulated company or industry to wield such power as could dominate a government in a republic because companies are private property rather than elected bodies. That specific cases such as Makary and Prasad justify the drug industry pressuring Kennedy and Trump does not mean that either official would be justified in being directed by that industry more generally. The problem is that corporate political-campaign donations can be so large that big pharma can have the political pressure to direct even a U.S. president. Going forward, company executives could try to justify such power by pointing to their “public” role in having shelved an ideology harmful to the public health that was pushed by Makary and Prasad. It is important to keep in mind, however, that regulatory capture is nonetheless unethical and contrary to democratic principles of public governance of private property, including companies.

---

1. Matthew Perrone and Seung Min Kim, “Trump FDA Chief Is Leaving After Angering Pharma CEOs, Vaping Lobbyists and Anti-Abortion Groups,” APnews.com, May 12, 2026.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.

7. Ibid.

Homelessness in the E.U.: Rectifying a Right

In late 2025, the E.U. Commission presented its first European Affordable Housing Plan. The E.U.’s involvement in “social housing,” which translates into federal funds being used to provide housing beyond homeless shelters for people who cannot afford to house themselves, implies that the programs of the states had been insufficient. The U.S. could take a lesson from the Commission’s plan, which is cleverly multi-pronged in tackling the societal problem. Both in the E.U. and U.S., both federal and state funds were needed even in 2025 when neither economy was in recession. It is better to increase the supply of affordable housing when times are good than when unemployment is soaring. This is an exception in the E.U. to the usual pattern wherein the E.U. increases its competencies, or enumerated powers, in periods of one crisis or another. Russia’s multi-year invasion of Ukraine, which borders the E.U., and the Union’s foreign and defense activity demonstrate how European integration has typically been enhanced by crisis rather than when times are good.

Homeless in both the E.U. and U.S. was a problem in 2024. In its “9^th Overview on Housing Exclusion” in 2024, Feantsa estimated a total of 1,287,000 people “rough sleeping, staying in night shelters, or temporary accommodation” in the European Union.[1] According to the U.S. Federal Reserve Bank, 771,400 people were homeless in January, 2024—an increase of 118,300 from 2023.[2] The total population of the E.U. at the end of 2024 was estimated at 450.4 million, and that of the U.S. was 341.8 million (whereas the respective states tended to cluster in the tens of millions). That works out to .0028% and .0023%, respectively. This may come as a surprise because in Europe, housing is more likely to be viewed as a right than in the United States.

Dan Jorgensen, the E.U. Commissioner for Energy and Housing (and the first such commissioner in E.U. history), said at the time of the Commission’s presentation of its proposal, “Housing is not just a commodity; it is a fundamental right. We must mobilise every euro and do everything in our power to make sure that in Europe everyone can afford a decent place to call home.”[3] In the U.S., the lax regulations on investor-speculators on houses, condos, and even apartment buildings evince a commodities-orientation to residential real-estate, whereas in the E.U. the homelessness problem may have more to do with insufficient supply rather than the salience of a political ideology favoring business or disfavoring the poor as deserving their plight.

I contend that permanent housing as a right is a better political ideology than is the business-commodity view of housing units both because being homeless takes such a terrible toll of the human psyche and because society should be obligated via the market or else the state to supply permanent housing because economic interdependence is endemic to a society as opposed to Hobbes’ state of nature, where life is short and brutish. Put another way, being in the state of nature in terms of housing while being in a society does not work because a society and a state of nature are mutually exclusive. 

It is inconsistent to insert, especially within city and even a town, even a slice of Hobbes' state of nature, whether in the form of sociopathic violent gangs for which law in south Chicago in Illinois is wholly disrespected, or homeless individuals in a town or city. Having the state of nature within a society is not like Yin being in Yang, and vice versa, in Chinese philosophy; rather, the state of nature inside a society contradicts the necessity that Kant argued is inherent to law, whether public or moral law. Furthermore, to tolerate homelessness within a society is like inserting a vice like vengeance into omnibenevolence—a point that Nietzsche makes in claiming that the Abrahamic deity is “dead” in the sense of having been discredited by being both vengeful and perfectly benevolent, which are incompatible with each other. Even though the effort to rid humans of vengeance is laudable, the cost in assigning the vice to God was surprisingly overlooked, and still is. Similarly, the utter incompatibility of homelessness and society is seldom recognized. 

By the end of 2025, it was well beyond time for the E.U.’s Commission to come up with a plan to rid the Union once and for all of the sordid plight of homelessness. Ridding Europeans of the constant, underlying existential angst that does not leave a mind that is subtly aware that homelessness could occur in the future can be expected to result in happier, more relaxed people and thus less interpersonal strife. It is indeed realistic that the E.U., together with the member-states, could together, as a shared competency, eliminate  the problem of homelessness in 2026 by relaxing state rules on whom can receive housing assistance (i.e., not just the very poor), using federal “European Social Housing” funds to get homeless people immediately into at least short-term housing (even hotels), and incentivizing the construction of more housing units to meet the demand, and even reducing housing prices and rents for everyone. The sordid commodity perspective in America would be exposed as severely flawed, as it reflects elected officials across that Union being in the campaign-financing pockets of private finance and business rather than looking out for, or protecting, all constituents from the horrible experience of being homeless. Just in virtue of being a human being—how we are hard-wired and how vulnerable the human brain or mind is to the incapacitating harm from severe, existential stress—something beyond short-term housing should be ensured unconditionally. How a human mind reacts to being homeless ought to justify the unconditional aspect, as those who do not work must wander around at all times and be subject to theft is a callous ideological belief.

---

1. “What is Homelessness,” Feantsa, Feantsa.org (accessed 16 December 2025).
2. Lisa McKay and Kenneth Cowles, “Who Is Homeless in the United States? A 2025 Update,” The Federal Reserve Bank of Minneapolis, March 14, 2025.
3. Vincenzo Genovese, “EU to Revise State Aid Rules to Address bloc-wide Housing Crisis,” Euronews.com, 16 December 2025.

Musk vs. Trump: American Business and Government at Loggerheads?

When the wealthiest person in the world and the President of the United States cross swords, people are bound to notice. Such a very public clash between billionaires, one of whom is the most politically powerful person in the U.S., should not lead the rest of us to infer that the interests of large corporations and the U.S. Government, including the respective executives and elected representatives, typically conflict. Corporate and individual mega-donations to political campaigns, the proverbial “revolving door” between working in government and at a corporation, the reliance of regulatory agencies on information from the regulated companies invite the exploit of conflicts of interest such that legislation and regulations are even written by corporate lawyers for their respective companies’ financial interest. Furthermore, that many very large American-based corporations have interlocking boards of directors gives corporate America considerable unified force in seeing to it that Congress and the federal president remain friendly to business interests. That both benefit from the status quo and have de jure or de facto vetoes of reform proposals reinforces the staying power of the club. Even as U.S. Senator Bernie Sanders enjoyed considerable media attention and crowds in his speaking tour against oligopoly (i.e., consolidation within an industry such that companies can set prices at will and can thus extract extra profit beyond that which would accrue in a competitive market), it would be wildly optimistic to hope for an onslaught of anti-trust enforcement from a Republican or Democratic administration.

Even though U.S. President Trump claimed in early June, 2025, that he had told Elon Musk to leave the Administration because Musk was “wearing thin,” and Secretary of State Rubio would doubtless attest to that, it should not be forgotten that Musk had spent more than $250 million “helping President Donald Trump win a second White House term.”[1] Musk “also spent more than $19 million in the final weeks of the 2024 election cycle to help Republicans win narrow majorities in Congress.”[2] Even though Musk was the richest person in the world at the time, to spend so much money and yet be inattentive to how his companies could benefit from government contracts and electric-car subsidies defies human nature. Indeed, even though Musk denied opposing Trump’s tax and government spending “Big Beautiful Bill” because of the cuts to EV subsidies, Trump had a point that the negative financial impact on Tesla was not a point in the bill’s favor to Musk. To be sure, Musk’s complaint about too much “pork” and thus deficit spending being major problems in the bill that the U.S. House had recently passed by a single vote is valid. Nevertheless, lest it be assumed that a dispute on public policy between two billionaires is in the interest of the poor and middle-class, Musk registered no complaint about the cuts to Medicaid, which finances healthcare for the poor who cannot afford private health-insurance, and food assistance for the poor.

Even in the midst of an argument between billionaires in business and government, we cannot assume that the conflict of political-economic interests among the elite results in the enactment of public policy that is in the public interest. In Trump’s bill, for example, even though less money would subsidize electric vehicles, there were no reductions of subsidies in the bill that passed the House for coal and oil companies. The grip of those companies in Congress and the Trump Administration could be assumed to be tight in spite of the global average temperature having reached 1.5C degrees, which the Paris Accord of 2016 set as a threshold. The cozy relationship amid climate change puts in stark relief the distinction between private interests and the public interest.

When asked at the Qatar Economic Forum in 2025 whether he would continue making political donations as he had in 2024, Musk replied, “I think I’ve done enough.”[3] It should not be missed that he added, “Well, if I see a reason to do political spending in the future, I will do it.”[4] It would be of value to the American political economy if he would do contribute to political campaigns aimed at breaking up the cosy relationship that CEO’s and (and the corporations) have with elected officials and regulators at both the state and federal systems of government in the U.S.; by “breaking up,” I mean something more substantial and structural than barring government officials and employees from being hired by corporations that have benefitted from the work of the officials and employees.

Instead, I recommend a return to competitive markets and even possibly limiting political-campaign contributions of corporations and the ultra-rich, for the financial influence of large concentrations of wealth on elected officials and appointees tilts the political economy away from being oriented to the public interest, which is not arrived at by the entanglement of certain powerful private interests. To be sure, going so far as trying to eliminate the gravitas of wealth politically would be utopian and thus a fool’s errand, but public policy could be formulated and enacted that is aimed at reversing or countering at least some of the self-interested tilt of the American political economy that so benefits members of the club—Trump and Musk included. Nor is Socialism necessarily the answer to protecting the poor and middle-class from the self-interested endeavors of the interlaced economic and political elites, for Adam Smith’s invisible hand can do wonders to regulate price if only competition is restored to oligopolistic industries, which includes even social-media companies.

Trump’s threat to cut off Musk’s SpaceX from government contracts and Musk’s acknowledgement that he might make sizable political donations even though he was disappointed in Trump’s bill for its pork and probable significant addition to the U.S. federal debt indicate that politicians have considerable discretion being able to benefit companies financially and that CEO’s can make use of such discretion by legally paying off political candidates and those office-holders who are up for re-election and would all too easy exploit a personal conflict of interest by bending public duty to private campaign-interest. Using ambition to check ambition is part of the genius of the American political system of checks and balances, but as the ambitions are solely among the wealthy, it cannot be assumed that the public interest is necessarily being served by the resulting public policies, for collusion even between contending ambitions does indeed exist even if the publicly-aired arguments among the elite of the political economy are more titillating.

1. Kevin Breuninger, “Elon Musk Says He Will Spend ‘A Lot Less’ on Future Campaign Donations,” CNBC.com, May 20, 2025.
2. Ibid.
3. Ibid.
4. Ibid.

Nature Credits in the E.U.

One of benefits of the market mechanism, by which, for example, economic goods are bought and sold, is that self-interest is relied on; people don’t have to be told to buy or sell a product because it can be in their self-interest to do so if the price is right. As an alternative to regulatory standards, a government can create units of pollution-allowance that businesses can purchase so to be lawfully able to pollute in so far as a purchased unit allows. In the E.U.’s emissions trading system, “operators of power plants and factories have to buy tradeable allowances to cover every tonne of carbon dioxide they emit.”[1] Business could buy and sell allowances so as to cover the amount of pollution that is anticipated. In this way, the market mechanism efficiently allocates pollution in line both with the interests of the companies and the public interest—the latter being made concrete in the decision on how much pollution per allowance and how many allowance units to create. Crucially, the company private interests are put within the purview of the public interest; the tail is not directing the dog. In political economies in which political-campaign contributions by businesses are high, especially if unlimited, the tail can indeed wag the dog, such that the public interest is determined by private interests. This is one reason why the Citizens United (2010) U.S. Supreme Court case is so significant. It allows corporations and labor unions to spend unlimited amounts of money on political campaigns and directly on advertisements—both being beneficial to elected officials in positions to curry favor through legislation and regulations favorable to business (or labor). The informal exchanges of political donations and legislation or regulation comprise a market of sorts. So, the market mechanism, which is created or at least regulated by government, can serve for good or ill, from the standpoint of the public interest.  Using the mechanism, such as the E.U. president proposed in 2024, on behalf of ecosystems, is for good rather than ill, and thus using, in effect, the self-interest of farmers could be better than relying on regulatory requirements that farmers expend some money and effort to beef up their local ecosystems.

At a conference on September 13, 2024, a Friday, E.U. President Ursula von der Leyen said, “We need new financial tools to compensate farmers for the extra costs of sustainability and compensate them for taking care of the soil, the land, the water, and the air.”[2] The assumption is that the farmers would not otherwise do so because expending the energy and paying the costs for the externalities would not add to their profits from farming in the short or medium term. The time-value of money too reflects the penchant in human nature for immediate over delayed gratification. To extend the farmers’ “event-horizon” and broaden out their concern to include their vicinity would be the purposes of “the market-based system of ‘nature credits’,” which Von der Leyen hinted “could also be applied beyond the agricultural sector.”[3] This is part of the beauty of the market mechanism: it can be applying to various things, serving various purposes, rather than only pertaining to economic products and services.

Via “nature credits,” a water company could have the incentive as per self-interest to help to take care of a spring that that company depends on, and a fruit company would be more likely to invest in the “essential work of pollinators.”[4] That the language of long-term investment applies raises the question of why farmers in general do not do what manufacturing businesses do as a regular part of business. It would seem that making sure that a principal water source is not lost or that bees stay in the area of the fruit trees would be in the self-interest of the respective companies. Why would compensation by the government be needed to run a sustainable business?  Is the managerial perspective really so delimited that the viability of the business is not included?

Unfortunately, even by 2024, climate change was perceived by many business practitioners still as a gradual and outside process not germane to business. Johan Rockstrom of the Potsdam Institute for Climate Impact Research, said at the same conference, “I can tell you, science is clear today that the ultimate determinant, what regulates the stability of the planet, its ability to stay in a desired equilibrium state is nature.”[5] According to a journalist, Rockstrom was “suggesting that action of biodiversity and climate made sense even if purely pragmatic.”[6] If farmers didn’t yet see it as such, “nature credits” would help render biodiversity pragmatic from an agribusiness standpoint—essentially interiorizing some externalities.

To be sure, even if a private interest broadens out to include some hitherto externalities, that interest is still not the same as the interest of the whole: the public interest. It would still be important to protect the public interest from being captured by a private interest; a large company or an industry that would implicitly presume to be in charge of its own regulation by dictating legislation and regulation to sycophantic government officials should be withstood by them. Even so, expanding the practical purview of private interests is in the interest of the whole, and the market mechanism can be used to make this so.

---

1. Robert Hodgson, “Von der Leyen Moots ‘Nature Credits’ Market to Avert Ecosystem Collapse,” Euronews.com, September 13, 2024.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.

On the Role of Agribusiness in Global Warming

Agriculture is a major source of carbon and methane emissions, which in turn are responsible for the general trend of the warming of the planet’s atmosphere and oceans. In fact, agriculture emits more than all of the cars on the roads. 10 percent of the emissions carbon dioxide and methane in the U.S. come from the agricultural sector. Livestock is the biggest source of methane. Cows, for example, emit methane. Methane from a number or sources, including the thawing permafrost, accounted for 30 percent of global warming in 2023. As global population has grown exponentially since the early 1900s, herds of livestock at farms have expanded, at least in the U.S., due to the increasing demand.[1] We are biological animals, and we too must eat. More people means that more food is needed, and the agricultural lobby in the U.S. is not about to let the governments require every resident to become a vegetarian. Indeed, the economic and political power of the large agribusinesses in the U.S. have effectively staved off federal and state regulations regarding emissions. It comes down to population, capitalism, and plutocracy warping democracy.

The full essay is at "On the Role of Agribusiness in Global Warming."

---

1. Georgina Gustin, “Climate Change and Agriculture,” Yale University, February 22, 2024.

The European Commission as Political

The European Commission, the E.U.’s executive branch, has been known for being a technocratic institution. Yet in drafting regulations, imposing fines, and negotiating trade deals, the Commission is much like the U.S.’s executive branch. In fact, high-level appointments must secure the approval of the legislature through confirmation hearings. Yet the top of the U.S. executive branch, the White House, has been known for being ideological and definitely political. That that executive branch also promulgates and enforces regulations can be easily missed. That the E.U.’s executive branch is also political has definitely been missed or dismissed in the ideological illusion that the E.U. is merely a technocratic international organization rather than a federal system of governments. This illusion could finally be seen as such after the election of Ursula van der Leyen as President of the European Commission in 2019.

Her announcement of new titles for commissioners sparked ideological controversy because the titles themselves are inherently ideological. One commissioner would be “for Democracy and Demography,” while another would be “for Protecting our European Way of Life.”[1] Besides the inappropriateness of using office titles as ideological placards, the insertion of ideology at the top of the Commission must have surprised many Europeans who were under the ideological impression that the E.U. was merely an international technocratic organization rather than a federal system with a federal government.

The “once technocratic institution,” the Commission, was, according to van der Leyen a “geopolitical commission.”[2] Finally an explicit acknowledgement is made that the E.U. is geopolitical, and thus a federal government, rather than just a trading “bloc.” That The New York Times consistently applied this label to the E.U. in spite of the fact that it had not only an executive branch, but also a legislative one (The European Counsel and the European Parliament) and a judicial one (the European Court of Justice) boggles the mind. Unthinkingly swallowing the European illusion has effectively enabled it, and thus forestalled the day when Europeans would finally realize what they have created.

---

[1] Valentina Pop, “EU’s New Boss, Invoking ‘European Way of Life,” Sparks Partisan Brawl,” The Wall Street Journal, September 19, 2019.

[2] Ibid.

Recommended: Essays on the E.U. Political Economy: Federalism and the Debt Crisis. See also Essays on Two Federal Empires: Comparing the E.U. and U.S. Both are available at Amazon.

Presidential Authority and Bureaucracy: Regulatory Agencies

Circulating in Congress in the fall of 2012 was a bill that would have allowed "the White House to second-guess major rules and mandate that agencies carefully study the economic effects of new regulation. The change could, in effect, delay a number of rules for the financial industry. Those who support preserving the status quo where Wall Street regulates itself will find much to like in this legislation," said Amit Narang, a regulatory policy advocate at Public Citizen, a nonprofit government watchdog group.[1] President Obama had received $1 million from Goldman Sachs as a campaign contribution in 2008. Yet of how much value to Wall Street is a mere delay in regulation? Some, surely, but not enough to make this the decisive issue here. Rather, I submit that the president's control as chief executive of the regulatory agencies and the added bureaucracy are more salient in this case study. 

In terms of Wall Street’s interest, the proposed bill would have permitted the White House only to delay proposed regulations until further explanation is provided; the president would not be able to veto them. The issue from this case can thus be said to be whether the U.S. president as the chief executive in the U.S. Government must have control over even independent agencies such as the SEC. To be tasked with the enforcement of U.S. law and yet not to have the right even to be consulted by agencies as varied as the FCC, the FDIC, the SEC and the CFTC puts the chief executive in a bind—that of constitutional responsibility without the requisite authority. 
At a much less significant level, the added bureaucracy could have been a problem, given how much bureaucracy was in the agencies themselves: “at the minimum a 13-point test for rule-making. That includes finding ‘available alternatives to direct regulation,’ evaluating the ‘costs and the benefits,’ drafting ‘each rule to be simple and easy to understand’ and periodically reviewing existing rules to make agencies ‘more effective or less burdensome.’”[2]

1. Ben Protess, “Lawmakers Push to Increase WhiteHouse Oversight of Financial Regulators,” The New York Times, September 10, 2012. 
2. Ibid.

The FAA Deferred to Boeing on the 737 MAX Jet

After a misfiring-prone automatic stall-prevention device on the 737 MAX jet had caused two accidents in which 346 people died, an internal review at the U.S. Federal Aviation Administration, a regulatory agency, found that the regulators had relied too much on Boeing employees to conduct the safety inspections of the planes. Incredibly, Congress expanded the industry-reliance practice of the agency in 2018. Both the FAA and Congress were admittedly motivated by the added efficiency that such “sub-contracting” could bring. However, to focus on the economic benefit while ignoring the inherent (and obvious) conflict of interest in “sub-contracting” to the very companies that are regulated by the FAA is itself a red flag. A subservient or over-reliant regulatory agency cannot be a check on a company’s claims of not having sacrificed safety or even safety checks in order to focus more on profitability.  Of course, the political influence of a large company such as Boeing may have played a role in the FAA’s “back-seat” approach, but in this case the government’s own interest in stretching the coverage of its human resources may have been dominant. That such an interest could involve minimizing or ignoring outright such a blatant conflict of interest may point to a wider culture in which institutional conflicts of interest are presumed to be innocuous or even benign rather than too toxic to permit even if they have not been actively exploited.  

During the FAA certification process for the 737 MAX, Boeing didn’t flag the automated stall-prevention feature as a system whose malfunction or failure could cause a catastrophic event.”[1] The FAA’s report does not point to any fabrication on the part of the company. The problem is that “FAA engineers and midlevel managers deferred to Boeing’s early safety classification.”[2] No check on the company’s determination could be in such deference. It is astounding that managers at a regulatory agency could have neglected or ignored this basic point, which gets at the raison d’etre of any regulatory agency. C’est vraiment incroyable.

In fact, the company’s initial safety classification allowed “company experts to conduct subsequent analyses of potential hazards with limited agency oversight.”[3] The operative assumption in this practice seems to be that experts cannot be initially wrong, or that they could eventually catch their own errors, and that such experts are not subject to pressure from managers to get the planes in the air and generating revenue that can at least cover payments on the planes themselves.

Even worse, the FAA classified certain Boeing employees as “designated agency representatives.”[4] Employees of a regulated company cannot represent the regulatory agency, for such a designation is itself an institutional conflict of interest. It is, in effect, to designate one wolf as a police-wolf around a hen house! How can this not be obvious? I submit that only in a permissive culture can such blind-spots thrive. The FAA’s practice of designating some employees of regulated companies as being able “to act for the agency” was set up by the FAA and “endorsed and expanded” by Congress with “the aim of freeing up government resources to focus on what are deemed the most important and complex safety matters.”[5] Was not something that had killed hundreds of people an important safety matter? FAA managers might retort, “But we didn’t know this except in hindsight.” Exactly. This is precisely what minimizing or ignoring a huge conflict of interest can do.

See Institutional Conflicts of Interest, available at Amazon.

---

[1] Andy Paztor, Andrew Tangel, and Alison Sider, “FAA Left 737 MAX Review to Boeing,” The Wall Street Journal, May 15, 2019.

[2] Ibid.

[3] Ibid., italics added.

[4] Ibid.

[5] Ibid.

Pruning Back an Ideological "Re-Definition" of Socialism

Should language lose its integrity for ideological purposes? On Fox News in the wake of the passage of Obamacare, Brit Hume and Newt Gingrich, a former Speaker of the U.S. House of Representatives, both (re)defined socialism as “government control of private property.” Their rendering falls short, however. According to the Random House Dictionary (via Dictionary.com), socialism is “a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole” (italics added). Whereas government regulation of privately-owned means of production and distribution involves some of the control being in the hands of the community as a whole through its government, socialism includes the vesting of both ownership and control with the government. 
Hume and Gingrich doubtless believed that words can be redefined to suit ideological objectives. Public discourse is difficult enough in a democracy. The dialogue "across the aisle" becomes more difficult when one or both sides decide that language can (and even should!) be subordinated to ideology to the extent that dictionary definitions (and common usages) are presumed to be changeable simply by applying a new meaning to the words on the public airwaves or speeches. Ideologically akin people will doubtlessly follow along, and soon the word has a meaning that contradicts the dictionary definition.  
Going further, to intentionally scare people by redefining a word in such a way that the word appears worse than it actually is nothing short of misleading manipulation. Even in such a case, not even the opposing partisans alert the people through the media or speeches that X means Y rather than Z according to dictionary definitions. No one stands up for language, so ideology can have its way and prey on words.
If government control via regulation is not convenient to the business sector and its advocates, what about government ownership without control! As per the definition of socialism, government ownership without formal control does not constitute socialist enterprise. Ownership and control can indeed be separated. Bearle and Means, in their classic treatise, The Modern Corporation and Private Property, point to the separation in modern large corporations, wherein stockholders as a group are the owners and control is maintained by managers. Theoretically, a government could own a company that is controlled by its management. Perhaps public policy would be served by the ownership alone, or the managers could have taken de facto control away from the government officials.
Therefore, the definition of socialism is more delimited than typically thought. To be sure, the meaning of words can change naturally, but such shifts are gradual as per changing times and thus uses, rather than sudden, as from being artificially interlarded for short-term political use. In the case of socialism, the term has historically applied to an entire economic system, such as those of the U.S.S. R. and China before capitalism made such inroads. A person would not say that healthcare is socialism, or even that taxes are socialistic. In Arizona, the dominant ideology has viewed taxes as theft.
With the fall of the command-and-control economic systems of the U.S.S.R. and China, socialism has come to be increasingly applied to governments owning and controlling particular enterprises rather than every means of production and distribution. Hence a capitalist economic system can contain socialist enterprises. For example, the Green Bay Packers’ football team in Wisconsin has been socialist because the citizens of the Green Bay together have owned the team. The community need not transfer ownership formally to a government for an enterprise to be socialistic. So too has the China National Tobacco Corp. 
In short, socialism can be distinguished from government regulation of privately-owned economic enterprise. Conflating the two by effectively redefining the word, socialism, muddies the public discourse and sows confusion, neither of which is helpful to viable republic. Furthermore, socialism can be applied to particular enterprises as well as to an entire economy whose means of production and distribution are owned and controlled by the community as a whole (often through its government). The application to particular enterprises does not reduce socialism to control alone. 

Is God the Invisible Hand?

A Baylor University survey on religion and economics in 2011 revealed something that may be distinctly American, culturally speaking. The results indicated that about “one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and [advocates] the free market as a matter of faith.”[1] Specifically, those Americans believed that the “invisible hand” of a competitive market is actually God at work. Put another way, the assumption is that the economy “works” because God wills it to by intervening directly in the market mechanism itself. Government regulation, in diverting economic supply and demand from “the invisible hand,” is thus sinful. Regulating the economy challenges God’s omnipotence (i.e., power) by interfering with God’s intervention in our daily lives via the operation of the market mechanism. 

The full essay is at "Is God for Regulation?"

1. Cathy Lynn Grossman, “Religion Colors Money Views,” USA Today, September 20, 2011. 

Alan Greenspan on the Self-Regulatory Market

Two days after the LTCM bailout was agreed to in 1998, a worried Alan Greenspan, leaning toward raising rates at the time, cut the federal funds rate. It was not enough to calm the markets, and he cut it again three weeks later. . . . It was not the self-correcting powers of the markets but aggressive central bank intervention plus a new round of irrational speculation that provided a floor under the downward financial prices and the calamitous consequences of bad Wall Street decisions. It was not even the LTCM rescue alone by private banks that saved Wall Street” Madrick, p. 281). “Alan Greenspan learned no lessons from these events about the inherent instability of a completely free market in finance. He still insisted markets regulate themselves” (Madrick, p. 282).

Analysis:

Milton Friedman believed that government regulation keeps markets from being efficient; he assumed that the market mechanism is capable of regulating itself. That increasing uncertainty and risk might reach a point that a market mechanism would freeze up, or collapse, rather than simply incorporate the increased volatility through pricing is a point extrinsic to the efficient market thesis. That theory submits that markets tend toward equilibrium, rather than spiraling out of control.
Testifying before Congress after the credit crisis of 2008, Alan Greenspan was asked by Henry Waxman (D-Calif) whether the government-averted credit-market collapse had prompted any revision of the retired Fed Chairman’s economic paradigm. Greenspan admitted to a flaw in the ointment of self-regulatory market theory. In spite of 40 years of evidence to the contrary, official Washington’s font of economic wisdom had drawn a blank.
Lest the human mind be left without an operative paradigm by which one can make sense of the world, by mid June 2011, Greenspan had mentally reduced the fly in the ointment to a mere footnote. Asked by Charlie Rose on The Charlie Rose Show what how the crisis had changed his understanding of the market mechanism and economics, Greenspan admitted his surprise that bank CEOs do not always operate their banks so as to keep them solvent. This is how the financial crisis of 2008 had changed his view of the market mechanism after all. Of course, such a fault could be attributed to distortive government regulation (e.g. regulation Q limiting deposit interest) rather than to some inherent weakness in the market mechanism being able to regulate itself.
Greenspan had backtracked; he had unlearned his lesson much like an alcoholic “forgets” that he or she has admitted to having a drinking problem.  Faced with a fundamental flaw in a paradigm on which it relies, the human mind can succumb to retreating to the safety of denial. In his Structure of Scientific Revolutions, Thomas Kuhn tells us that it can be a generation before the downfall of a reigning paradigm is finally recognized, after the current proselytizers have passed and the people to come, without a vested interest in the prevailing paradigm, have taken their place. Perhaps it is only the human mind writ large (i.e, intergenerational) that advances, or really learns.
Lest we have to wait for the dead to bury themselves, we can affirm and acknowledge right now that the market-mechanism is not inherently self-regulating, and that this flaw is not caused by government regulation. Instead, markets can collapse—just as a human being freezes up from fear when risk and uncertainty hit a certain threshold—only to be revived by governmental intervention.  

Source:

Jeff Madrick, Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (New York: Alfred A. Knoff, 2011).

See also Skip Worden, Essays on the Financial Crisis, available at Amazon.

Judge Allows ATT Purchase of Time Warner: Vertical Integration Escapes Anti-Trust Objection

Typically horizontal mergers, as when one company merges with another that makes similar products, have trouble when it comes to anti-trust, restraint of trade, objections. The go-ahead of the ATT merger with Time Warner in mid-2018 suggests that vertical combinations, such as when distributor buys a content-creator, survive on anti-trust grounds. Even if trade is not restrained, another problem is present—that of conflicts of interest. Anti-trust law is oriented to preventing restraint of trade rather than such conflicts. Accordingly, just because the ATT merger survived on anti-trust grounds does not mean that a regulatory gap did not exist at the time.

In 2016, a U.S. judge had blocked the merger of Staples and Office Depot because it could have left consumers with “only one dominant retailer” focused on office products.[1] In other words, such a retailer could easily have been a monopolistic price-setter rather competitive price-taker (from the market). The market itself should be dominant, anti-trust theory claims.

The case of ATT, which was known still in 2018 as a cellphone provider, would add the owner of programing content, including HBO, Warner Bros, and CNN by buying Time Warner. ATT was not trying to corner the market, in other words, on cellphones. The problem lies elsewhere. In this case, ATT could privilege its own devices over other means of watching the content. Although such a privileging could restrict trade at the distributor level, the underlying problem is that of an institutional conflict of interest: privileging one’s own distribution over other means of seeing the content.

Yet the obligation to maintain other means of distribution may be illusionary. That is to say, ATT may not have any such obligation. If the company’s strategy is to purchase the content (e.g., HBO and CNN) exclusively to be distributed through ATT products, no price differential would exist between ATT’s means and those of other distributors. The ethical problem exists if ATT allows other distributors of the content, for the temptation would then be to charge those others more in order to privilege ATT’s own means of delivering the content. My point is merely that ATT could ethically restrict its own acquired content to its own devices; the ethical problem bumps up against the human nature of business only if ATT adds its own distribution devices to others in providing the acquired content. Anti-Trust law has another orientation, and is thus ill-fitted to this problem. Put another way, unfair pricing (of distribution) is different than, though possibly related to, undue restraint of trade. Both of these market imperfections warrant regulation, so relying solely on anti-trust law is sub-optimal in terms of public policy.

---

[1] Cecilia Kang, “Why the AT&T-Time Warner Case Was So Closely Watched,” The New York Times, June 12, 2018.

The Downfall of MF Global: Implications for Banks Too Big To Fail

Here is an alphabet-soup of regulatory agencies that let MF Global, a financial services company that specialized in futures-trading, engage in much, too much, risk: SEC, CME, CFTC and FINRA. On one level, regulators will never be able to stop practitioners from making risky or simply bad decisions; a business system populated only by firms above average is by definition impossible. As long as their managers have any freedom of movement at all, some firms, including some in the financial sector, will inevitably fail. The question I want to pose is whether this means that firms too big to fail (TBTF) should be allowed to exist at all. In short, although MF Global itself was not TBTF, the risk Corzine (who had been chairman of Goldman Sachs) permitted suggests that human nature might be insufficiently disposed to support mammoth concentrations of private capital whose fall could mean the collapse of the financial system itself. Ultimately, I suppose, human nature can only go so far, organizationally speaking.

MF Global admitted to $630 million in missing customer funds. Although accounting errors and bank-cushions could account for the discrepancy, MF Global used customer funds to loan itself money. To be able to do so, the former U.S. Senator and Governor of New Jersey, Jon Corzine, met personally as head of MF Global with federal regulators to get them to relax their proposed rule that would have forbid such a loan. According to the New York Times, financing by borrowing customer funds is not unheard of on Wall Street, but is “carries substantial risk.”

Corzine’s influence with the regulatory agencies may have been similar to the role that Madoff’s status played in his dealings with the SEC. It would seem that regulators are readily “captured” by high status alone—never mind relying on the regulated firms for information and possibly even being influenced by political contributions via elected officials acting on the behalf of big donors. Given the riskiness in borrowing customer funds without the traditional banking oversight of lending, the regulatory “status lapse” syndrome is dangerous—particularly if a firm TBTF is involved. In other words, might we be rolling the dice in Dodd Frank by relying so much on regulators? The possible mix of duplicity and risky multi-billion dollar bets at MF Global should drive home this point.

People at an exchange that cleared trades for MF Global have indicated that Corzine’s firm might have moved money out of customer accounts “in a manner . . . designed to avoid detection” as the firm headed toward collapse. CME Group, the parent company of the Chicago and New York Mercantile Exchanges, indicated that it appears that MF Global dipped into customer accounts after CME finished an onsite review of the securities firm during the last week of October, 2011. The CME statement read in part, “It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection insofar as MF Global did not disclose or report such transfers to the [Commodity Futures Trading Commission] or CME until early morning on Monday, October 31, 2011.” CME served as a clearing house for trades that were made through MF Global, according to the Wall Street Journal.

Meanwhile, questions regarding MF Global’s $6.3 billion bet on E.U. state debt and the scrutiny by regulators were mounting, according to the Journal. That any bet would be for such a sum ought to raise a red flag for the firm making the bet. Although MF Global was not TBTF, the managers’ willingness to take on such risk suggests that the mentality to take on extraordinary risk carries on in the financial industry. This finding may render the very existence of financial firms deemed too big to fail as something we might want to revisit through legislation. In other words, if bets worth billions of dollars on European government debt were going on through the E.U. debt crisis, the risk alone (to say nothing of the utter stupidity) may suggest that financial-sector firms that are too big to fail are also too big to exist—especially if regulatory scrutiny is insufficient. The risk and the numbers may have reached a dangerous level, given how human nature treats risk (and the limits of human cognition).

Paul Volcker admitted on Charlie Rose in late October 2011 that he never thought he would talk in terms of trillions of dollars, but there it is, that day had arrived and with it, the horrendous risk of banks being too big to fail. Whereas Citigroup had $1.63 trillion in total assets at the end of June 2006, the bank had $1.94 trillion at the end of the third quarter 2011. Comparable figures for Bank of America are $1.45 trillion and $2.22 trillion. JP Morgan Chase: $1.33 trillion and $2.29 trillion. Wells Fargo: $500 billion and $1.3 trillion. Where is the lesson on TBTF from September 2008? It is as if the credit crisis and fall of Lehman Brothers had not happened. Thomas Hoenig, former Kansas City Fed chairman, said in a speech in February 2011, “We must break up the largest banks.” He said the government could do so by restricting the activities of government-backed banks “and significantly narrowing the scope of institutions that are now more powerful and more of a threat to our capitalist system than prior to the crisis.” According to the Wall Street Journal, regulators “can ultimately force a firm to sell off parts of itself if they don’t believe a firm could be wound down without threatening others.” Although Hoenig said he is not against BIG, just too big to fail, so it is possible that the biggest banks could show that “they are manageable, that their risk will not impact the taxpayer in the future,” I contend that the mere existence of concentrations of $1.94, $2.22, $2.29 and $1.3 trillion is inherently dangerous to the financial system and the greater economy. If even one of those should go under all at once, assuming losses are involved, investors, business managers, bankers and even consumers would surely hear a subtle fiscal “thud” and react aversely, even if in a self-fulfilling prophesy. If Wall Street bankers did not learn a lesson from September 2008, however, that “thud” could be far more than psychological. The example of MF Global may suggest that the bankers on Wall Street did indeed continue on in being all too willing to make risky multi-billion-dollar bets, having “slept through” the shrieking “wake-up call” of the financial crisis of 2008. The resumption of the extravagant bonus culture strongly suggests that the bankers still had an incentive to bet big with little regard for risk.

Treating the mega bank as too big to exist as a mega bank does not depend on regulatory scrutiny, which can be subject to the “status syndrome”; rather, once a firm hits the pre-established threshold, the regulators would simply come in and orderly “smash the atom” such that smaller firms result (with different owners, managers and employees—unlike the case of the companies coming out of Standard Oil, which had the same ownership and whose executives were even allowed to continue working in the same building!).

I think perhaps we presume too much regarding human nature, given the edifices we build ever higher and higher, as if in testament to the self-idolatry of our presumption that we cannot be wrong. Lest we come too close to the sun and turn our cities into deserts, we might want to fly our chariots a bit closer to the ground.

                                                

Sources:

Jean Eaglesham, Aaron Luchetti, and Jacob Bunge, “Regulators Enter the MF Fray,” The Wall Street Journal, November 3, 2011. 

Azam Ahmed and Ben Protess, “As Regulators Pressed Changes, Corzine Pushed Back, and Won,” The New York Times, November 4, 2011. 

Victoria McGrane, “Banks’ Critic Poised to Be Head of FDIC,” The Wall Street Journal, November 18, 2011.