How many times, in the last year, have I heard praise for FDR’s banking reforms, even down to the specifics of federal deposit insurance?
The funny thing is, this factoid is false. Roosevelt opposed deposit insurance. Everyone did who at that time knew the history of the states that had experimented with this form of subsidy. Only logrolling pushed deposit insurance into law as a known special favor to small banks in rural areas — not to cure the nation’s ills.
The actual history and lessons of bank failures is explored by Charles Calomiris in a recent paper provocatively titled “Banking Crises Yesterday and Today.” According to this Columbia Business School professor, bank panics were not uncommon in the U.S., prior to the Federal Reserve in 1913. And the Fed pretty much stopped them. Massive bank failures, on the other hand, are different. Not unheard of elsewhere, massive failures had not been a problem in America leading up to that time. However, such failures became a problem a few decades later in the Great Depression.
Calomiris explains that such massive crises are brought on, chiefly, by institutional risk factors, like deposit insurance, government manipulation of the housing market to increase ownership through loosening of financial standards, and the “too big to fail” doctrine.
It turns out that honest standards, and not mammoth government subsidies and guarantees, prove the best way to prevent catastrophe.
This is Common Sense. I’m Paul Jacob.
1 reply on “Massive Failures”
FDR seems to be responsible for all kinds of stuff that turns out to be unfounded in reality upon closer inspection.
I have read FDR’s “fix” for the depression was Hoover’s plan “writ large.” And, while credited with ending the depression, he didn’t live to see its end in 1946, or so I read.
I view FDR as the original “progressive” (Teddy Roosevelt’s 3rd-party adventure notwithstanding) American president. Henry Wallace, the veep during WW II, was a communist, which is no doubt why FDR replaced him with Harry Truman (a creature of machine politics) in ’44, probably realizing that he wouldn’t survive his fourth term and so decided not to leave America with a red president (the current status quo; hey, go to the Instant Replay, as Obama has been caught on video and/or audio making the most unimaginable statements…knowing that he was being recorded)(d’oh!).
I read that catastrophe was avoided in the recent past, when the FDIC raised its top payoff for losses for bank customers from $150k to $250k. They (the FDIC) are, of course, crashing into asphalt.
What’s the significance of $250k? This WAS the cutoff for defining the “rich” for purposes of not raising taxes. This is, of course, an impossibility because the gov’t makes more off a pack of smokes or a gallon of gas than the co’s that actually provide us with smokes and gas…and someone ALWAYS wants to raise the price of both, whether its our gov’t or OPEC.
Do poor/middle-class “non-rich” people NOT smoke or use gasoline? This is a built-in tax increase.
All corporate taxes are simply the private sector acting as de facto tax collectors: they set their prices high enough to cover the taxes…or have a smaller profit margin. (I think that both computer software and cosmetics have higher profit margins than the “evil” oil co’s…who provide us with gasoline, the low-life SOBs. Anyone who would prefer that software be taxed higher and gas less? Show of hands?)
People who don’t realize that a “tax refund” means that one has made an “interest-free loan to the government”…and the refund is actually repayment of a loan (pause for breath) might not realize it, but Obama is, indeed, raising taxes on them, “rich” or not. So gas and smokes are just the teeny tip of a HUGE iceberg… and Obama has a whole slew of icebergs to unleash upon America.
And now the EPA (part of the Obama administration, over which one would gather he has no control) has the audacity of ho… uh, (sorry) to threaten us with a “command-and-control” (achTUNG, baby!) as opposed to a “free market” solution to the Global Warming Hoax if Congress (which is nicely being TOTALLY IGNORED by Obama’s admin in this instance) doesn’t pass a “Cap and Trade” (or “Cap’n Tax” to the lucid) scheme which partially fulfills Reagan’s definition of liberalism: If it moves, tax it.
Breathes there a man with soul so dead…that he doesn’t use a LOT of energy every day, one way or another? (Sorry, ladies, but I’m stealing a quote from a famous pome. Yes, I know.)
I thought the Constitution put some limits on the branches of government. I draw a blank when I try to think of where the “czars” are mentioned in the Constitution, but one gathers that they serve as something like a presidential “executive order”: both can be used to make laws without the inconvenience of running them through the House or the Senate.
Gosh, will they be allowed to pass laws that end up being tested in the Supreme Court? I wonder how a “wise Latino woman” will make “a better decision” when she runs into this wall-acious conflict of interest (“Hey, this guy made the idiotic gesture of nominating me to the highest court in the land, so…”). May be solely dependent upon Obama’s poll numbers at the mome.
A Johnny Carson moment: How BAD is Obama DOing? Well, almost half of the American people want Bush back! (Bad-a-bump drum flourish)
Yeah, Bush thought that the Supremes would do their jobs and make a sane decision re campaign finance “reform,” which introduced those partisan political entities defined by numbers of specific rules in the US Tax Code. 501(c) or something like that. (I despise the use of numbers and/or acronyms, eg, GSE, to basically bore the uninformed, driving them away. You actually have to pay to get these people to vote. Thank God!) And George Soros ended up with the ability to throw money (I hesitate to say “right and left,” as it only goes to the left) by the millions into our national elections.
An old saw goes “voters get the gov’t they deserve.” Now we get the gov’t that George Soros buys and pays for. This is “reform”?
I feel a lot of love in the room, so I’ll just leave it at that. If you have a serious disagreement with the above, reconsider your position, then feel free to post an insulting insult in response. Please avoid the “Nazi” or “Hitler” metaphors: that’s SO early ’00s. Be creative.
Do a google on Southeast Asia following the Vietnam War. Pol Pot would be fresh.
God bless.