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Crony capitalism reigns US economy
[Iran Press TV Latest] A prominent US economic and banking expert has portrayed a grim outlook for the world's most powerful economy, saying the "crony capitalism" runs rampant in the US. Writing in the Wall Street Journal, Gerald O'Driscoll, the former director of the Center for International Trade and Economics at the Heritage Foundation believes that a growing tide of fraud and corruption has surged in the current US financial system that is on the verge of becoming "an economy of liars" run by crony capitalists. In the wake of a bruising financial turmoil in the US, including a sub-prime mortgage crisis in 2009, many experts have persistently called for root and branch financial reforms in the US Congress. These days, people might think that US is reeling from financial straits and that the worst is behind them, but pundits predict the next mortgage crisis is on the horizon. According to O`Driscoll, who has been a vice president at the Federal Reserve Bank of Dallas, "free markets depend on truth telling... but in the US today, we are moving away from reliance on honest pricing. The federal government controls 90% of housing finance. Policies to encourage home ownership remain on the books." "Fed policies of low interest rates result in capital being misallocated across time," he added. "Low interest rates particularly impact housing because a home is a pre-eminent long-lived asset whose value is enhanced by low interest rates." O`Driscoll argues that "while protecting citizens against force, both at home and abroad, is the government's most basic function, protecting them against fraud is closely allied." He went so far as to state that US government "has failed miserably to perform this basic function", and the reason lurking behind the failure is that financial services regulators failed to enforce laws and regulations against fraud." On March 2009, Former NASDAQ chairman Bernard Madoff pleaded guilty to eleven accounts of federal crimes including an estimated $64.8 billion fraud and money laundering. This senior analyst on banking and monetary policy also bristles at gimmicks employed by the Lehman Brothers prior to its bankruptcy in order to hide its leverage and to conceal how much money it was borrowing, arguing that it's hardly tenable to believe regulators were in dark about such irregularities and illegal procedures at the heart of US financial system. "Congressional committees overseeing industries succumb to the allure of campaign contributions," O'Driscoll observes. "The interests of industry and government become intertwined and it is regulation that binds those interests together." He reiterates, "we call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith." Posted by: Fred 2010-06-21 |
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