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Monday, April 13, 2009

Economy Happiness of Moral Hazards

Posted by Charles Mudede on Mon, Apr 13, 2009 at 2:52 PM

Wall Street still rules the world. Proof?

Goldman reports $1.8 billion profit
Goldman Sachs reported a much stronger-than-expected first-quarter profit Monday, bouncing back from its worst quarter as a public company.

The big investment firm also sets plans to sell $5 billion in stock, paving the way for it to repay its TARP loans.

Goldman (GS, Fortune 500) also set plans to raise $5 billion through a sale of stock, saying it wants to become the first big bank to repay the federal loans extended during last fall's financial sector meltdown.

Many of us had hoped the collapse of several major investment banks, and their deep dependence on the state for survival, spelled the end of neoliberalism and the 30-year period of global financial capitalism. But now doubt is growing. The fox might have outfoxed us all. Where did we go wrong? The idea of moral hazard might give us a good answer. An aspect of neoliberalism that needs better appreciation is its long history of reliance on state-funded bailouts. It is the confidence in this form of socialism (a safety net for the powerful) that has given bankers and investors the freedom to take bigger and bigger risks. Laissez-faire capitalism can not make its astounding leaps and flips without the trampoline of public funds.

Between 4:10 and 5:10, David Harvey provides a clearer picture of my meaning:

The problem neoliberalism faces is not one of impending doom (it's very much alive and kicking) but of legitimacy. Meaning, we thought we were watching the death of laissez-faire capitalism but in fact were watching the death of neoconservatism, the political wing of the neoliberal project.

The neocons let Wall Street into the halls of Washington, but when shit hit the fan, the neoliberals booted out the very people who opened the doors for them, the neocons. Why? Because the neocons actually believed that capitalism could exist without the state. They believed in the mystical (or misty) idea triangulated by the phantom forces of the free market, the individual, and democracy—their holy trinity. The neocons now turn out to be an idealistic man and the neoliberals a whore who broke all of her sweet promises. For him, this was yesterday: in the arms of the most beautiful whore in the house; and this is today: attending tea parties and other sordid events.

Comments (9) RSS

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Horrible writing and a complete lack of understanding with regards to the financial crisis.

Posted by Poor charles on April 13, 2009 at 2:57 PM

Muh Dik! Tits! Foucault! Marx! Jews! Neocons! Capitalism! Tits! White Wimminz & Muh Dik! uh.... Derrida! Muh Diiiiiiiiik!

Posted by dat sum postmudern shit rite dere on April 13, 2009 at 3:02 PM

Zero-growth is non-profit?

Wow that's wrong.

Posted by formanoreasta on April 13, 2009 at 3:42 PM

"Neoconservatism, the political wing of the Neoliberal project."

Charles, I don't hate your writing as much as some people, but every once in a while it would be nice if you could provide some definitions for those of us who aren't in your head.

Posted by Brandon J. on April 13, 2009 at 5:22 PM

neoliberalism...seems to just mean laissez-faire globilization to you charles. is this true?

Posted by ellarosa on April 13, 2009 at 7:02 PM

Well, your Marxist teleological triumphalism sure didn't last long, did it? You can take heart in the fact that you have probably witnessed "the death of laissez-faire capitalism" for the time being though. I also agree that free-marketers should understand that the state is a necessary fact and get over it. Now if only the socialists like yourself could accept that a relatively free market is usually the best way--in fact the only feasible way, in the long run--to coordinate something as complex as a state's economy, much less the global economy, we'd be getting somewhere.

Posted by Mr Me on April 13, 2009 at 9:30 PM

wtf??????

Posted by Y.F. on April 13, 2009 at 9:42 PM

hee. love the responses.

but charles, man, did anyone really figger this shit was gonna ring the bell for "global financial capitalism"? REALLY really? even for half a second? come on, at best it was gonna be a wake-up call on the basic utility of glass-steagal-type separations. hooray for moderate regulation, prudent oversight, etc.

and emphasizing the importance of meaningful "moral hazard" is all well and good when the only necks on the block are those of the fools taking the risks. but when the consequences threaten to take out half the bystanders, the call to moral hazard starts to sound more like callous indifference - a best a misplaced idealism that chooses suicide over dirty fingers. then again, it's hard to separate real from imaginary potential consequences in situations like this, so who the fuck knows what's what?

plus hi there.

Posted by dristan on April 13, 2009 at 10:05 PM

"The fox might have outfoxed us all. "

Because you were doing something other than posting on the slog? You'd be easy to outfox, Charles, because you don't really do all that much. There's really no need out-anything you.

Posted by eric sic on April 14, 2009 at 10:32 AM