Written by Winston P. Nagan   

As has become typical of the way the Senate conducts business, it subjected the President’s nomination for the position of director of the Consumer Financial Protection Bureau, former Attorney General of Ohio, Richard Cordray, to a filibuster. Fifty-three Senators, including two Republicans, voted for the appointment constituting a majority but not super-majority. The rest, some forty-seven Republicans voted to prevent the appointment from coming to a vote. This was a vote to prevent an important consumer protection agency from being able to function with some efficacy in the financial markets. The central purpose of the agency is to protect the idea of a free market in this sector of the economy. What were the forty-seven Republicans thinking? Central to the free market is the idea of the freedom of contract, a foundation of a capitalist system. There is no freedom of contract when the contractual transaction is secured by fraud, deceit, misrepresentation or coercive tactics to prevent the assertion of legitimate contractual rights and obligations. The realistic question is, when forty-seven Republicans voted to block Mr. Cordray’s appointment, were they in fact voting “for” fraud, deceit, misrepresentation and undue coercion in the financial markets. In my view they clearly are. Even more egregiously they appeared to be following in lockstep the “master’s voice” from Wall Street. And the next question is; why should Wall Street be “for” fraud, deceit and misrepresentation in the financial markets? This is a longer story and is worth an iteration.

In the early part of the last century President Teddy Roosevelt earned a reputation as a “trust busting leader”. This Republican saw the threat that economic oligopolies presented for economic freedom and, in the larger sense, political freedom. Oligopolies hate free markets. They become oligopolies because their prime animation is not to encourage competition but to consume it. Left unregulated, these giants of economic order tend to become economic cannibals. They live to consume competitors and competition. In pursuit of their animation they change the way business is done and old fashioned legal rules and ethical standards, which discourage fraud, deceit and misrepresentation, are simply an economic inconvenience. In their perspectives the prime object of economic activity is whether the competitor is acquired or consumed. The only value is the outcome: did you win in extinguishing the competition? Here the ethic of outcome extinguishes the ethic of means. This was the danger that Teddy Roosevelt saw and he acted to break-up monopolies and salvage the free enterprise system.

Since Roosevelt’s time our Universities and “think tanks” have produced legions of lawyers, judges, and economic theoreticians willing to serve aspiring corporate giants in resisting and reversing the advances made to preserve competition in the market. Such expertise comes cheaply since there is intense competition within our professional classes to serve the oligopolies and service them as well.

One of the most important effects of “corporatocracy” in the market is that without competition, there is no inspiration to improve the product. In fact, the incentive is great to produce a product whose obsolescence is planned. America’s automobile manufacturers and others fell into this trap. The larger consequence of such policies has been the price we pay in consumer skepticism of domestic products, as well as in resource consumption and its ecological consequences.

Currently under our very noses we have the emergence of the growth of the financial oligopoly; too big to fail. Oligopoly may be translated into economic power and political dominance. For example, when President Bush and Treasury Secretary Olsen emerged with a package in the crisis to save the “too big to fail” crowd they worked on an assumption that the crisis would be a reason for an un-scrutinized package. What a package it was? Billions upon billions were to be given to the banks with no strings attached and with an exclusion of any form of judicial oversight. What this amounted to was a gift to the “Wall Street Corporatocracy”. This was a gift from the grateful, but duped, taxpayers of America.

When an honest Harvard Law Professor, Elizabeth Warren, showed up in Washington, her role resembled the fairytale hero who saw that the king was naked and said so. The “corporatocracy” was shocked at this women’s temerity in calling this loot of the treasury for what it was; a gigantic confidence scheme to defraud the United States. It is somewhat regretful that our public watchdogs have not carefully exposed the Bush/Paulson crowd for this major scam.

What is this to do with Walls Street ferocious fight to kill the consumer protection watchdog? On this issue they clearly had a choice. They could have committed themselves to sound and ethical business practices. They could have cleaned-up their act. They could have committed themselves once more to the freedom of contract idea at the heart of the free market system, a commitment that would not undercut the freedom of contract of the consumers of financial services, a freedom extinguished by fraud, deceit, misrepresentation and other obnoxious practices. They chose the opposite. That choice is a choice that seeks to destroy the foundation of the American political economy: the freedom of contract. To this end they have hired expensive lobbyists and paid untold millions to undermine this basic principle. They have called in their chips with Republicans Senators to kill any resurrection of real freedom of contract in the financial markets. And their current strategy is to destroy the consumer watchdog agency by blocking the appointment of a highly professional and skilled leader. It appears that they want an economic contest in which the rules of the free market sustained by the freedom of contract principle no longer apply. The new rule is the rule of “corporate coercion” as a new oligopoly ideal. This appears to resemble the emergence of a different economic and political order for the United States. The concentration of economic power in the oligopolies translates into the concentration of power of the oligopolies on the political process. The extremes of such concentrations of economic and political power were a characteristic of Stalinist Communism. This version of the concentration of economic and political power is not the same as Stalin’s totalitarian state, but it has elements that drift dangerously in that direction. And this drift from the economic to the political has been enormously facilitated by the Supreme Court’s blunder in the Citizens United Case. The meaning of this constitutional development is that it enormously facilitates the “corporatocracies” effort to own the politics of the nation. Governor Roemer, a Republican, recently warned that Washington is being bought and sold like a “sack of potatoes”.