Matt Taibbi’s 5,000-word exposé of the SEC’s document-shredding is a magnificent piece of journalism, and is the first and last place that you should look to understand what’s going on here. After the piece came out, Senator Chuck Grassley—who’s quoted in the article—made growling noises in the general direction of the SEC, which is now very much on the back foot. But all the news and background that you need can and should be found in Taibbi’s article, rather than Grassley’s 325-word press release.
So how well is the mainstream media reporting this news? Everybody’s reporting Grassley’s statement, of course, as they should be. But the WSJ, Bloomberg, FT newspaper, and even Reuters make no mention of Taibbi or his article at all. The NYT is better, providing a link to the article and saying that the document disposal was “first reported by Rolling Stone magazine on Wednesday”, but the link feels grudging and there’s nothing which indicates that if you follow the link you’ll get a much fuller and richer version of the story than you’ll get from the NYT. Only FT Alphaville draws a direct connection between Taibbi’s article and Grassley’s statement and really encourages you to read the piece.
Blogs and Twitter, of course, are much better. Zero Hedge, Dealbreaker, Naked Capitalism, Daily Intelligencer, Clusterstock, Atlantic Wire, and many others took Taibbi’s article seriously, linked to it prominently, devoted entire posts to it, and mentioned him by name rather than just referencing the name of his publication. The Huffington Post gave the article its standard aggregation treatment, and Arianna tweeted it personally.
As for the substance of the article, Taibbi makes a very strong case. Only Matt Levine has attempted a defense of the SEC, and he says that the agency’s policy of destroying files was “publicly announced”, when in fact it was a secret internal policy which the SEC wouldn’t even admit to when asked point-blank by the National Archives and Records Administration, the agency in charge of all federal document-disposal decisions. Levine says that “the trouble with Big Brother was too much all-pervading surveillance, not too little”; the financial crisis, I think, proves him clearly wrong on that front. The SEC in particular was toothless and ineffective for the entire Bush Administration, effectively giving banks and other fraudsters a green light to do anything they wanted. And its response to these latest allegations has been distressingly defensive and obfuscatory.
I hope this turns into a big scandal and causes significant changes at the SEC—although I’m not holding my breath. But if it does, Taibbi will deserve a huge amount of the credit. And judging by today’s coverage, he won’t get it from the mainstream financial press.
Taibbi's excellent piece further confirms that the govt should neither "run the economy" nor "regulate" markets. Trusting fed-govt bureaucrats to regulate industry is like trusting drug dealers to keep the neighborhood drug-free. Govt is monopoly force, and a govt-"regulated" market begets legalized fraud and aggression, and spawns "black markets" and "loopholes." And what do indomitably violent gangs do when their crimes are being discovered? They destroy the evidence, kill the messenger, and get away with all of it, over and over again. This is the nature of highly centralized government. Yet the disinterested, naive, insane, and dishonest among us can not see — or, they refuse to admit — that the regulatory Leviathan can not be tweaked and reformed into ethical, fiscal, and moral excellence.
"The SEC in particular was toothless and ineffective for the entire Bush Administration, effectively giving banks and other fraudsters a green light to do anything they wanted."
Really? Are we to believe that these regulatory agencies — which themselves essentially are incestuous, corporate-govt cartels — can be good as their alleged intentions? Has any federal agency (constitutional or not) ever performed nearly to its promised level, fiscally or ethically or legally?
The debate over the "living, breathing constitution" has been a rout: that slippery Hamiltonian slope isn't paved only with good intentions, but also with sandpaper and rubbing alcohol. A "living" constitution is a dead one, and a million wonderful Taibbi articles are all for naught if those "regulatory" cartelization devices are continually trusted based on the mistaken belief that they can be adequately reformed by the monopoly with which they enjoy a symbiotic working relationship.
#1 Posted by Dan A., CJR on Fri 19 Aug 2011 at 08:35 PM
Mimi: "Corporations own the government!"
Eunice: "They need to be regulated."
Mimi: "By whom?"
Eunice: "The government!"
http://mimiandeunice.com/wp-content/uploads/2011/07/ME_420_CorporateState.png
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#2 Posted by Dan A., CJR on Sun 21 Aug 2011 at 06:22 PM
To Dan A.:
So you propose complete deregulation? Or decentralized/more democratic government?
Sometimes you say fed/central govt, but sometimes you just say govt.
If you are for more localized govt, I'd get behind that - but how do you not regulate these corporations which are just as bad as the governments that they corrupt? You're assuming we live in an informed democracy, where informed customers make informed choices. The truth is we don't know half of what we consume or understand the many complex ways corporations can destroy this world. I would think anyone who reads CJR knows the public isn't informed well, and so how can a free market thrive?
We need a govt, a federal govt to stand in the way of federal/global corporations and represent the people. To suggest anything else is idealistic, I think. Libertarians like to paint things as if it was some ideal 1940s small town with mom and pop store metaphors. Very simple of them.
The constitution wasn't written by sacred beings - it was written by human beings. Think about what this means before you sanctify it.
#3 Posted by Brian Jensen, CJR on Sun 21 Aug 2011 at 11:22 PM
Actually, Brian, you and I agree: the Constitution should not be sanctified. In fact, I'd argue that the document granted too much power to the national govt, esp. the executive and judiciary. Although the Constitution doesn't grant lawmaking powers to the executive or judiciary, SCOTUS decisions and executive-written regulations are enforced as legitimate laws; you and I are forced to subsidize all that goes into enforcing them. That's not only unconstitutional but tyrannical. Anti-federalist warnings were quite prescient here. If the federal govt is allowed to determine the limits of its own power, then the federal govt will discover new powers all the time. And lo, from the beginning we've had these utter fabrications of "implied powers" and "judicial review," originally justified by the subterfuge of hyper-nationalists Hamilton and Marshall. And yes, the framers were flawed as humans will be; which is why there is a strenuous amendment process for making fundamental alterations to the Constitution. Yet, the federal govt ignores that protocol at every turn. Why? Probably because it is not in its interest to limit its own powers. The same applies to the area of market regulation. Govt regulations always are limits on private association and trade; always are expansions of govt power and govt-connected corporate power; typically are ineffective or counter-effective; and usually are passed for political purposes (destroying competition, getting re-elected, etc.). And it only gets worse the more centralized it is.
#4 Posted by Dan A., CJR on Mon 22 Aug 2011 at 03:10 AM
Actually, Dan, the problem as discussed by Taibbi:
http://current.com/shows/countdown/video/exclusive-matt-taibbi-on-sec-covering-up-wall-street-crimes
is that the senior regulators were not centralized nor autocratic at all, the government did not use its powers at all, in fact government let the companies regulate and investigate themselves which was the equivalent of not being regulated nor investigated at all. The result? The destruction of evidence from previous investigations (closed by senior officials) and massive fraud hidden from the public until it caused massive damage to investors and the greater economy.
We know what the world is like in the absence of government oversight over those in positions of trust, hidden uncomfortable realties which erupt into fricken chaos.
I believe in open government, transparent government, government which is accountable to its electorate and is held to account by journalists and public interest groups.
I do not believe in absent government because the examples are rife as to what happens when people act when no rules are enforced and no one is watching.
They build things like 400 trillion derivatives markets within economies which have 15 trillion or less GDP.
http://www.pbs.org/wgbh/pages/frontline/warning/
They conduct their own inspections and maintenance of fracturing nuclear reactor cooling pipes, nuclear reactors which they built upon earthquake prone zones.
http://www.counterpunch.org/mcneill08122011.html
We know what life is like under no government, it's similar to life under bought government. What we require is for the public to asset control over government, not dismantle it.
Because if you just dismantle it, you haven't solved the problem of what people tend to do when no rules are enforced and no one is watching.
#5 Posted by Thimbles, CJR on Mon 22 Aug 2011 at 11:10 AM
Actually, Dan, the problem as discussed by Taibbi:
http://current.com/shows/countdown/video/exclusive-matt-taibbi-on-sec-covering-up-wall-street-crimes
is that the senior regulators were not centralized nor autocratic at all, the government did not use its powers at all, in fact government let the companies regulate and investigate themselves which was the equivalent of not being regulated nor investigated at all. The result? The destruction of evidence from previous investigations (closed by senior officials) and massive fraud hidden from the public until it caused massive damage to investors and the greater economy.
We know what the world is like in the absence of government oversight over those in positions of trust, hidden uncomfortable realties which erupt into fricken chaos.
I believe in open government, transparent government, government which is accountable to its electorate and is held to account by journalists and public interest groups.
I do not believe in absent government because the examples are rife as to what happens when people act when no rules are enforced and no one is watching.
They build things like 400 trillion derivatives markets within economies which have 15 trillion or less GDP.
http://www.pbs.org/wgbh/pages/frontline/warning/
*section on Japan nuclear power eliminated to escape the spam filter*
We know what life is like under no government, it's similar to life under bought government. What we require is for the public to asset control over government, not dismantle it.
Because if you just dismantle it, you haven't solved the problem of what people tend to do when no rules are enforced and no one is watching.
#6 Posted by Thimbles, CJR on Mon 22 Aug 2011 at 11:12 AM
You gotta love it: the right spends 30 years dismantling federal regulatory mechanisms, and then when something goes wrong blames the problem on the agencies they gutted.
There is a certain purity in that approach that you just have to admire.
#7 Posted by garhighway, CJR on Mon 22 Aug 2011 at 01:25 PM
Thimbles,
Thanks for reinforcing my point on the moral hazard of trusting the govt to protect you from force and fraud.
Garhighway,
It's an astounding inversion of reality to suggest that the federal regulatory regime has diminished over time. Anyway, "regulation" and "deregulation" are always done for political reasons. Sadly, most people still buy into the BS about protecting the little guy. Oh well. By the way, what is "the right"? Bill Clinton? Far as I can tell, it's not anyone in this thread.
#8 Posted by Dan A., CJR on Tue 23 Aug 2011 at 05:29 AM
"Thimbles,
Thanks for reinforcing my point on the moral hazard of trusting the govt to protect you from force and fraud."
No problem Dan. Trust the government to do its job? That's just dumb. As a citizen you have to demand the government to do its job, you have to push it to do its job, you have to organize and fight for it to do its job. That is the duty of every citizen in a democracy, make authority accountable to the people and, if authority is not accountable enough, change the structure of the authority until it learns to fear its citizens, not just manage and dismiss them.
I do not advocate a dismantling of government, I advocate for citizen participation and engagement in government. No government that is unaccountable to the people is just. No institution, be they banks, software companies, drug manufactures, fuel extractors, is just when it is unaccountable to the people and the law.
And this is the problem with many modern conservatives, they believe that a free market should be free of government and free of law. This does not produce accountability. This does not produce justice. This produces societal and environmental anarchy within market tyranny.
Furthermore, those conservatives took steps to make government secrecy the norm and government surveillance a "necessity". They demonize groups such as the ACLU and journalists such as James Risen as traitors. They claim to love freedom, but they employ the tactics of a police state at the drop of a hat.
There is an authoritarian contagion within American conservatism which must be dealt with before you can start politicking on issues of small government and free markets. When you ignore that contagion and encourage people to vote for a party (or against a party) based on small government philosophy, you end up electing a party that believes in small government for themselves (and their cronies) and police state government for everyone else. You elect people who institutionalize unaccountability and law breaking while promoting injustice.
And then you look back over the years and wonder how you came to regret your political victories.
Rule of law. Transparent accountable government. Active, informed citizenry. These are what America needs. America doesn't need anymore thieves operating in secret in an unpatrolled economy.
#9 Posted by Thimbles, CJR on Tue 23 Aug 2011 at 12:54 PM
Thimbles, your point is well-taken. But it still comes down to whether the national govt should be trusted with all that power to police behavior.
I am long past viewing philosophical issues through the lib/con prism. Both sides are motivated politically; both agree that the govt should be empowered, just so long as it benefits their side.
A major flaw in the argument of nationalists (if you will) of all stripes is that if the national govt is not given the task, then the task will not get done, or won't be done properly. In fact, the opposite typically is true: the task will be done more quickly, efficiently, and inexpensively by the entities closest to the individual, family, community, etc. (And the scale of any moral, ethical, social damage will be smaller.) This is one of the many points on which non-establishment liberals agree with libertarians and the like.
The cartoon to which I previously linked well sums up the counter-intuitive logic of a federal regulatory regime. It is in the nature of the central monopoly (govt) to allow its corporate cronies to do abuse the same with which it is trusted. This corporatist phenomenon prevails on a larger (more inescapable) scale the larger (more centralized) the power monopoly is. So why not, at the very least, leave the behavior-policing to the separate states?
#10 Posted by Dan A., CJR on Wed 24 Aug 2011 at 11:06 PM
"So why not, at the very least, leave the behavior-policing to the separate states?"
I have no issue with that so far as state law does not interfere with constitutional and citizen rights. In fact, the current crisis could have been largely neutralized had the federal government let state authorities do their jobs.
http://www.ritholtz.com/blog/2009/10/pre-emption-of-state-anti-predatory-lending-laws-led-to-more-foreclosures/
But you still have a conservative problem, modern conservatives believe in "free markets" as in a market free of government and free of law. And these conservatives will use their regulatory powers, their judicial powers, their administrative powers, their media power to advocate for the right of business to rape the public since the "free market" is more efficient at doing it.
You have that authoritarian streak, which makes conservatives quick to use their powers to accomplish their goals over the rubble of their critics, and that anarchy streak, which makes conservatives give free rein to business over their consumers, their labor, and the environment in which they function. When they aren't busy ignoring wrongdoing, they are facilitating it, and covering it over. This environment would seem like an invitation for fraud, if these people were the type to acknowledge fraud exists in the "free market". You have a problem. There is a group of people that believe in power over law and, when it serves them, they use the power of law to bust their opponents and, when it doesn't serve them, they ignore the law completely. That group is a growth within the conservative movement and you will never have clean politics nor a clean free market economy until you deal with that growth.
#11 Posted by Thimbles, CJR on Thu 25 Aug 2011 at 12:32 AM
Worth a watch:
http://www.democracynow.org/2011/8/23/covering_up_wall_street_crimes_matt
#12 Posted by Thimbles, CJR on Fri 26 Aug 2011 at 12:23 AM