Dorgan argues that leaving the free market unchecked is like driving a car without brakes, and asks "if these companies (banks, auto firms, AIG, etc.) are too big to be allowed to fail, why weren't they big enough to be regulated?" Now with the latest takeovers, the U.S. has four banks controlling one-third of all our bank deposits.
By January, 2009, over $8 trillion of taxpayer money had been used to help big financial institutions. During that period some of the same institutions were paying big bonuses - overall, they're year-end results totaled $35 billion of losses, and $18 billion in bonuses.
One of the worst decisions that contributed to today's reckless finance was the 1999 Financial Services Modernization Act that repealed the ban on banks investing in securities and real estate. (Earlier legislation that allowed S&Ls to invest in higher risk real estate brought the 1987 S&L Crisis.) Senator Phil Gramm was the major Congressional force behind the change, but it also was supported by President Clinton (signed it), and made worse by President Bush II's choice of willfully blind regulators and a Federal Reserve Chairman (Alan Greenspan) blinded by the ideal of a self-regulating market. Then in 2004, Henry Paulson, Chairman of Goldman Sachs, helped convince the SEC to allow banks to use greater leverage.
Other problems include "no-doc" and teaser (no payments for up to a year, ARMs, interest-only) loans, brain-dead rating firms, low Federal Reserve interest rates (partly to counteract an earlier recession and the inflationary effect of both an Iraq War and major tax cuts), and remarketing of sub-prime loans that appeared to spin gold out of chaff.
Home-equity helped fuel personal consumption in the middle of the new millennium's first decade - $310 billion/year from 2004-2006. Government borrowing exceeded $2 trillion in 2008, and it's expected to be higher in 2009. Meanwhile, we continue with $700-800 billion in trade deficits as well. Dorgan contends this cannot continue.
Government regulators in the last ten years sat by while Enron, Madoff, Tyco, and the MCI WorldCom scandals blew up. Commodities trading is another scandal waiting to explode - Brian Hunter controlled 70% of natural gas on the NYMEX in 2006, without CFTC awareness. Dorgan also attributes last-year's $147/barrel oil to speculators running amok, but offers no substantiation.
The top 1% of households own 38% of the nation's wealth; the bottom 60% own 4%. Warren Buffett pays 17.7% of his annual income in payroll and income taxes, vs. 32.9% as the average of others in his office. The rich should pay more - per both Buffett and Dorgan.
Corporations, until 2004, bought and leased back municipal assets (eg. sewer systems) to allow them to depreciate the assets and lower their taxes. Corporations now only pay about 10% of federal taxes.
Dorgan says he's thinking about a VAT - the advantage is that it can be eliminated for exported products and would make U.S. companies more competitive. (The bad news is that a VAT is VERY regressive in its impact.)
Dorgan realizes we're in a bit of bind regarding the millions of illegals already in the U.S. Before solving that problem, he believes we need to secure our borders and go after companies that hire illegals. Dorgan has nothing to say about curing our job outsourcing problem - that was covered in his prior book, "Take This Job and Shove It."
My one criticism of "Reckless" is Dorgan's treatment of health care. Dorgan does recognized the need for reform, and suggests greater emphasis on prevention, improved personal responsibility (don't smoke, better diets), lower drug prices (aka other nations), less drug advertising, etc. Dorgan, however, doesn't seem to realize that normal workforce-turnover, coupled with a multi-payer system, undermines financial incentives for prevention. In addition, he doesn't come out for a single-payer system - others claim it would reduce expenditures by about 10% (less overheads), nor does he bring up the enormous regional variation in health care practice that, if reduced, could save billions and billions more.
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Reckless!: How Debt, Deregulation, and Dark Money Nearly Bankrupted America (And How We Can Fix It!) (Hardcover)
I have vivid memories of watching MONTY PYTHON'S FLYING CIRCUS every Saturday evening with group of fellow college students. We packed into the Grand Wazoo's apartment to watch the program on PBS followed by SATURDAY NIGHT LIVE. What a hoot!
