Wilberne Persaud, Financial Gleaner Columnist
In the United States it is not only Wall Street that needs fixing. Consider this falsehood spreading across the internet: that an automaker is a sleeper for communist China and embroiled in an anti-American plot to topple it from dominance and leadership in the world economy.
This is a fictional post in the blogosphere. Compare to books, emails and video blogs telling transparent lies about Barack Obama today, as were told about John McCain in 2000, as happened to swift-boated John Kerry in 2004.
And there's much more. A quick Google search will unearth sundry other dirty tactics, creation and telling of strange fables against others.
So the post above is fictitious, created to highlight an absurdity. If anyone were actually to publish something like this as an advertising challenge against a commercial competitor, libel laws and truth in advertising would destroy its publishers.
If not, they would at least make a big dent in their pockets. Ford, Procter and Gamble or Eli Lily are not allowed to make false claims nor publish falsehoods about their competitors and their products.
Why then does US law, the US senate and government, mainstream news media all allow the kinds of political advertising lies and propaganda to be aired?
Is it illegal to issue falsehoods about an economic competitor in efforts to gain advantage in the marketplace but okay, completely acceptable to do so to influence people in their vote for filling the most powerful job on earth?
The United States is the land of free speech.
Political advertising
Not surprisingly, political advertising is protected to the maximum by the First Amendment in the US Constitution.
Any effort to curb political free speech will come up against the constitution and compelling practical considerations of creating legislation that makes sense.
For some this is enough to leave things alone. Yet, we all know how easy it is, given the power of advertising, to plant a lie as truth in people's minds. So for the biggest political job in the world, a fix should be seriously considered.
This is not to advocate boring recitation of wish lists and promises by candidates. Nor is it to deny the power of personalities and vision in creating political buzz. It is simply to advocate truth.
All available and yet-to-be-discovered techniques would remain in play. The only requirement is that no candidate, advocate, interest group, person or persons would be allowed to use claims that are known to be untrue in any advertisement in support of, or against a candidate for office.
The other aspect of the problem, innuendo, is an entirely different matter. That can only be settled by the verdict of the electorate.
Once negative advertising proves advantageous with the electorate it shall continue. All exhortation to observe decency and respect fails once the objective becomes winning at any cost. The other fix is a practical matter.
In the wake of Reagan and Thatcher, regulatory supervision of financial services in the US and United Kingdom was shaved to its minimum for the times.
Late response
The era of privatisation ruled not only for the centre but also for all those countries approaching the IMF for support. The past decade of financial services regulation on Wall Street achieved minimalist proportions.
The fascinating fact of the recent financial turmoil that must be explained is why the response has been so late, so apparently haphazard, so hobbled by unbridled ideology in face of incontrovertible facts unprecedented stock market losses, evaporation of interbank and commercial paper credit, failure of huge banks requiring shotgun marriages or fire sales.
All financial crises preceding meltdown, historically, have been facilitated or allowed by regulatory systems that permit the type of innovation that overstretches itself in pursuit of gain through higher risk and market euphoria.
It is inconceivable that US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke could have been unaware of these problems for some months now.
What at first sight appears curious, even inexplicable, becomes clearer if one contemplates the following scenario.
Imagine this is March 2008. Paulson and Bernanke approach Congress proposing to place Fannie Mae and Freddie Mac into conservatorship.
They simultaneously seek approval to purchase US$400 billion in preference shares in Lehman Brothers, Morgan Stanley, Goldman Sachs and a few other iconic Wall Street financial services giants.
Absurd idea
Such an idea would be absurd. It would stand no chance of success and would further warrant the opinion that these two officials had lost their minds and should be forced immediately into therapy.
Even now the British solution of purchasing preference shares in banks, which has the greatest chance of working quickly, is seen as abhorrent in the US. It smacks of socialism, nationalisation, big government. But it is the only quick and perhaps reasonably equitable way, of solving the current problem.
It is also however, a forced admission that the model of absolute free enterprise, market self regulation of the past decade is flawed.
Euphoria, greed, risk and computer model generated derivatives Warren Buffet called 'financial weapons of mass destruction' thrived in that environment.
This realisation was clear to originator of the invisible hand metaphor Adam Smith himself. Europe has now acknowledged this.
By the time this is published, the realisation may not be admitted, but its impact should have been evident as the US places new capital directly into troubled finance houses.
wilbe65@yahoo.com
