This audience, like most groups, will have mixed emotions about my commentary that will range from “ho hum” to angry complacency (powerless to act but mad as hell) to writing lawmakers attached to the nation’s finance committees. Coming to grips with the negative effects of leverage seems to be a subject that continues to thwart higher thinking within both business and government. Leverage is wonderful when it works. The spoils of its success, however, benefit a minute number of people……but benefit them very well. What we witnessed in 2007 and 2008 was leverage, in reverse, on a grand scale. The entire system deleveraged, businesses shut down, and the masses lost jobs/careers.
Where is the proverbial “happy medium”? Pro business lobbies want the government to downsize. Too much government is harmful when it becomes an industry that has a negative effect on GDP. Its job should be to mildly oversee the private sector and force compliance where truly needed instead of politically mandated. Government, on the other hand, will tell us the private sector cannot be trusted and requires tight scrutiny. Unfortunately government has a little ammunition with which it can fortify that statement. Part of the problem rests with the historical issues to which I have alluded in this column.
So government overcompensates (or tries to) when the private sector abuses new found freedoms created by a previous deregulation event. The repeal of Glass Steagall created the Dodd-Frank bill a decade later. Allow me to reiterate that the repeal created new competition among the three main financial industries. What Congress missed in the translation, however, was the leverage that never would be addressed until the system was on the brink of a major meltdown.
You now have your own sense of leverage when it comes to knowledge of our financial disasters. You can entertain yourselves within your favorite search engines and, hopefully, speak with authority on matters that have huge consequences to our ways of life. Write Congress. Speak out. Remember that the financial crises in this country going back twenty years, addressed in this column, can be traced to the companies who took the majority of the mind-boggling short term loans as reported in that 2011 GAO report. Government is not without responsibility as well, as has been noted several times.
I will update this commentary from time to time as events unfold. Thanks for checking it out, and I really hope you were able to say “Ah Hah!” once in a while.