Economics of Gun Control

Money and guns, often goes together. Sometimes used for the protection of cash, other times made on the sales and use of guns and ammo. Manufactured and sold openly, weapons of every description are a stable in the marketplace. Yet, firearms seem especially targeted for ownership extinction by law-abiding citizens. Ironically, the public purchases of personal pistols, rifles and shotguns are systematically restricted and regulated, while law enforcement officials add the latest in advanced ordinances to their arsenals. The obvious message is that the government is preparing for war against their own citizens.
The distinguished sage, Murray Rothbard, in The Economics of Gun Control, offers a historic example of government regulation for intentional consolidation designed to eliminate the mom and pop neighborhood gunsmith.
“The latest gun control proposals from the Clinton administration provide an instructive, if unwitting, lesson in the economics of government intervention. Until this year, if you wanted to become a federally licensed gun dealer, you only needed to pay $10 a year. But the “Brady Bill” raised the federal license fee to $66 a year a more than 500% increase at one blow. Even this is not enough for Secretary of the Treasury Lloyd Bentsen, who proposes to raise fees by no less than another tenfold, to $600 a year.
One fascinating aspect of this drastic rise in license fees is that Bentsen actually proclaims and welcomes its effect as a device to cartelize the retail gun industry. Thus, Bentsen, in the non sequitur of the year, complains that there are 284,000 gun dealers in the country, “31 times more gun dealers than there are McDonald’s restaurants.”
That bastion of self-defense docility, the New York Times in Gun Control as Economic Stimulus, describes the inflow of federal receipts since the selection of Barack Obama to be the head gun grabber. Well, before the Sandy Hook false flag self-justification excuse for banning numerous small arms, the trend to hoard guns and ammo became a growth industry.
Here’s a chart showing millions of dollars of firearms and ammunition excise taxes collected at the federal level over the last decade:
Firearm and ammunition tax revenues skyrocketed for a different reason: These went up because people were simply buying more guns and ammunition, apparently because they feared Barack Obama would curb their access to deadly weapons upon taking office.”
In the consistent statist tradition of disarming the public, the haters of the Second Amendment look to curtail sales to individuals. The economics behind the U.S. gun control debate illustrates the trends for sales to government agencies as the future market for the gun industry.
“At a time when the U.S. economy is fragile, it’s more difficult to clamp down on an industry that posts annual sales of $12 billion and has been generating new, high-paying, high-skill jobs at an impressive pace. In fact, over the past two years – as U.S. unemployment has surged over eight per cent – the gun industry has created 26,000 new jobs that pay an average of $47,000 a year in salaries and benefits.
Furthermore, rather than suffering through the recession, gun sales have climbed as Americans have become more fearful of police budget cuts, rising crime, general civil unrest and, post-9/11, terrorist threats.
The fact that U.S. government agencies, spurred by new counterterrorism measures, account for 40 per cent of gun industry revenues is also a crucial consideration . . .”
Keepers of the peace have become predators of the Homeland Security society. The neutering of local authority for federal jurisdiction is the hidden result of all the latest legislation intended to unarm the public.
By now, you probably heard the account of Feds Buy Two Billion Rounds of Ammunition, as reported in Breitbart.
“It’s not the number of bullets we need to worry about but the number of feds with guns it takes to use those bullets. There are currently more than 70 different federal law enforcement agencies employing over 120,000 officers with arrest and firearms authority . . . That’s an increase of nearly 30 percent between 2004 and 2008. If the trends have continued upward at a relatively steady rate, that would put the total number of federal law enforcement officers at somewhere between 135,000 and 145,000. That’s a pretty staggering number, especially when you consider that there are only an estimated 765,000 state and local law enforcement officers. That means that about one in seven law enforcement officers in the country works directly for the federal government, not a local jurisdiction.”
The operational economics of gun control legislation has the purpose of maintaining a state controlled monopoly for firearms. One such example seen in the bill, known as the NY SAFE Act, included is a ban on any semi-automatic rifles or shotguns with “military-style” features, such as a pistol grip or a folding stock, has the goal of disarming the public. Such draconian methods drive the trade in guns underground. The black market in arms becomes the defiant mart for the new criminalization of self-protection seeking citizens.
The natural response from gun manufacturers, which are in the liberty survival business, is to boycott sales of their products to the very tyrannical government that wants to stamp out constitutional rights. Companies like Olympic Arms, LaRue Tactical, York Arms, Templar Custom and EFI, are cutting off sales to law enforcement agencies within jurisdictions that enact unconstitutional laws and regulations. A more complete list can be found in, Gun Companies Boycotting Law Enforcement In Anti-Gun States.
The federal SWAT shooters follow bureaucratic orders, as they tear down the last vestige of a free people. Curtailing or driving out of business, legitimate firearm manufacturers, wholesalers and retailers, is a part of the plan to eliminate resistance to the gun grabbing despotic regime.
Just look how far the anti gun culture politicos have gone since the Clinton era to tax gun sales out of business. Today your very own Inherent Autonomy existence is at stake from state governments as well as the federal tyrant.
James Hall writes for BATR

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Money for the People: Grillo’s Populist Plan for Italy

Default on the public debt, nationalization of the banks, and a citizen dividend could actually save the Italian economy.

Comedian Beppe Grillo was surprised himself when his Five Star Movement got 8.7 million votes in the Italian general election of February 24-25th. His movement is now the biggest single party in the chamber of deputies, says The Guardian, which makes him “a kingmaker in a hung parliament.”
Grillo’s is the party of “no.” In a candidacy based on satire, he organized an annual “V Day Celebration,” the “V” standing for vaffanculo (“f—k off”). He rejects the status quo—all the existing parties and their monopoly control of politics, jobs, and financing—and seeks a referendum on all international treaties, including NATO membership, free trade agreements and the Euro.
“If we get into parliament,” says Grillo, “we would bring the old system down, not because we would enjoy doing so but because the system is rotten.” Critics fear, and supporters hope, that if his party succeeds, it could break the Euro system.

But being against everything, says Mike Whitney in Counterpunch, is not a platform:

To govern, one needs ideas and a strategy for implementing those ideas. Grillo’s team has neither. They are defined more in terms of the things they are against than things they are for. It’s fine to want to “throw the bums out”, but that won’t put people back to work or boost growth or end the slump. Without a coherent plan to govern, M5S could end up in the political trash heap, along with their right-wing predecessors, the Tea Party.

Steve Colatrella, who lives in Italy and also has an article in Counterpunch on the Grillo phenomenon, has a different take on the surprise win. He says Grillo does have a platform of positive proposals. Besides rejecting all the existing parties and treaties, Grillo’s program includes the following:
• unilateral default on the public debt;
• nationalization of the banks; and
• a guaranteed “citizenship” income of 1000 euros a month.
It is a platform that could actually work. Austerity has been tested for a decade in the Eurozone and has failed, while the proposals in Grillo’s plan have been tested in other countries and have succeeded.
Default: Lessons from Iceland and South America
Default on the public debt has been pulled off quite successfully in Iceland, Argentina, Ecuador, and Russia, among other countries. Whitney cites a clip from Grillo’s blog suggesting that this is also the way out for Italy:

The public debt has not been growing in recent years because of too much expenditure . . . Between 1980 and 2011, spending was lower than the tax revenue by 484 billion (thus we have been really virtuous) but the interest payments (on the debt of 2,141 billion) that we had to pay in that period have made us poor. In the last 20 years, GDP has been growing slowly, while the debt has exploded.
. . . [S]peculators . . . are contributing to price falls so as to bring about higher interest rates. It’s the usurer’s technique. Thus the debt becomes an opportunity to maximize earnings in the market at the expense of the nation. . . . If financial powerbrokers use speculation to increase their earnings and force governments to pay the highest possible interest rates, the result is recession for the State that’s in debt as well as their loss of sovereignty.
. . . There are alternatives. These are being put into effect by some countries in South America and by Iceland. . . . The risk is that we are going to reach default in any case with the devaluation of the debt, and the Nation impoverished and on its knees. [Beppe Grillo blog]

Bank Nationalization: China Shows What Can Be Done
Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . . But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism. The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare
Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences. They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.
In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north. An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.
Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding. He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . . They issue the money out of thin air and lend it to us. It’s the State who is supposed to issue it. We need money to work. The State should say: “There’s scarcity of money? I’ll issue some and put it into circulation. Money is plentiful? I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy
Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make. This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.
To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.
In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.
Bolton notes that this was achieved without causing inflation. When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.
The Need to Restore Economic Sovereignty
The money for a guaranteed basic income could be created by a nationalized central bank in the same way that the Reserve Bank of New Zealand did it, and that central bank “quantitative easing” (QE) is created out of nothing on a computer screen today. The problem with today’s QE is that it has not gotten money into the pockets of consumers. The money has gotten—and can get—no further than the reserve accounts of banks, as explained here and here. A dividend paid directly to consumers would be “quantitative easing” for the people.
A basic income guarantee paid for with central bank credit would not be “welfare” but would eliminate the need for welfare. It would be social security for all, replacing social security payments, unemployment insurance, and welfare taxes. It could also replace much of the consumer debt that is choking the private economy, growing exponentially at usurious compound interest rates.
As Grillo points out, it is not the cost of government but the cost of money itself that has bankrupted Italy. If the country wishes to free itself from the shackles of debt and restore the prosperity it once had, it will need to take back its monetary sovereignty and issue its own money, either directly or through its own nationalized central bank. If Grillo’s party comes to power and follows through with his platform, those shackles on the Italian economy might actually be released.

The Hunger

“Legitimacy is something that is conferred not by just the majority of voters.”

Bush II White House spokesman after failed Venezuelan coup of ‘02

Hugo Chavez is dead. His 58 years were well spent and those who rejoice at his demise, whose mindset hastened it, must do so through the lens of their own loss: The oil giants who demanded a pound of his flesh for reducing their 84% take of Venezuelan oil to a pittance of 70% - that 14% now provides for the people who live where it is extracted from, but buys no new houses for the oily slicksters at Exxon or BP or Shell or Chevron who have never even been there.

The owners of millions of acres of untilled land sold to the people of Venezuela to farm and live upon now only have their money (and less land) to comfort them in their privation. The Heinz company who rejected Hugo’s JFK inspired “Alliance of Progress” land redistribution program and closed their Maturin plant, firing the workers, only to have Hugo reopen it and rehire all the fired, still must have their kornchup produced by poorly paid workers elsewhere.

Such loss.

Investigative journalist Greg Palast spent some time with Hugo and his Bolivarian Revolution; got to know the man and observe his efforts in his native Venezuela. In his documentary The Assassination of Hugo Chavez, he describes Hugo’s distress at the power of the USA directed toward his demise, as well the efforts taken by the land of the free against the democratically elected leader of yet another nation who decided to use his nation’s resources to assist the indigenous population, not merely further enrich very select foreign ones.

Because of Hugo some very rich white folks must do with less; some very rich Venezuelan folks and other South American business types must do with less so that some very poor negro e indio natives can live in cinderblock houses instead of tin shacks; so they can have education and medical assistance and jobs – so they can have food.

Food politics is the most disgusting of human tortures. Food exists in abundance and can be cultivated and grown in such a manner that no one need starve to death. It is for abstract notions of wealth that so many suffer. In the West it is easy to dismiss starvation because even our poor in many cases are so damned fat. Hell, even our vegans and vegetarians are fat (where not wasting away electively) which is an indication of surfeit of comestibles in a world of so much want. So we find it easy to ignore that for which we do not have a cultural context.

We shouldn’t. Our dismissal of so much suffering around us only hastens said suffering unto us as there is never a want of that sad commodity, and history teaches that it is readily shared with any and all who ignore its peril. Allow me to offer some intellectual context: understand that if you find it difficult to merely imagine this, then it is definitely a reality we should not allow to befall those around us if only because we are those around us.

You wake up tomorrow, there’s nothing to eat. Anywhere. You look around and see that all the people you know everywhere you go are faced with the same dilemma: no food. Adding to this is a hot climate, very few safe drinking water sources and a lot of hungry people using those. What do you do? You know there is food around-- hell, there are billions of people on all three sides of you and they wouldn’t have made it there with nothing to eat.

But now, where you are, where you can get to, and with everyone around, you must face a terrifying reality: there is nothing to eat. Anywhere. No breakfast; no point in going to work to earn money if there is no food to buy with it; you set about trying to find something to eat.

You’ve been up for six hours, there’s a line for water. A long line. You have nothing to carry any in so what you drink is what you get. People are getting surly. You finally get a drink, a long draw out of a communal trough, not particularly sanitary, but it is the first thing you put into your body all day so you shudder and suck it up. Then you are pushed away by the growing line behind you and take your place among the others, thousands, looking in the same places for something, anything to eat.

12 hours (when was the last time you went without food for 12 hours?) and your growling stomach aches, your head aches and you’re back in line for water, which is murky and diminishing. The crowd is increasingly disagreeable and a little on edge. Some violence, but a lot of weeping and moaning. Babies are crying and children are whining and begging. But there is nothing to beg and the whining is becoming intolerable. You find a bed and curl up: your mouth is dry, your head is throbbing and your stomach is cramping – you’ve endured your first 14 hour day with no food.

Wake up. 24 hours and you feel pretty fucking awful. Your mouth is like vacuum cleaner dust and your stomach throbs as if you are being gut-punched by an unseen antagonist. Your head swims as you make your feet, but now you are again faced with the same dilemma: no food. Anywhere. And a lot of hungry people around you. The line for water is massive and the supply is dwindling. Every place else you go it’s the same, huge crowds of starving people struggling to at least get a drink of water. A drink of water.

People are moaning and wailing, begging each other for sustenance but there is nothing. You finally get a drink at around noon; the water is akin to what you’d expect from a spittoon but you make no bones about it, your stomach is empty and anything is looking good. The problem is that there is nothing. And everywhere you look, everywhere you go it is the same: hungry people stumbling around in a daze wondering what to do. Prospects are becoming grim and it’s only been one day.

If you had seeds, you would eat them because you’d never survive to harvest. You’d never survive planting as the desperate and crazed would steal them from the earth itself to stave the hunger. In fact, around you those very desperate and crazed are eating things they dig out of the ground and as your stomach turns in horrid knots, the punching now a kicking, your head pounding, mouth like sandpaper, a dirt clod or a weed doesn’t sound too bad.

But what to wash it down with?

Two days. That’s what I've described, very limited on gory detail while very close to the reality on the ground for millions of humans as you read these words. In the time you take to read this article perhaps fifty people will die in a manner quite close to the above description, perhaps on day 9 or 10. Two days. Many last for two weeks.

According to Wikipedia, in 2012 total food consumption in Venezuela was over 26 million metric tons, which represented a 94.8% increase from 2003 when Hugo introduced his controversial price fixing for staple foods. This caused much wailing and gnashing of teeth among food producers who, interestingly, were themselves eating all right. But for a little more context let us consider this in terms we can relate to.

In the USA many of us get three meals a day. Let’s ponder a good one: breakfast, a three egg omelet with cheese and veggies, maybe some ground sausage, a couple strips of bacon, a piece of toast with butter and a cuppa coffee. A good sized omelet, let’s give it 60 mouthfuls, bacon another 20 and toast (we’ll take little bites), 20 more. That is a very generous 100 mouthfuls of breakfast. A decade ago, in the 21^st century, an average Venezuelan would have gotten 5 bites of that breakfast and a sip of coffee. Realistically they would have gotten 5 bites of something far less inspiring. At 100 bites per USA meal they would enjoy 15 Venezuelan bites a day.

But of course not everyone gets 100 bites per meal and in this scenario we are regarding people who were looking at portions which would likely equate to 10 bites of food a day of our hearty consumption in the USA. I wonder how many of those Hugo deprived of their profits had to reduce their meals to less than 100, 150 bites per, so that those who elected him President could maybe have a 100 bites of food a day?  

In less than a decade the hungry in Venezuela got to eat. Between 1998 (Hugo’s first term) and 2006, malnutrition-related deaths fell by 50% and by 2009 malnutrition had fallen to 6% from 21% when Hugo took office. He took imaginary money from people who had more than sufficient to their needs and wants and used it to put real food into real people’s bellies, giving them something they never knew before: help. A chance. He gave poor people bread and bricks and they elected him as their leader. For this populist generosity he was portrayed by the rich there and elsewhere as a commie pariah and steps were taken to rectify his perfidies. For his efforts to keep his citizens upright he was rewarded the grave.

While I have no doubt many Venezuelans are pleased that Hugo is denied the ability to interfere further in their monetary schemes, I feel certain many more are saddened that he will no longer be able to join them for dinner.

Hugo Chavez - Requiescat in pace.  

© 2013 Prezbyter 3/6/13

Is A Collapse Inevitable? Jim Willie & Gerald Celente: The US Has Become Weimar Amerika. When The Gold Start Skyrocketing, People Will Wake Up To The Ponzi Scheme.

“The US has become Weimar Amerika, a fascist enclave.”

The propaganda has turned openly laughable. On the popular major financial news networks, the recent decline in the so-called Gold price has prompted quite the parade of clowns on the ship of fools to trumpet nonsense. The widely published and posted Gold price is dominated by futures contracts, and thus as corrupted as meaningless.
The entire global financial structure is crumbling before our eyes. The gang of central bankers has applied their monetary policy for four and a half years since the implosion of Lehman, Fannie Mae, and AIG. The first is dead, while the second has transformed into a sanctioned subprime lender again, and the latter is a sinkhole. The deceptive messages are shrill, acute, and motivated from desperation. The West cannot solve its problems, hardly properly described as a financial crisis anymore, under the current framework bound to the fiat paper currencies.
The global monetary war is heating up notably. The heavy liquidity has caused unfixable distortions in every conceivable bond market niche. The new and better debt devices have been exposed for their shams. The leading central bankers lost their credibility long ago. The weakness is as broad as it is deep, a reliance upon paper wealth and paper structures and paper contracts, during a time of zero bound interest rates and unfettered hyper monetary inflation to cover the debts. Almost no foreign USTreasury Bond buyers exist anymore.
The US has become Weimar Amerika, a fascist enclave.
…

When The Gold Start Skyrocketing, People Will Wake Up To The Ponzi Scheme” – Gerald Celente With Adam Vs. The Man | Gold, Gold Suppression, market manipulation

Is a collapse inevitable? Gerald talks about the financial crisis and whether or not a collapse is inevitable.
Jim Rickards – -Stocks have gone sideways for half a generation. Why is that cause for celebration?
Jim Sinclair – Paper Markets To Disappear As Gold War Rages
Korea Joins Russia, Kazakhstan in Boosting Gold Holdings

The Number 1 Problem When Owning Gold

…
Between the four of them, Masaakai Shirakawa (Bank of Japan), Mario Draghi (European Central Bank), Mervyn King (Bank of England), and Benjamin Shalom Bernanke (US Federal Reserve) control an astounding $8.85 trillion.
And given the speed with which they are printing currency and expanding credit, it’s a number that’s only going to increase.
Morgan was right. Credit is not money. The word credit comes from the Latin ‘credere’, which means ‘to believe or trust.’
And when it comes to maintaining the purchasing power of their currencies, these guys have an absolutely stellar long-term track record, completely unblemished by success. In short, they have given us no reason to trust them.
Owning gold is the same as voting against this system, turning your paper currency into something that they cannot inflate or conjure out of thin air.
Yet there’s one problem.
While the world’s central bankers have given us absolutely no reason to trust them, our governments have given us every reason to NOT trust them.
Governments, especially the bankrupt insolvent ones, have a long history of theft, deceit, and plunder. As we have discussed so many times before, confiscation and/or criminalization of gold is not exactly a zero-risk prospect.

Eric Holder: Some Banks Are So Large That It Is Difficult For Us To Prosecute Them

Source: Zero Hedge
While it is widely assumed that the too-big-to-fail banks in the US (and elsewhere) are beyond the criminal justice system - based on simple empirical fact - when the Attorney General of the United States openly admits to the fact that he is "concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them," since, "it will have a negative impact on the national economy, perhaps even the world economy," one has to stare open-mouthed at the state of our union. It appears, just as the proletariat assumed, that too-big-to-fail banks are indeed too-big-to-jail.

GRASSLEY: On the issue of bank prosecution, I'm concerned that we have a mentality of too-big-to-jail in the financial sector of spreading from fraud cases to terrorist financing and money laundering cases -- and I cite HSBC. So I think we're on a slippery slope.
HOLDER: The concern that you have raised is one that I, frankly, share. And I'm not talking about HSBC now. That (inaudible) be appropriate.
But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.
Again, I'm not talking about HSBC. This is just a -- a more general comment. I think it has an inhibiting influence -- impact on our ability to bring resolutions that I think would be more appropriate. And I think that is something that we -- you all need to -- need to consider. So the concern that you raised is actually one that I share.

When you rob a bank, you go to jail. When a bank robs you, it posts a profit, Attorney General admits

For years, the Obama Administration has been pummeled for failing to bring criminal charges against a single major Wall Street bank or a single leading Wall Street banker for what the FBI termed an “epidemic of fraud” that blew up the entire economy.  Investigations revealed the banks committed routine fraud in peddling mortgage securities they knew were garbage, trampled basic property laws, laundered money from Iran, Libya and Mexican drug lords, conspired to game the basic measure of interest rates and more.  Yet, time after time, the Justice Department and regulatory agencies settled for sweetheart deals, with no admission of guilt, no banker held accountable, and fines that were the equivalent in earnings of a speeding ticket to the average family.

Yesterday Attorney General Holder stated openly what was already apparent.  The Justice Department believes that Too Big to Fail Banks are Too Big to Jail.  Criminal indictments against banks or leading bankers might endanger the economy and thus were too big a risk.

Here’s what Holder said

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” he said. “And I think that is a function of the fact that some of these institutions have become too large.”

Holder was responding to questions by Republican Senator Charles Grassley about why the Justice Department brought no criminal charges against the large British bank HSBC after it admitted laundering money for parties in Iran, Libya and Mexican drug lords.  The Attorney General acknowledged that the sheer size of the big banks “has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate.  That is something you (members of Congress) all need to consider.”

Foam the Runway

Allowing the big banks to operate above the law is at one with the philosophy that guided both the Bush and the Obama administrations during the financial collapse.  Tim Geithner, former head of the New York Federal Reserve bank under Bush and Treasury Secretary under Obama, would preach that it was necessary to “foam the runway” to protect the banks from total crackup.  That “foam” included literally trillions in the backdoor bailout of banks organized by the Federal Reserve, abandoning the underwater homeowners who were victimized by Wall Street’s wilding, while neutering any regulatory or criminal accountability.

 Above the Law

Holder’s outrageous admission means that bankers operate – and know they operate – above the law.  That renders all the argument about regulations and legal limits risible.  Bankers spend tens of millions lobbying to weaken regulations and starve regulators of authority and resources.  But when the action gets hot, the bubble starts to build, the music keeps playing, they can trample the laws, mislead the regulators and defraud their customers, bolstered by the confidence that the laws will not apply to them.

Holder’s argument, however, is indefensible.  There is no reason a bank with billions of assets could not survive the indictment of its CEO or CFO.  If the Fed and Treasury can “foam the runway” to protect otherwise insolvent banks from collapse, they surely could insure that a bank survives while its executives are held personally responsible for their crimes.  Putting a few bankers in jail and holding them personally accountable for their frauds would do much to bring sobriety back to Wall Street.

The Campaign for a Fair Settlement, of which the Campaign for America’s Future is a partner, has called on the president to repudiate Holder’s statement, and to direct the Justice Department to prosecute those who violated the law.  But Holder’s position forces a bigger issue.

Too Big to Be

So big banks operate above the law.  And as the conservative head of the Dallas Federal Reserve Bank Richard Fischer and many others have argued, they are not disciplined by the market.  They know their losses are covered, while they pocket their winnings.  They have multi-million dollar personal incentives to leverage up, use other people’s money to make big bets on high risk operations that offer big rewards.  Their excesses blew up the economy, but they got bailed out and emerged bigger and more concentrated than ever.

And, of course, since investors know the big banks can’t fail, the big banks can attract money at much lower rates than smaller banks, a subsidy worth about $83 billion a year according to recent calculations by Bloomberg News.

Clearly, institutions that are above the law and beyond the discipline of the market cannot exist in their current form.  The Congress has only two choices.  The big banks can be nationalized and treated as public utilities.  The public would pocket their profits and cover their losses.  Or the big banks can be broken up, and be accountable to both the law and the market.

Senators Sherrod Brown and Jeff Merkley have spearheaded the drive to break up the big banks.  This takes remarkable courage.  Brown had to overcome torrents of big money poured into the effort to defeat him when he ran for re-election last year.

Now they are gaining unlikely allies.  George Will has called on conservatives to follow Brown to the barricades.  Republican Senator David Vitter has joined in calling for study of the subsidy big banks enjoy.  Retired bankers like John Reed, former president of Citibank have joined with Dallas Fed President Fischer and others to call for breaking up the banks.

Can the big banks be held accountable?  Wall Street is a leading source of funds for both parties.  The revolving door between Wall Street and Washington spins no matter what administration is in power.  The Obama administration has opposed every effort to break up the big banks.  Republicans in Congress have shamelessly offered themselves as Wall Street’s protectors in exchange for campaign money.

But Holder’s admission makes action – however improbable – imperative.  A nation of laws and markets cannot abide huge private financial institutions that are accountable to neither.