I mean this diary, at least at this point, as a metaphor only. I want to see where it takes us.
There is a concept in tort law, that being wrongs committed to another in the absence of a contract, called "enterprise liability." Here is the brunt of the definition from Wikipedia:
Enterprise liability, also known as market-share liability, is a legal doctrine under which individual entities (for example, otherwise legally unrelated corporations or people) can be held jointly liable for some action on the basis of being part of a shared enterprise. Enterprise liability is a form of secondary liability.
For example, suppose high-risk manufacturing activities are shunted into one corporation, while a second "marketing" corporation keeps all the profits. In the case that someone was injured by the manufacturing activity, a court might apply the enterprise liability doctrine to allow recovery from the marketing corporation, which holds all the assets.
I wrote a diary two months ago called "The Promise and the Guarantee". The idea was that, in listening to campaign promises (and of course now we're in permanent campaign mode), you had to pay attention to both the promise someone was making, and to the guarantee of what would happen regardless of whether the promise was kept. Trickle-down economics may be the best example of this that I know. The promise is that "the rising tide lifts all boats." The guarantee is that the rich get richer, whether the poor get richer, poorer, or something in between.
We can see this in action in this "peek behind the curtains" in the blog of New York Times business blogger Joe Nocera, who published this expose from someone named Big Banker, after his profession, at the time of the Wall Street bailout. Here's the observations of someone who was a winner in the old system, talking about banks and the subprime crisis, at a time when rich people were telling us that we should blame the poor or the government -- anyone but the wealthy lenders! -- for bad loans:
Letter to Joe Nocera from Big Banker
(I quote at some length, under Fair Use, partially because the news value of this information is stale.)
For those who don’t believe that the government issued ‘guidance’ to the banks ‘asking’ them to curtail loans in the subprime market and warning them of the risks, read these attachments. They are from the Federal Register, 2005 and 2006. Other warnings go back as far as 1999. They are referred to in these guidance letters. Clear as day. I dare you to dispute this further. LINK 1 LINK 2
Banks do NOT LISTEN. They will not make more loans unless the deal they strike with the feds specifically requires them to and tells them how to do it. They didn’t voluntarily listen to the regulators back then and they won’t voluntarily listen to the regulators now.
And if the folks on Capitol Hill need more incentive, then they can try this on for size. The ONLY reason that any big banks remain "well capitalized" today is because the government provided a guarantee to FannyMae and Freddie Mac that immediately shored up the value of their mortgage-backed securities. These are the same mortgage-backed securities that banks hold, in crazy abundance, on their balance sheets to support their capital requirements. The big banks are enjoying their capitalization status on the backs of the taxpayer already. Do not misunderstand this. The government had to take over Fannie and Freddie or we would not have ANY banks in business today unless they were under the control of the FDIC.
In 1994, The Riegle-Neal Interstate Banking and Branching Efficiency Act was passed. It allowed, among other things, for "well-capitalized banks" to acquire banks anywhere in the US.
Do you happen to notice the words, well-capitalized?? So let’s see if I’ve got this right. The government warns the banks to be careful when issuing loans in the sub-prime market. The banks don’t listen. They make the loans anyway. Then the banks sell them to Fannie and Freddie who lump them together to form a mortgage backed security. Now they buy the security back to hold in their capital account. Then the market collapses, the feds come in and guarantee the mortgage-backed securities. The banks get to boast that they are still well-capitalized. They get more money from the feds through the bailout, presumably to support and boost the economy through loans to small business. But instead, they will hoard it or use it to buy up some of the smaller banks in direct violation of an act that was passed in 1994.
(Oh, happy days of six weeks ago, when that was the worst we had to worry about!)
28 years ago, burdened by the high interest rates imposed by Paul Volcker to paralyze inflation and whipped by the taunting of Ayatollah Khomeini, the Americna people bought the promise of trickle-down economics. It turned out to be a Ponzi scheme. The poor got richer in a lot of ways, but not primarily because of giveaways to the rich, and got poorer in many others, as the government decided that it did not need to help them. As more political power moved to the monied classes, they used it to amass even more power, until finally what had been unthinkable since the Great Depression occurred and Republicans controlled all three branches of the federal government. That put us on a fast track to disaster.
Whom can we hold responsible for this? Legally, most of those whom we could hold responsible are beyond our reach. It's the people who profited from the rise of the financial sector and who have since sold their stock or invested their earnings, or inherited from those who did, who were the "winners," but those past earnings aren't "income" for us to tax. (People talk about imposing a "wealth tax," but it's not clear that it is even constitutional under the taxing authority of the Sixteenth Amendment. It could be done per capita or at the state level, but there is no constitutional provision allowing us to just go after someone's pile of wealth -- unless they sell someone a joint or something.)
Beyond obvious solutions like reinstituting the old estate and capital gains taxes, how do we apportion liability for not delivering on the guarantee that accompanied the promises made by those who imposed our casino economy on us? It would be great to be able to turn back time and undo people's profits, but unless specific illegality was involved -- and sometimes even then -- there is no way to do so.
I think that the answer might involve something that looks a lot like enterprise liability.
This has been class warfare, waged by the wealthy against the poor and middle class. Those seeking, and figuring out ways to arrange, huge growth for the sake of investors, at whatever cost to the rest of us, appropriated as a class our country's wealth from us to them. We cannot now reach all of the individuals who did this. We have to impose any redress on a class-based level.
What this means, in practice, is more steeply progressive taxation -- both the marginals and the targets. What this means is that housing speculators should not look to the government for help. (Why are we trying to boost housing prices when so many of us cannot realistically afford houses and therefore did not seek them?) What this means is no apology for getting more resources to the poor and working/middle class at the expense of the wealthy, to try to undo some of the harm done over the past three decades.
The attacks on "unionism" by the Senate Republicans have made clear that they see us as being in a class war. So be it. They don't have to be held guilty as a class; they simply have, as a class, to make recompense. Do some of the innocent suffer along with the guilty? Yes, that's the nature of enterprise liability (as well as, oh, use of cluster bombs, which seems of less concern to them.) Viewing the changes that must come through the lens of enterprise liability should allow us to feel that we are not wild-eyed revolutionaries; we are simply using the long-established tools of our legal system to right wrongs done.
Too much free enterprise in recent years has been a shady enterprise. Who pays for it? Those who have been involved in the enterprise. Is that just an open bargaining position? Perhaps. If so, it's a good one.