“President Barack Obama,” Fox News reports, “says the big trading loss at JPMorgan Chase shows the need for Congress to put more teeth into Wall Street reforms.” Touting the new rules, the President stated that the goal is to “discourage big banks and financial institutions from making risky bets with taxpayer-insured money.”
In American political dialogue, it’s common to hear left-leaning talking heads paint a picture of the 2008 financial crisis as the free market gone awry. Rightly condemning the major banks, they reason that a lack of state oversight and regulation of the financial sector led to a high-risk environment that allowed ordinary people to be taken advantage of.
The “End the Fed” crowd has had its own response to the financial disaster, one that in the United States is associated almost exclusively with a particular brand of right-wing populism. They pin the catastrophic booms and busts epitomized by the crisis on the Federal Reserve System and the malinvestments it encourages.
What is seldom remarked upon is how well the right and left populist narratives at play regarding the financial crisis fit together and indeed strengthen one another. Market anarchists point out the connivance of the state — through institutions like the Fed — and Wall Street, building on the tradition of American anarchists like Benjamin Tucker.
For libertarians like Tucker, steadfast in attacking state-granted economic privilege, it was the idle capitalist who most benefited from state meddling in the economy, the boss who lived off of and profited from the industry and ingenuity of others. Market anarchists contend that it is not any “free market” that allows the baleful dominance of giant banks, but rather a catalog of crucial state interventions.
In the struggle against the economic elite, therefore, working people haven’t ever needed the assistance of the state; they require only that it cease intervening on behalf of the rich, powerful and politically connected “captains of industry.”
Along with tall barriers to entry such as special permits and capitalization requirements, it is the Federal Reserve System, the US central bank, that most releases the banks from true competition. Under the Fed’s centralized system, the big banks are allowed to lend what are really imaginary dollars without limit, discharged from worries about depositors being startled by their lack of discipline.
From its birth, the Fed was designed as a mechanism for precluding legitimate competition within the banking class. It would serve the purpose not only of bailing the banks out were they to go over the cliff, but of encouraging and imposing a debt-dependent economic system wherein Wall Street would enjoy a commanding position over all of industry.
The radical anti-capitalist, anti-state message has far more explanatory power and clarity when it acknowledges that the class interests of the Federal Reserve System are aligned with those of the Wall Street banking elite. As Benjamin Tucker argued, “It is useless to look to the State for remedy or punishment. Capital rules every department from legislature to court. It is through the State that capital wields its power.”
The one route to genuine “reform” is the complete and permanent separation of the economic from the political, a real free market of voluntary trade and cooperation replacing the present system of coercive collusion. And that’s an answer that will never get much play in the Wall Street-Federal Reserve den of thieves.