*In the early part of the century there was a frenzy in derivative trading. As a result of that frenzy the national economy, and possibly the international economy, was on the verge of collapse.
The United States government observed this situation and correctly concluded that oversight in the finance industry was needed. Chase Bank disagreed. While the government was devising the Volcker regulations, Chase was attempting to find a way around them. Chase was trying to get exemptions put into the regulations specifically so they could engage in the kind of risky derivative trading that set in the years long economic tailspin.
And Chase was successful.
That is how we got the headlines last week that Chase lost two billion dollars with a lack of subsequent panic. The details are complicated but not especially important. The long and short of it: Chase invested in something, and then bet that their investment would not work out, then bet against their first bet.
Risky and illogical financial trading anyone?
There is lots to say about the problems with Chase’s ability to get exemptions built into the Volcker rule from a corporation influence government to the continuing existence of financial derivatives. But let us begin with the perspective of government in this instance.
The people I government tasked with creating laws concluded that American society needed protection against derivative financial products. But after frequent pleadings, these same government officials decided to allow for certain exceptions that Chase promptly used to put themselves in a position to lose $2 billion. At the core of this chain of events is the government’s illogical trust of the economic upper class.
Contrast this with the current policy of the New York Police Department (NYPD) of randomly stopping and frisking ethnic minorities. The NYPD reports that this technique has resulted in arrests in 5% of the cases. Out of 100 stops, 5 people are arrested – not convicted, just arrested – which means the NYPD is lessening the likelihood of crime being committed, not taking criminals out of society. And while any potential reduction in crime is welcome, a method that has a 5% return can hardly be called a success. The NYPD could have similar results picking names from the phone book at random. And when you consider that this technique is dangerously close to violating the 4th Amendment to the Constitution, the technique becomes more problematic.
But the situation with the NYPD illustrates an essential truth about American society: there is a basic distrust of the economic lower class (ethnic minorities in NYC are disproportionally lower on the financial ladder).
At first glance the trust of the rich and distrust of the poor seem to make sense. But a closer look shows where it doesn’t make sense at all.
Most rich people who earned their riches (as opposed to inheriting it) did so by making decisions that consistently benefited them above everyone else. And quite frankly there is nothing wrong with self interest. But then why would the government trust rich people (and those striving to become rich) to make decisions with the interests of society as a whole at heart. That is the complete opposite of what they’ve done in the past. This concept becomes even clearer in the case of banks trading derivatives. Recent history said we couldn’t trust banks, government trusted banks and created a loophole, and banks immediately engaged in the exact behavior that created the recession 5 years ago.
On the other hand there is a fundamental distrust of poor people. But the technique being used by the NYPD goes one step further than distrust and basically assumes that poor people are criminals and therefore subjects them to random searches. There is a racial/ethnic dynamic to this, but I will overlook that because the economic element is just as important. The Puerto Rican who wears a suit on the train going to work on Wall Street is not a target of NYPD in this case; the black guy in jeans and hoodie on his front steps is.
Thinking a couple of moves ahead about the risk reward of these philosophies shows even further how much sense this trust and distrust doesn’t make. The difference between the best case and worst case scenario for the NYPD is the difference between 5 potential criminals. The best case scenario for government trusting rich people is that rich people will get richer generally off the labor of working class people with the hope that some working class people will become rich. The worst case scenario is to undermine the confidence in the banking system and possibly destroy the world economy.
Attitudes are not easily changed and trust must be earned. So I can imagine that poor people have an uphill climb. But at some point we have to accept that our trust in rich people is misplaced. And create laws accordingly.
Trevor Brookins is a free lance writer in Rockland County, New York. He is currently working on a book about American culture during the Cold War. His writing has appeared in The Journal News. You can reach him at [email protected] or follow him on Twitter @historictrev.
Want to read more articles like this one? Subscribe to EURnewsletter.
Got A News Tip or Video You Want to Share? Contact us HERE.
- Ebony Celebrates Black Power with Williams, Belafonte and Zendaya
- Boxer Yusaf Mack is Attracted to Transgenders; Inspired by Caitlyn Jenner
- Editorial: Instead of 'Is it Because I'm Black?' - Why Not, 'Is it Because You're White?'
- Whoa! This is T-Pain ... Performing Minus Auto Tune? (Watch/Listen)
- Dick Wolf: King of Crossovers Takes Chicago, Talks TV Dominance [EUR Exclusive]
- Jill Scott: ''Soul Train' Brought Soul Into Everyone’s House'
- Presenting Ice-T and Coco's New Baby: Chanel Nicole
- Black Teen Vlogger Renounces Conservatism; Laquan McDonald Killing Convinced Him
- Girls Want to Join the Boys Scouts of America
- Lil Boosie Rants Frustration with 'Gay Sh*t' On TV
- Discover More Stories on EURweb: Click Here