Footnote to the preceding

As always, the devil in the details. Or, more precisely here, there is a devil hidden in the deails.

Section 128 of the House bill would have sped up the enactment of a provision of a 2006 law from October 1, 2011 to October 1, 2008. That same provision, same section, was in the bill the Sentate passed, the one the House is going to reconsider perhaps as soon as Friday at a time when GOPper opposition there is supposedly "softening" in the face of all the pro-corporate goodies festooning the Senate version of the bill.

It's a short section, in fact it's only one sentence. Here it is:

Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking October 1, 2011 and inserting October 1, 2008.

What would that innocent-sounding, seemingly merely technical change mean?

First, bear in mind that after the depression of the '30s, banks were required to maintain a certain minimum level of reserves. The idea was to protect against catastrophic failures born of, for example, the bank's outstanding obligations being called in at a time of tight credit when there proved to be insufficient reserves to cover them. It was intended as a protection for depositers.

Yeah, yeah, fine, what does that have to do with this?

Well, because of the effect of that provision of the bailout bill, immediately upon passage, banks would no longer be required to hold any reserves on deposits. As Pam Martens says in Counterpunch,

[b]anks already in trouble for lack of capital would get to hold as little as “zero” capital for transactions.

Part of the "solution" the bill offers, it seems, is simply to define the problem out of existence. After all, banks can't be regarding as failing due to a shortage of capital if they're not required to hold any. Oh, but don't worry! The upper limit on deposits covered by FDIC insurance has been upped from $100,000 per account to $250,000! So it's all A-OK!

But it's not. Besides the fact that very few of us live in a world where that difference will mean a freaking thing, the net result is to shift the burden of risk from the banks to the public. Another case where the gains stay private while any losses go public. It's a variation on what used to be called "lemon socialism," the process where failing or mismanaged enterprises got taken over by the government - so the public got the lemons while the sweeter fruit remained in the hands of the corporations. And we've certainly seen a fair amount of that of late.

And all the while, the very people who benefit from this arrangement, the very people living their elitist, sheltered, privileged lives but who will clamor for the government to as if as a matter of right protect them from the effects of their own decisions, will be the same ones who with a tear in their eye will declare themselves deeply moved by the beauty and perfection of "the free market" while sneering that those others, those déclassé others looking for "handouts" like unemployment compensation, a decent minimum wage, Food Stamps, health care, a way to not lose their homes, that they need to, like them, learn the importance of hard work and most importantly, self-reliance.

Section 128: a monument to the corporate way of life.