http://www.tobinproject.org/sites/tobinproject.org/files/assets/Kwak%20-%20Cultural%20Capture%20and%20the%20Financial%20Crisis%20%2810.24.11%29.pdf
capture:
"a process by which regulation is, by intent and action of the industry regulated, directed away from the public interest toward the interest of the regulated industry. "
sub set :
"intellectual capture....cultural capture "
"Regulators come to see the industry through the eyes of market participants rather than the end users they exist to serve"
end users ? corporate finance ? if not corporate finance then who ?
households ? governments ?
"the public interest" like the almighty remains un-defined
again like a God it is invoked which here is little more
then a referral to an invisible "circumlocution department "
rule one
always preserve the public interest's indefinite outline
a studied ambiguity is essential to regulatory immunity
what is the end user "objective function" here ?
can one define the instrumentalities independently of the tasks
or do the existing "institutionalized expedients" themselves
in the goodness of time become
de facto
the objective function called the public interest
the subtle substitution of means for ends
institutions not just acting ... in the public interest
but institutions that ARE the public interest
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to the extent an instrumentality can be modified
defining public interests can be put back "in play"
if a gap in knowledge ..familiarity can be created
between regulator andregulated
by changes in industry practice
then during the learning interval created by the new means..the new methods and practices
what is ...including what is the public interest
can be" accurately defined " solely by finance and its innovators
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the dominant wisdom :
"...the "Wall Street" investment banks and universal banks in particular seem to have gained the cooperation of the federal regulatory agencies, not simply by appealing to material self-interest, but also by convincing them that financial deregulation was in the public interest. "
and once that strategy blew sky high in '08.....and the public interest was betrayed
the scramble began
but there's more here even if de regulation was starkly revealed as not in the public interest
still
during the big crisis
saving the big banks
became the key to upholding "the public interest"
its as if the first action after any crime
is
"preserve the criminals ...even if not all aspects of their 'way of life' "
post crisis
the public interest was not
to best preserve protect and advance
the efficient while adequate systemic flows of credit
to vital sectors of the economy
not in other words a deep redesign effort combined with emergency measures
but simply emergency measures that maximally save
whatever the "cost"
the presently instituted and constituting mediums of credit
... save the big private banks
and get them up and running as close as possible just as they were running before and do it ....ASAP !
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more on intellectual capture
" market participants are the only source of the detailed information and expertise this type of regulation requires. "
yes innovation rich sectors in particular
like hi fi circa 1980 to 2008
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recap of the great regulators rapture :
intellectual
"the increasing complexity of finance made it more difficult for agency employees to evaluate proposals on their merits, increasing the importance of proxies;"
cultural
" the growth in lobbying expenditures beginning in the 1970s exacerbated the asymmetry of influence between the financial industry and competing interest groups"
the prestige gap:
" the rapid growth of financial industry compensation unmistakably widened the status gap between major banks and federal agencies."
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network cacooning
"I think that mindsets can be shaped by people you associate with, and you come to think that what’s good for Wall Street is good for America" joe stigilitz
the brain wash of group think:
"those in charge of the relevant state entity internalizing, as if by osmosis, the objectives, interests and perception of reality of the vested interest they are meant to regulate." buiter
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btw
the financial market ? what in hell is that
but corporate finance
"This complexity has created a financial regulation industry – an army of compliance officers, regulators, consultants and advisers – with a vested interest in the regulation industry’s expansion"
this complexity ? this army.... created by the complexity of the regulation task ?
are they not glorified by their task ?
these credit system "professionals"... these bureaucrat-technocrats
has their elevation to office amounted to a rapture ?
precisely what is their mission if not facilitate the objectives of the hi fi laputa ?
has anyone suggested they radically re engineer the system ?
even nationalization
is merely envisioned swedish style
first the intervening omnipotent " jaws of life"
AKA the limitless public credit mine..... the FED
then some additional finite assumption without real let alone total subsumption
laputa rules its regulators because laputa IS the objective function
and the coming on board is by a rapture:
" hitting the big time "
built out of these magic spell binders :
a new socially impressive
addicting "group identification"
"regulators and the representatives of financial institutions
are really the same people, only at different points in their careers "
sudden high but lose-able "status"
and the cacooning effect
of specific professional networks
