Molly Ivins: The Suicide of Capitalism

Jul 17, 2006
By Molly Ivins

AUSTIN, Texas—In case you haven’t got anything else to worry about—like war in the Middle East, nuclear showdowns, global warming or Apocalypse Now—how about the suicide of capitalism?

Late last month, the U.S. Court of Appeals struck down a new rule by the Securities and Exchange Commission requiring mandatory registration with the SEC for most hedge funds. This may not strike you as the end of the world, but that’s because you’ve either forgotten what a hedge fund is or how much trouble the funds can get us into.

These investment pools for rich folks are now a $1.2-trillion industry (known to insiders, I am pleased to report, as “the hedge fund community”). Hedge funds are now beginning to be used by average investors and pension investors. Back in 1998, there was this little-bitty old hedge fund called Long Term Capital Management. Because hedge funds make high-risk bets, Long Term Capital got itself in so much trouble its collapse actually threatened to wreck world markets, and regulators had to step in to negotiate a $3.6-billion bailout. A similar fiasco at this point probably would break world markets.

The Securities and Exchange Commission under William Donaldson (appointed after the Enron mess) had tried to regulate hedge funds. But Christopher Cox, current SEC chairman and no friend of regulation, said he would consult other members of the administration about whether to appeal the ruling, which “came on the same day as disclosures,” reports The Washington Post, that the feds “are investigating Pequot Capital Management, Inc., a $7 billion hedge fund, for possible insider trading.” Nice timing, judges.

This is the third time in less than a year the appeals court has blocked the SEC from acting beyond its authority. According to The Washington Post, “Former SEC member Harvey J. Goldschmid, who voted to approve the plan, yesterday urged regulators to appeal to the U.S. Supreme Court, members of Congress or both. In the Pequot case, a former SEC lawyer who worked on the Pequot investigation before being fired by the agency has written a letter to key members of the Senate banking and finance committees alleging that the SEC dropped the probe because of political pressure.” The lawyer said he was prevented by political pressure from interviewing a top Wall Street executive. Sources said the executive was John J. Mack, once chairman of Pequot and now chief executive of Morgan Stanley—and a major fundraiser for President Bush’s campaigns. I’d say the guy’s wired.

So what we have here is yet another case of ideological decision-making (“all government regulation is bad”) being applied despite the most obvious promptings of common sense. Come to think of it, that’s exactly the pattern this administration has followed with war in the Middle East, nuclear showdowns, global warming and Apocalypse Now.

Well, if the administration won’t do something, how about Congress? Reps. Barney Frank, Michael Capuano and Paul Kanjorski are co-sponsoring a bill to reverse the court decision—and to gather more information about how hedge funds affect the economy. This would seem a peppy response, except Congress seems quite determined to do nothing at all these days, having already beaten the record of the “do-nothing Congress” of the Truman era. As near as can be figured out, the Republican “game plan” is to do absolutely nothing between now and November. This doesn’t improve anyone’s opinion of the Republican Congress, but has the happy effect of dragging the Democrats down with them.

American Capitalism: Rot in Peace

From Slate Magazine's article "Rot in Peace," a photo journalism piece on the urban decay and the death of capitalism in the inner cities across the USA.

Letting man-made structures decay to the point of disappearance is not an idea with a lot of popular or professional support, at least in America. In the mid-1990s, however, sociologist and photographer Camilo José Vergara proposed a "ruins park" for the mostly empty urban core of Detroit. In his "American Acropolis," the vacant buildings would become habitat for peregrine falcons and intrepid plants. The prairie would reseed the city streets. People would gather to witness a "memorial to a disappearing urban civilization." Detroit citizens did not welcome the proposal. It mattered little to them that Vergara found redemption and beauty, as well as regret, in their husk of a city.

In this slide, Vergara's photo of the derelict reading room of the Camden Free Library in New Jersey, a thicket of saplings reaches toward a tattered ceiling's filtered light. Historian Elizabeth Blackmar detects in Vergara's photos an "aesthetic pause," which leads us to wonder how we could have avoided the wasting away of these 20th-century landmarks—and to reflect on what we are to learn from their demise.