Hands Off The Profits But Share Our Losses

Newcastle Herald

Saturday September 20, 2008

Greg Ray

Hands off the profits but share our losses

AMERICA turning socialist?

Don't bet on it.

A few commentators have levelled the accusation following the US Government's decision to bail out a number of big victims of the Wall Street-created credit disaster now rocking the world.

But really, what's going on is just standard "free market" practice whereby profits of successful enterprise are clearly private, but losses and failures can if they are significant enough be socialised.

It's like the old story about the two bank borrowers.

The one who owed the bank a small amount of money and got into trouble was sold up and skinned alive.

But the one who owed a huge mountain of funds was propped up and mollycoddled. He was "too big to fail" because, if he went down he'd take the bank with him.

Some of the big US failures appear to be in that class: if they are allowed to fail they could take down the US financial system and destroy whatever faith remains in the integrity of the US economy.

You will notice that the head honchos of the various collapsed investment banks and broking houses involved in the US crash have almost all wandered off the stage carrying massive carpet bags of loot.

The mess they have left for everybody else to mop up.

And everybody has a share of the mopping mug punters in the USA, small and medium-sized banks, the foreign investors who finance US deficits, superannuation funds and even local government ratepayers like you and me in far-off Australia.

The last time anything as bad as this happened was the banking collapse which followed the Great Depression.

When that collapse was examined it was found that a lot of fraud and dodgy business occurred because of blurry lines between commercial and investment banking.

Allowed by slack laws to do practically anything in order to generate bigger profits, some financial organisations became increasingly inventive, careless and unethical until they imploded, destroying the lives of large numbers of people.

The US Government enacted the so-called Glass-Steagall Acts to separate the commercial and investment banking and to prevent certain forms of unbridled speculative lunacy from ever again causing such mayhem.

I don't know for sure whether it worked or not, but when Bill Clinton repealed the Glass-Steagall Acts in 1999 following years of intense lobbying by bankers it didn't take long for speculative lunacy to reappear and for another massive financial system collapse to occur.

If there's a lesson in any of this it might be that regulating banks, brokers and the finance system in general is not such a bad idea, especially if you are one of the bunnies who will have to pay if or when they fail.

Chemical warning

THE global chemical industry is shuddering following the publication this week in the Journal of the American Medical Association linking "bisphenol A", also known as BPA, to heart disease and diabetes.

BPA is a very common chemical used in lots of products used in daily life, including polycarbonate plastic drink containers, food can linings, dental fillings, medical equipment and baby bottles.

Researchers studied urine and blood samples from 1455 American adults aged between 18 to 74.

They found that the 25 percent of people with the highest levels of BPA in their bodies were more than twice as likely to have heart disease and/or diabetes as the 25 per cent of people with the lowest levels of the chemical.

Similar findings have been noted before in animal studies, but have been brushed aside as not necessarily relevant to humans.

Canada has already declared BPA a toxic chemical and more nations may now do the same. But it may be a case of shutting the door after the horse has bolted, since about 90 per cent of people already have BPA in their bodies.

It isn't clear how, or even if, BPA harms the body, but there is speculation that it could interfere with hormones.

Chemical companies have warned that the new study doesn't prove anything, suggesting that BPA may be wrongly blamed for an effect caused by some other factor.

It's food for thought, however.

A few months ago Professor John Aitken at Newcastle Medical School told me that the biological effects of the chemical environment we have created for ourselves since the middle of the 20th century were not well understood.

He and his team are studying links between chemical pollution and infertility and the rising incidence of testicular cancer in NSW.

Edited by: Jim Kellar, Amy De Lore

Sub-editors: Gina Cranson, Leigh Tonkin

Writers: Joanne McCarthy, Frances Thompson

Cover design: Natalie Alcova

Cover photo: Simone De Peak