Free Market Capitalism is not High Finance Capitalism

My new term, reality free market economic capitalism, is a term to explain my belief in a system that is getting pummeled by all of these socialist bailouts. Make no mistake about it, the banking system has turned into a Las Vegas style craps table, no more pegged to free market capitalism than a baseball game is pegged to competition when one pitcher has been paid to serve up meatballs.

The world of high finance is failing. Today, Citibank was bailed out by the United States Treasury because a large portion of banking is no longer about receiving deposits and making loans. Banking today is more about betting with other companies that still other companies are going to fail. Since when is that banking?

The bets are derivatives such as credit default swaps which are simply side bets that another company is going to fail. In the name of insurance, these bets are unfunded, unregulated and untenable. In today's shaky financial environment, these derivatives are now being subsidized by our federal government by bailing our companies exposed to them. The first major player was AIG. Today, it is Citibank. In between, these derivatives unravelled nearly every investment bank in the country.

The basis for reality free market economic capitalism is that common sense can not be tranched out of the system. Risk can not be leveraged and eliminated out of the system. But this is exactly what investment banks and derivatives traders tried to do. By packaging risk products and selling risk broadly throughout the market, high finance capitalists have tried to make loads of money by eliminating risk. This flies in the face of reality. Now the Federal Treasury is asked to bail out these risk-eliminating derivatives. 

Instead of bailing out companies that practiced such stupidity, what should happen is that these banks should be forced to sell off their assets to the highest bidder and whole companies should be broken down and restructured. Banks and investment companies should not be allowed to write bets on other companies' failure, whether you called them credit default swaps or what they should be called, unregulated gambling liability instruments yielding stupidly high investment toxicity, or UGLYSHIT, for short.

UGLYSHIT is not a free market product. They are products created to circumvent free markets. Free markets are risky as a necessary part of them is there are winners and losers. UGLYSHIT was a way to eliminate risk. In the end, they have become the most risky products ever invented by man.

The most amazing thing about UGLYSHIT is that they were created by incredibly arrogant, highly educated Wall Street Bankers who went to schools like Wharton Business School and Harvard Business School, and worked at places like JP Morgan and Goldman Sachs. 

Incredibly smart people, right? Maybe we should teach them about reality free market economic capitalism.