When the Fed accommodates the dirty deeds of TBTF banks, it appears there is regulatory capture.
Not exactly, and the difference is a critical pattern of existence that determines the probability.
First of all, if we say that the regulator has been captured, then it looks like all we have to do is release it. That’s not the case.
The banking business is self-regulated. Big bankers call it a free-market model although, at the same time, big business, including bankers, claim the model is inefficient. Thus the need to regulate it with the imprimatur of a quasi-public regulatory body like the Fed. If there is the property of being captured here, it is more like banking is captive to the Fed, but that, too, is not accurate, which suggests that the Fed and the banks are really one, big bureaucratic entity, structured to execute a stable, routine task from the top down.
While this unified, non-market model is technically patterned to predict the outcome with routine reliability (economy-of-scale efficiency), both parties still claim a counter-identity to exculpate the probable risk. It’s like the franchise model. The franchisor (the Fed) enfranchises banks, distributing goods (money) to them. The franchisee sells the goods to the public (the rents) in compliance with the terms and conditions of the franchisor’s identity. When things go bad, and there is a liability, the franchisees can say that the regulator was not doing its job and the dirty deeds bog down in the bowels of bureaucratic desuetude while the “free market” innovates new ways to deflate the economy without risk of liability. This attributive-risk model is also used to control the risk within the American political system.
When things go bad (which like Dodd-Frank says, they most certainly will), and we look to attribute the values, there is always a counter-identity to blame. There is the Republican or Democrat-franchise brand. These “phantom brands” exist with economy-of-scale efficiency, forming a probable pattern of probability over time, absorbing the risk (which is called “playing politics”) and resisting nothing.
The two-party, binomial structure annihilates the probable risk. (This is called “nihilism”–the condition of “being and nothingness.” “Phantom brands,” you see, exist but don’t really exist.)
Resisting nothing is pretty easy (right?), and so this is where nihilistic philosophy of risk-management breaks down. Despite how far the technical model (the method that yields the risk-value to be consumed) is “built out” to achieve “scale” (forming the bureaucratic model of power), gaining operational efficiency is nulled (voided), yielding to the risk to be avoided, because over time, the internet of “things” measurably exists, and the probability is whole on demand.
The risk cannot be created or destroyed but it can be made to probably exist on demand.
(Got your umbrella, your surgical mask, your goggles and your boots on the ground? NOW! It’s time to go out and demand some risk, the utility of nothing “We” can passively resist!)
Academics have a lot to say about the natural advantage derived from building things out to scale and achieving zero marginal cost. Not much about the method that yields to a declining median income, however, and a loss of fundamental alpha risk, but the risk-value is not really lost. It still exists, but does not exist, depending on the terms and conditions that demand it.
Risk is conserved.
Alpha risk, for example, does not lose its “natural” value (its enduring “primary” utility). Its “natural identity” expresses in predictable, probable patterns easily referred to as “Ferguson” or the “War On Terror.” These “attributes” indicate over-consolidation of the risk, which yields to “crowd control.”
Controlling “the mob” is to control for the alpha risk by means of its consolidation. It is the method that yields to the indefinite terms (the being and nothingness) that captures the utility (the so-called “self-regulated” authority) of the social contract, existing on demand (“naturally”) from the top down.
Like big bankers, it looks like the object of a meaningful existence is to “not be captured.” Avoiding the risk is to avoid controlling authorities that exist to demand the value of your existence or lose the value of self control–the alpha risk.