Could it have been the prostitution industry that saved the finanical industry?

The other day I was listening to the audio version of Dubner and Levitt's book Super Freakonomics. The part about the study that says Chicago prostitutes are substantially more likely to have sex with a police officer than be arrested by one got me thinking.

You may recall when the governor of New York, the man who vowed to take down the city's oldest industry, left office in disgrace because, as it turned out, he was quite the prominent patron to that very industry. That's right; Mr. Spitzer was caught, red-handed, handing $4,500 to his favorite "escort". A prostitute, who, surely, would not be sympathetic to the Occupy Wall Street movement - for the Wall Street bailouts, I cynically suspect, were essential to the continued success of her enterprise.

Chris Dodd and Barney Frank stamped their names onto some 2,000+ pages of regulation supposedly designed to protect society from the big bad banks. They vowed to put an end to the inherent moral hazard of what's been dubbed the "too big to fail" doctrine. I suppose I should read it before I pass judgment. But then again, if it's judgment I'm concerned with, I could read the King James version of the Bible - four times - in the time it would take me to read the Dodd Frank bill just once. All I know, because I read it somewhere, is that 77% of all US banking assets are now controlled by the 10 largest US banks. Talk about your perverse incentives!

So here's the narrative: Capitol Hill threatens the financial industry. The financial industry's most alluring characters therefore, bearing (or perhaps baring) gifts, descend upon Washington. Washington thus bends the regs to accommodate its benefactor. In essence; the more Washington threatens to have its way with the financial sector, the more the financial sector will have its way with Washington.

It's like the Elliot Spitzer story: He threatened the prostitution business, then partook. Now you tell me, who owned whom? Did the pimp at all concern himself with Spitzer? Or did Spitzer worry about the pimp (the one who Fed-Exed him the envelope with all those digital images)? I.e., I don't suspect the big banks, nor NYC prostitutes, have much to worry about these days.

Hmm... Come to think of it. Maybe there's more to the prostitution angle than meets the eye. Indeed, could it have been the prostitution industry that forced the bailout of the financial industry? Seriously: What if Wall Street happens to be a prime source of business for a major prostitution ring? And what if the ring's leaders are aware of the power of the politician over the banker? Would that not inspire the prostitutes to cozy up to the politicians? For then, when the banker'sin jeopardy, Fed-Ex envelopes might suddenly appear in oh too many inboxes on Capitol Hill. Then Voila! Bailouts galore!

I know; not nice, unfair, and a terrible insult to the morally-adequate politician. Right?

Wouldn't smaller government mitigate (to no small degree) virtually all manner of ill-reputant (corporate at least) incentives?