TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Financial firms are shifting focus toward Washington, D.C. because of the government’s growing role in the finance industry:

Before the financial crisis, BlackRock’s chairman Laurence Fink would speak with federal officials at most a few times a month, for instance when they called him in New York for information about mortgage markets or pensions funds or other areas in which his company was active. But now, as the chief executive of the nation’s largest asset manager, Fink says he talks to officials at least once a day. He plans to open an office in Washington by next year to influence policy and has hired the lobbying powerhouse of Quinn Gillespie & Associates.

This is what happens when government decides to take a more affirmative role in regulating and organizing the economy: companies try to influence government policy more.

The reason is obvious. Since the federal government is now the biggest player in the financial industry, and has the power to “save” a company with government funds, block their compensation policies, or even regulate away their line of business altogether, companies have no choice but to try to influence government policy in their favor. It’s only logical, but nonetheless tragic.

This is what a greater government role in the economy does. It creates corruption. Rather than survive and succeed based on their market success, companies will now compete based on who they know in Washington. This isn’t capitalism. This is what strong government entails.

(Via Jeffrey Miron.)