September 25, 2008
Democrats Channel Hugo Chavez in Rescue Demands
It appears a deal in principle -- but perhaps an unprincipled one -- has been struck on the Paulson-Bernanke market-rescue plan. Early reports are that the Democrats demanded and received two very dangerous concessions as their price to agree to prevent the complete disintegration of the American economy:
- Some sort of government control of compensation (salary, bonuses) on the salaries of executives of companies embroiled in this crisis;
- Much worse, the government would gain an "equity interest" in those companies.
Squeaker of the House Nancy Pelosi (D-Haight-Ashbury, 93%) says the deal is done:
House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.
But in a miracle of clear and concise journalism, the same article claims -- two paragraphs later -- that it's still under discussion:
It was not yet clear how lawmakers had resolved lingering differences over how to phase in the eye-popping cost - a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout - without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was a topic of intense negotiation.
Don't we love the feeling of security we get from those multiple layers of editing at the elite media? The New York Times weighs in, saying that it is indeed part of the plan:
But lawmakers in both parties said that few substantive differences and no major obstacles remained....
They also said that there would be limits on pay packages for executives whose firms seek assistance from the government and a mechanism for the government to be given an equity stake in some firms so that taxpayers have a chance to profit if the companies prosper in the months and years ahead.
The latter especially is a key element of Woodrow Wilson, Benito Mussolini style fascism; it invariably leads to the State, as the $700 billion gorilla on the board of directors, exerting overwhelming control over corporate decisions... which it will exercise on the basis of politics, not profits.
When people read "fascism," they immediately tend to envision concentration camps, jackboots, and Nazis goosestepping at mass rallies; but the real danger of fascism, especially liberal fascism (fascism with a smiley face, as depicted -- against author Jonah Goldberg's wishes -- on the cover of his book Liberal Fascism), is government control of corporations. The more control is handed over to politicians and bureaucrats who have no hand in actually producing the product (loans and securities, in this case), the more critical decisions will be made on irrelevant political considerations, often leading to financial disaster... and another bailout, leading to even more government control. Eventually, the State completely hijacks the corporation for political purposes... and we're well on our way to Hugo Chavez-land.
Imagine the possibilities!
- The next Democratic president could threaten to order American banks and financial institutions to completely divest from Israel, in order to "pressure" Israelis to accept a suicidal deal with Hamas and Hezbollah terrorists.
- The administration can flex its "equity stake" to force companies to offer benefits to same-sex partners on the same basis as spouses.
- It can bully the companies it partially owns into ruinous union contracts, into making corporate donations to 527s, pressure executives into raising campaign cash for favored candidates... and it can certainly demand sweetheart loans to the very politicians who inherit such unearned power -- from the crisis they themselves created, à la Countrywide's deal with Chairman of the Senate Committee on Banking, Housing, and Urban Affairs Chris Dodd (D-CT, 93%).
There are some things that could be done to partially mitigate the horrific damage to free markets by government ownership of the nation's financial institutions. I would hope, even if Democrats demand an equity stake before they will agree to rescue the American economy, that conservative Republicans can at least limit that stake to non-voting stock, and put in place oversight that prevents some representative of the next administration from sitting on the institution's board of directors.
I don't know how long such limitations may last; the next president could still intimidate the company into political compliance by threatening to dump equity at "going out of business" prices (literally!), tanking the market capitalization. But it might hold back the tide of liberal fascism for a little while.
John S. McCain appears to be concentrating his efforts on responding to the oversight and spending misgivings of conservatives about this deal and getting some of their ideas incorporated into the deal; he is thus corralling their support for the eventual deal:
Rogers said McCain didn't participate in that [negotiation], but was in talks with Republican leaders afterward. Conservative Republicans were among the holdouts, and there were indications they were waiting for McCain to make a move before they did.
As Thursday began, McCain said he didn't believe the administration's plan had the votes to pass without changes. "We are running out of time," McCain said. However, he said he still was confident a bipartisan compromise could be reached before markets open on Monday, one that would stabilize the markets, protect taxpayers and homeowners and "earn the confidence of the American people."
Meanwhile, Barack H. Obama is showing his own kind of leadership, demonstrating what an Obama administration would actually be like:
For his part, Obama urged a swift resolution that would get the legislation passed, saying "action must be taken to restore confidence in our economy ... Now is a time to come together -- Democrats and Republicans -- in a spirit of cooperation on behalf of the American people."
Obama also rolled out a new 60-second TV ad to run in "key targeted states" in which he cited economic policies endorsed by Bush and McCain as essentially to blame for the troubles.
"For eight years we've been told that the way to a stronger economy was to give huge tax breaks to corporations and the wealthiest. Cut oversight on Wall Street. And somehow all Americans would benefit," Obama says in the ad. "Well now we know the truth. Instead of prosperity tricking down, the pain has trickled up. We need to change direction. Now."
Evidently, Obama believes that Democrats and Republicans should "come together" to cooperate on covering up for Democratic complicity in this crisis by slandering Republicans.
In fact, we already know who caused this problem... and we also know who is trying to resolve it, and who is trying to use the crisis to extort more socialist populist policies to damage the capitalist system.
Once McCain has satisfied himself that he has modified the deal enough to bring conservatives in Congress aboard, and that the deal is going to pass, he will return to full-blown campaign mode; and I hope he then releases his own advert, along the lines I suggested in the first link in the paragraph above, explaining how this crisis actually came about: through Democratic market manipulations and interventions for populist-political, non-economic reasons (giving other people's money to the poor to buy votes). The truth from McCain will surely be much more believable and convincing -- than Obama's handwaving, boilerplate fantasies about "huge tax breaks to corporations."
Hatched by Dafydd on this day, September 25, 2008, at the time of 3:23 PM
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The following hissed in response by: Insufficiently Sensitive
The Democrats wish for an 'equity stake for taxpayers' in any corporations who are rescued by this ill-considered bill. This can only mean that they hope that the corruption which permeated Fannie and Freddie will be lavishly spread to other corporations so that (a) Democratic goons like Jamie Gorelick and Franklin Raines and Joe Johnson can be forced on to private Boards and rewarded with other people's money for no constructive efforts toward company success, and (b) the substance can be sucked out of the corporations into the anonymous coffers of Government and doled out to whichever causes will do the national autonomy the most harm.
The following hissed in response by: BigLeeH
I think you may be getting a bit too partisan on this issue. Screwing up the housing and finance markets has been a bipartisan effort for decades. Sure, the Democrats have taken the lead on the mess -- they have always been the more talented grifters -- but much of the rank and file of the Republicans have been panting along behind them and struggling to catch up.
I am currently rather cross with the House Republicans. If the bailout proposal is getting larded with pork it is because the Republicans have gone off to their chambers to sulk leaving the Democrats to be Democrats. The Republicans emerge from time to time to mutter about their 'alternative' plans which either amount to sending the firemen into the burning building to change the battery on the smoke detector, or seeding the clouds and hoping that rain will extinguish the flames.
I was vaguely hopeful they would come up with something better but they didn't. Their mortgage insurance proposal has the advantage of not costing as much as the bailout but the slight disadvantage of doing nothing to solve the problem. Just as the Treasury will have to swag the price paid to purchase the problem securities in the Paulson plan (because nobody knows their proper value) the administrators of the mortgage insurance plan would have to swag the price of the insurance (because nobody knows the actual risk). The risk, after all, is the difference between the book value and the actual values of the securities. Since the book value is known, it follows that if you know the risk you can set the sale price, and alternately, if you know the sale price you can calculate the risk.
And what's worse, the Paulson plan has the advantage that sooner or later the troubled securities will mature and the program will be over. If the government gets into the business of mortgage insurance we will have a new government program that my great-grandchildren will have to put up with.
The following hissed in response by: MTF
At this stage of the game only the politics matter, and McCain has failed to emerge from this crises as any sort of leader. He is an afterthought during the news cycle, mentioned mostly in worried tones as a "wild card" factor. The GOP has somehow managed to take a crisis created by Democrats and take ownership of all the bad news, while losing any credit for solving it. What a screwed up political week!
Years from now history will probably agree with you Dafydd, but for now we're in deep trouble.
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