March 21, 2009

The Great Dictator

Hatched by Dafydd

In 1940, socialist Charlie Chaplin -- acting as screenwriter, director, producer, and of course star -- released the Great Dictator, which parodied Adolf Hitler in particular and fascism in general. Chaplin played both Adenoid Hynkel, dictator of Tomania, and also a Jewish barber who happens to look exactly like Hynkel.

But the Great Dictator of 2009 may turn out to be glib huckster from Hawaii by way of Chicago named Barack H. Obama; for the administration appears poised to enact rules that could end up completely controlling all executive compensation for every major company that has anything to do with financial matters, or is publicly held, or has any sort of requirement to report anything at all to the SEC -- even including companies that never took a dime of TARP or stimulus money:

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

Of course, there is virtually no chance that any scheme this radical could get through Congress, where Republicans still have at least some say in enacting legislation -- if only to filibuster something this grandiose, anti-capitalist, and authoritarian. But Obama has an answer for that minor roadblock as well; if the Times is to be believed, he intends to impose wage controls by direct decree, bypassing Congress entirely:

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

The plan is certainly audacious. I would rather say breathtaking, stunning, shocking, jaw-dropping, mind-boggling -- and of course, quite mad. But when the president of the United States believes he can simply dictate (by executive order) how much everybody working in any publicly traded company is paid, I don't think it can be called anything less than a form of socialism.

But what kind? Certainly not Marxism, because he is not abolishing corporations or private capital. Rather, this sort of corporate socialism was invented in the 1920s by a fellow in Italy named Benito, who called it "fascism." Barack Obama evidently plans to go the "full Jonah," returning liberal fascism to America for the first time since Lyndon Johnson's "Great Society," and following in the footsteps of such liberal-fascist/populist luminaries as Franklin Roosevelt, Woodrow Wilson, and Theodore Roosevelt.

To the list of reactions above, let me also add -- ominous.

So how much executive power would Obama seize to himself? How about this:

A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large, troubled companies that are not now regulated by Washington, like insurance companies and hedge funds.

That proposal would, for instance, make it easier for the government to cancel bonus contracts like those given to executives at the American International Group, which have stoked a political furor. Under the proposal, the Treasury secretary would have the authority to seize and wind down a struggling institution after consulting with the president and upon the recommendation of two-thirds of the Federal Reserve board.

So a contract is a contract -- unless the president doesn't like it, in which case he will be able to rewrite it (or void it) at will. When contracts between third parties stand only as long as the head of government allows them to stand, then there is no stability and no predictability: In short, there is no more rule of law, and capital pulls up stakes and moves to a sunnier clime. Then, of course, there will be a great many more "struggling institutions."

Who decides which institutions are struggling? Perhaps that too will be decided by the same deciders: the Secretary of the Treasury, the president, and five out of the seven members of the Federal Reserve Board of Governors. If so, then the president can point to any corporation, family business, or not-for-profit organization, declare it to be "struggling," and then take it over, rewriting contracts, compensation packages, benefit plans, retirement funds, and (one presumes) prices and wages.

At that point, there truly is no limit to the president's power to personally dictate and direct the nation's economy. We will no longer have a capitalist or even quasi-capitalist state but direct fascism, without even the liberal "smiley face" to adorn the invisible foot of government.

So what sort of dictator would Mr. Obama be?

In unveiling the regulatory plan this week, President Obama would signal to Europe that he intended to crack down on the risk-taking and other free-wheeling practices by the financial industry that resulted in the global economic meltdown.

...And that also resulted in the greatest creation of wealth in all of human history. We'll have none of that, buster!

And who is behind the move? It appears to be Fed Chairman Ben Bernanke more than Treasury Secretary Tim Geithner:

From the outset of the Obama administration, officials and European leaders have disagreed over how much to limit pay. And Mr. Geithner has discouraged the administration from imposing across-the-board limits on compensation of all employees at troubled companies receiving federal assistance and more burdensome pay restrictions at healthy institutions that the administration is trying to encourage to take government money so they can increase lending.

Last week, Ben S. Bernanke, the Federal Reserve chairman, also called on regulators to supervise executive pay at banks more closely to avoid “compensation practices that can create mismatches between the rewards and risks borne by institutions or their managers.”

Presented with a choice between two top advisors, one of whom cautions against a radical nationalization of the entire corporate world, the other of which urges just that approach -- Obama opts for the latter. Surprise, surprise, on the Jungle Boat ride tonight. So if the Times report is accurate, then the Executive branch will determine what risks are acceptable for businesses to take; what rewards they are allowed to bestow upon their employees; and presumably every phase of the transaction in between. Can wage and price controls be far behind?

So what do Republicans have to say about this plan? I don't know -- because the New York Times elects not to inform us. They neither quite nor even paraphrase any response by anybody other than members of the administration and Democratic leaders in Congress. Evidently, the rest of us have become invisible.

But I make no doubt that Arlen and the gals from Maine will, with "great reluctance," throw their weight behind the necessary step of putting capitalism under state control... "just for the duration," of course.

So how long, exactly, does the duration endure? Until we're as prosperous as we were during most of the Bush administration? I fear that with the advent of liberal fascism, and the resulting destruction of the economy that will provoke, that new golden age could be a lang, lang time a-growin'.

Hatched by Dafydd on this day, March 21, 2009, at the time of 9:53 PM

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The following hissed in response by: Geoman

Yes it is fascism made flesh.

And why oh why are we not simply allowing troubled banks to go into bankruptcy? All contracts are then overseen (and potentially voided) by a court. Everyone takes a bit of a bath, but so what? Instead we simply buy 80% of AIG, then moan and groan over executive compensation. Then we make draconian laws designed to punish everyone, not just AIG.

Heck, if bankruptcy is too harsh, have them go into government receivership. The government could pump some funds in to reduce at least some of the pain.

The bottom line they won't do what must be done because it hurts too many people who gave big money to the politicians. Simple as that. They prefer fascism to pissing off their friends.

The above hissed in response by: Geoman [TypeKey Profile Page] at March 23, 2009 10:22 AM

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