Tuesday, October 14, 2008

Bungling our way to Socialism

The government is so big that portions of it work at cross purposes, don't what each other are doing, or are busy cleaning up after each other. Today, the Wall Street Journal is reporting that the Federal government is buying stakes in private banks.
The U.S. government is expected to take stakes in nine of the nation's top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system, a far-reaching effort that puts the government's guarantee behind the basic plumbing of financial markets...

Other elements of the plan, which will be announced Tuesday morning, include: equity investments in possibly thousands of other banks; lifting the cap on deposit insurance for certain bank accounts, such as those used by small businesses; and guaranteeing certain types of bank lending. It builds on an earlier plan to buy up rotten assets dragging down banks, which failed to calm investor fears, and follows similar moves by major European countries.
Emphasis mine. Those rotten assets exist, for the most part, due to a previous wave of government interference. In that episode, the government, through regulations and coercion, encouraged mortgage brokers to make home loans to people with bad credit and no money to contribute to the purchase of the home. To make up for the incompetence and meddling that got us into this mess in the first place, the government is now buying stakes in the private banks it helped ruin.

Totalitarianism doesn't always come with thugs or rogue armies or massive demonstrations. Sometimes it just blunders its way into being.


Anonymous said...

I think I'd go so far as to say that most totalitarianism starts this way. The thugs and the rogue armies are just the final stage, after the bunglers and the well-meaning idiots and the corrupt petty officials have laid enough groundwork. Finally, the general populace gets to thinking that, in comparison, totalitarianism wouldn't be so bad. And that's when it all goes to pot.

K T Cat said...

Great point, Tim. All we need is a few years of massive government intervention in the middle of pre-existing, colossal debts...

Ohioan@Heart said...

And then a charismatic figure with the support of the media comes along and...

Wait. I need to stop now.

I'm scaring myself.

Dean said...

In other news today, Paul Krugman wins the Nobel prize for his work in economics.

...and the beat goes on.

Rose said...

As I understand it - The govt. took an ownership position - they're not the majority holder.

The govt. bought preferred stock not intended to be a long-term, holding for the federal govt. - gives the banks access to capital for which they'll pay interest and give the govt. warrants for future purchases

Since theres a shortage of lendable funds in the economy right now, they did this to increase the banks' core capital so they can hold deposits and make loans - $1 of core capital gives the banks the ability to provide $10 dollars of lending for the economy

Paulson directed the banks to deploy the new capital - not hoard it - it to unfreeze the credit market. The economy is an engine that produces jobs and all the govt. revenue is acquired through taxation. Credit is the lubricant that keeps that engine running. Without that lubricant the govt. revenues dry up.

The shares are purchased at fair value - and like Chrysler, once the banks recover, the Govt. should see a return on that money. (IF they can keep Barney Frank and Nancy Pelosi's grubby paws off it!)

And the program is designed so the banks can repurchase these shares back from the govt., when private capital is available.

Any bank that participates agrees to limit golden parachutes.

It's a stabilizing measure.

And it is strictly voluntary. Nationalization would not be. Banks that do not need the capital do not have to participate.

And by the way, Bush doesn't have the authority to nationalize the banking system, that would require an act of Congress. We have a good system.

In extraordinary times, extraordinary steps are necessary to prevent a downward spiral. That's the lesson learned during the Depression.

I agree it seems bad - but hopefully it is not going to put us on the path to soacialism.

Electing Obama on the other hand, surely will.

Imagine Ayres in Rove's position.

Rose said...

Neo's post on Obama the soft socialist - her piece references another piece by Bookworm Why Obama's socialism matters


K T Cat said...

Rose, as usual, is completely correct on this one. Still, if you had told me a year ago that the government would be stepping in to buy any part of a private bank at all, I'd have thought you were crazy.

B-Daddy said...

Tim, You are correct. It has all been laid out by the Nobel Prize winning economist, Friedrich Hayek, in his seminal work, The Road to Serfdom.

Dean, that Kurgman could win the same prize as Hayek, is a travesty beyond reason.

Rose said...

KT - I told you once that I have seen this all before. You asked me where. I never got back to you because it is such a complicated answer.

But it is relevant here... I'm reading another blog and this statement is made:

it's the 4th quarter and it's not pretty. an assessment that old McCain can't do it.

I can tell you what follows this. Pretty but empty wins. Experience and decency loses.

It won't mean anything to any of you - but here, where I live, we have seen this before. In 2002, a "pretty," young, not very good lawyer ran against an incumbent DA.

The activists saw their opportunity and backed him. They managed to get him elected. With a message of CHANGE. People voted for change for change's sake. The pretty face, The young and pretty face. CHANGE.

His first order of business upon taking office was to reward his backers by filing a lawsuit against the activists' primary target, Pacific Lumber Company.

And at the same time, his incompetence and inexperience became apparent, leading to charges of being 'soft on crime.'

A Recall effort ensued, and that is when the activist role became apparent - they went into full battle mode to protect their new tool. Good people were cut down to keep them quiet, charges were filed (by the DA) against those who spoke out, the media loved the DA, and, like what you are seeing now with Obama, refused to cover any problems with what the DA did and said.

The lawsuit for which he became famous, because those activists had access to high powered PR that gained him national attention, the lawsuit was tossed on demurrer. Never made it to court. (He appealed it, and lost, and appealed it again to the CA Supreme Court and lost again. The case never made it to trial because it never had any merit, much as the activists believed in it.)

But it ripped this community apart. And it hasn't been the same.

In the next real election, the pretty face ran against a senior deputy DA, and again, the media played the pretty card, one article even compared how the two men related to their hairdressers (one was bald, you see.) The full head of hair won.

In that election, every single law enforcement group in the County endorsed the senior Deputy DA, the challenger.

Every single lie, every single mistake the DA made was vociferously defended by the activist machine, and the media went along. Just like what you are seeing now with Obama.

The result, from January 2003 until now has been the loss of all but three of the experienced Deputy DAs, the inability to hire qualified replacements, loss of almost all of the support staff, some of those have been replaced, the destruction of some key programs - the Child Abuse Services Team (CAST) and the Victim Witness Unit. Plea Bargains are at an all time high. Innocent people are prosecuted for no real reason - a man went through a full trial because he had let his child wander a few feet ahead of him on a small town street, the schizophrenic nature of prosecution is now finally apparent to all. But too late.

The similarities - the smooth talker, the pretty face, the empty suit, these are all things we have seen here. It is shocking to see it materialize in a Presidential candidate. That empty but mirrored facade, where people see their own high ideals reflecting back at them and mistakenly they attribute those ideals to the candidate in front of them.

It's why I started blogging. To document what was going on. To provide a place where the record was stored. So the activists could not any longer hide the truth, so the reporters, when they finally decided to care, would have a place to go to find answers.

And, I had documents, in his own words, the things that were said and planned.

It's been a fight.

And I see this same fight happening on blogs here, trying to get that word out, in the face of a hypnotized media. I see the same patterns of lies. I see the unregulated orgs, with their spin-off groups doing the same kinds of dirty work, the same kinds of dirty tricks.

We're a small area. But a microcosm of what is happening nationally. Call it a trend towards socialism if you like. A turning away from all the things that matter, thinking, because we are so well taken care of, that it will be fine.

Sorry for the long comment. But when I hear that line about the pretty face - my heart sinks. My body hurts. I am discouraged.

Because I know the result.

And I don't want to see it happen.

Rose said...

Maybe I should have put that on the Obama Messiah children singing post... but anyways... there are only 20 days left for people to see and CHANGE their minds. There is still HOPE that this election will be saved from Obama.