Wednesday, September 17, 2008

Socialism for Big Business


If ever you know not to take seriously the screeds of the Cato Institute on the miracles of American capitalism, this last week's performance on Wall Street and the orgy of happiness at the thought of the American taxpayer subsidizing them should permanently put to rest any feigned belief in the invisible hand. Nowhere can you see the greatest hypocrisy in free market business circles of this country than the recent government takeovers of Fannie Mae and Freddie Mac, and the upcoming government bailout of AIG and Bear Stearns. True, Fannie Mae and Freddie Mac were sanctioned by the federal government, which is at least a reason, along with the fact the majority of home owners' loans derive from those two institutions. Nevertheless, the federal government, as I write this, now owns and operates Fannie and Freddie. Their losses are now our losses, as taxpayers.

The AIG bailout is even more insidious. A private insurer, with no contacts with the federal government, is being propped up by the Fed (along with the encouragement of the President) to the tally of a $75 billion credit line from the government. Some of you may recall that this is the same AIG who had to pay out a record fine of $1.6 billion two years ago because of its payoff schemes and accounting fraud (on a scale much greater than the $1.6 billion the company was forced to pay). The same AIG who just paid out $7 million to its most recent CEO (who had the job for all of three months). Golden parachute, indeed.

The responses from the political class are typical. From John McCain, phony criticism about "greed" on Wall Street, and even phonier promises about ending the golden parachutes for CEOs who take large buyouts after running their companies in to the ground (all the more laughable considering that one of Senator McCain's closest advisers is the ex-CEO of HP, who took a large buyout). No opposition, however, to the government takeovers of private enterprise. From Suze Orman, Fox Business Network, to The Wall Street Journal and the average stock broker, all are supportive of the federal government's takeover of these industries.

It is even more ironic that the very same investment institutions that spent the last decade lobbying Congress to make it tougher for people to declare bankruptcy are now the ones on the welfare line looking for preferential loans and credit. Of course, to some this is wonderful. CNN's Ali Velshi goes so far as to say that bailing out AIG will be good for taxpayers. After all, the federal government needs to show Wall Street that there is a player out there with endless capital who will reinvest and reinstill some confidence on Madison Avenue. Of course, if you asked Velshi what he thought of taking that $80 billion and permanently wiping out homelessness in this country, or overturning the bankruptcy law that his check writer lobbied on the behalf of, not surprisingly, the response will be quite something else.

President Bush's public statements belie the moral flexibility of a man who once claimed that you always knew where he stood. This lover of the free markets and free peoples (at least in Georgia and Iraq), in tow with Federal Reserve Chairman Bernanke, are going to set up what is the equivalent of a slush fund for failed capitalism, to maintain these companies and continue to subsidize their business decisions. Of course, there are no accompanying regulations prohibiting large salary buyouts of the CEOs who emaciated these companies. No regulations to prevent future financial institutions from repeating these crimes. I do not think I need to retell the lack of regulation, all the more so since the current Secretary of Treasury, Henry Paulson (one of the lead advocates of this permanent credit line) is the ex-Chairman of Goldman Sachs (not a minor player with varied interests in these industries that Mr. Paulson wants us to underwrite). This would not be unlike having Pablo Escabar as Administrator of the DEA.

Also notice that these are the same people who think you are a Communist for wanting to spend a few billion dollars (fully funded and accounted for by an extra cigarette tax) to give health care coverage to uninsured children in this country. These are the same people who bashed poor people and people of color all throughout the post-World War Two age, from the phantom "welfare queens" to the "culture of failure" in our inner cities (i.e., black people), and yet annual welfare spending for the poor never rivaled the money being allotted for these bailouts. You see, socialism is now OK, so long as it is for the rich. For you, the taxpayer, the one who is losing your home to foreclosure, your once decent-paying job (outsourced and downsized), and barely getting by on the pittance of health insurance (which you know your insurer will fight you tooth and nail when it comes time to actually cover anything), no, you are just individuals--free to drown and die. It is the Republican way.

1 comment:

Anonymous said...

On these bailouts, It's insanity. Not only could you take care of things like homeless people, think of how many people could be helped with a degree @ a public university! Cours we apparently don't learn fro history-as in The Great Deppression. Starting with Ronnie and his capatilistic cronies our goverment has been hellbent on tearing down all laws and regulations which were put into place to stop s..t like this from happening after the Depression. Like the 'firewalls' that were put in place between commercial banks,investment banks, and insurance companies.