Tuesday, October 27, 2009
The Taking Over of the American Economy
I was horrified to learn that one of the key people that was responsible for the housing finance crisis, Congressman Barney Frank who is chairman of the House Financial Services Committee, is now set to introduce legislation this week to further expand government’s ever-increasing and intrusive tentacles into our economy. He came to the conclusion that legislation was needed after meeting with a treasury official of the Obama administration. Treasury Secretary Timothy Geitner said he would support and encourage this legislation with the full backing of the Obama administration.
Basically, Congressman Frank’s bill, if passed, would allow the government to take over and run any financial institution that it deemed was in serious financial trouble and was too big to fail because of the negative repercussions that failure would have on our economy. In essence, our federal government wants the power legislatively to do what they have already un-Constitutionally done previously. They want the ability to seize a private company and have complete control of its day to day and longer term operations. According to reporting from the New York Times yesterday, it was stated that , “The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution.”
The New York Times further stated that, “Some economists believe the mammoth size of some institutions is a threat to the financial system at large. Because these companies know the government could not allow them to fail, the argument goes, they are more inclined to take big risks.” THAT is precisely one of the key problems with this type of legislation. It removes the onus from the various financial institutions to make responsible loans. The can afford to engage in unwise or risky ventures, because they know that ultimately if they were to collapse financially then the shock waves this would cause for the U.S., and indeed the world, economy would be horrific. The thought therefore goes that the US Government would not allow them to fail. Hey, it sure seemed to work for GM and Chrysler. Or did it?
Never mind that by Obama’s usurpation of these private companies, firing the executives, reneging on vested interests to shareholders, and then making Democratic contributors (United Auto Workers Union) the beneficiaries of the federally reorganized car companies was un-American, but it was also un-Constitutional. Now the federal government wants legislative cover to do this again, for our own good should the need arise.
If private companies knew that they were on their own and foolish or risky behaviors taken by executives could result in the bankruptcy and dissolution of their companies, I guarantee there would be a lot less likelihood of such actions. Most people are not going to engage in behavior that they could reasonably expect to come back to harm them personally. This would also make share-holders more accountable in their investments towards poorly managed companies. If ones knows that regardless of how a company is run, the federal government will always be there with tax payer money to bail it out should the need arise, then there is no incentive to not take foolish risks for potential large gains, no matter how ill-advised they might be.
T. Timothy Ryan, the president of the Securities Industry and Financial Markets Association, said that those on “Wall Street were concerned that the administration’s plan would remove many of the bankruptcy protections given to lenders of large institutions”. So once again, our congress and President are looking for ways to further socialize our economy and remove private property rights from investors and business owners all for “our own good.” After all, Obama, who has never run a company or held an executive position in any form in his entire life certainly is more qualified on how to run the world’s most powerful and productive economy in history. At this rate, by the time Obama leaves office I suspect we will have the equivalent GDP of Latvia.
It is amazing how our government can seemingly get away with such blatantly socialistic and anti-American actions with very little outrage from the American people. I imagine Hugo Chavez is probably admiring Obama from Caracas with a twinge of jealousy right about now.