Some time ago I wrote of Obama's attitude toward people who take their fiscal responsibilities seriously—punishingly tax them into oblivion to support those who don't or won't accept their own responsibilities. Goodbye middle class. The same destructive approach is now being used against big financial companies.
Under the Obama plan, big companies like Citi and Goldman Sachs would not be forbidden; instead they would be regulated so strictly it would be a disadvantage to be a big company. The Federal Reserve would be in charge of the scrutiny. We've already seen how incompetently the fed protected us from the current financial crisis. Why should we expect more now?
What's really interesting, however, is the Administration's explanation of the plans. They will not forbid; they will just make existence inordinately complex and expensive so that the big companies cannot or will not expand.
“Without banning them, we're providing some pretty heavy penalties for entering the top group of institutions that could pose a risk to the entire financial system,” said Diana Farrell, deputy director of the White House's National Economic Council.
“The regulator might say to a large institution,’ Make sure there is very good reason to get that big, or that interconnected, or that complex because the penalties will wipe out any advantages, such as lower cost of capital, you might have,'” she said.
So much for the free enterprise system. So much for capitalism. Say goodbye to risk taking too. What would be the point of investing in a company threatened with severe penalties if it grows too big (and successful)? It would be like buying a Pontiac today. Would you really trust mechanical and parts support from a government-owned car company that will no longer manufacture Pontiacs? Buyers beware!
Think of the regulator. Who will decide on the new rules of the road for these companies? Upon what economic theories will decisions be based? Where is the threshold over which no company may cross? Will there exist the same “moving barrier” that was erected for the banks to hurdle in the shape of “tests” the government devised? Are we dealing with economic laws or social engineering? In the end, the Obama administration is protecting one entity—itself. It cannot be blamed for destroying these financial behemoths. In less refined parlance, that's called CYA.
There's such a predictable pattern to Obama's programs.
1 Replace private business with a government entity or
Create or extend a governmental hierarchy to oversee this entity
2 Develop punitive and expensive regulations to weaken private industry or
Make sure the government entity appears more attractive than the private entity
3 Over time observe the private business' inability to sustain itself and fail
4 Socialize the industry
We've seen the pattern in the banking industry where the government would not accept loan re-payment thereby keeping banks under the government's spreading thumb. Then “tests” were developed to check on each bank's success. When too many passed, new tests were developed.
We've seen the pattern in the auto industry where unions were mollified and Fiat was the winner. Bondholders were shown that the rule of law only applies when the Administration needs it. We will see how government-backed GMAC does as prime lender to the industry, and we'll see if the auto company can turn a profit on its own. We'll also see if the jobs lost by dealers, and the dealerships lost by the community (and collateral damage to other business in the community) will be replaced in the new economic structure.
In Healthcare, we'll have to watch as care is rationed, private insurers go under, those offering their employees benefits are penalized in some fashion, and employee benefits are taxed.
We better wake up. We better get in touch with our representatives and wake them up. We better do this before it's too late.
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Obama, banks, finances, economy, politics, commentary, opinion, politicians, socialism, government ownership, auto industry, GM, Chrysler, Citi, Goldman Sachs, Federal Reserve, Fiat, GMAC
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