The War on Domestic Prosperity

If you just watched the same Presidential news conference that I watched then you should have heard President Obama announce a “War on Domestic Prosperity.”

Citing a new “Doctrine of Preemptive Corporate Takeover,” the Obama Administration will now begin looking to head off any possibility of failure by seizing and taking control of companies which may pose any possibility of failure.

Standby for more takeovers. Stand by for government-run industry. Standby for a socialized economy. Say goodbye to freedom and an America we all love.


Comments

  1. I am thinkin’ it’s oligarchical power grab masking as socialism but with a goal of a fascist state. It’s a frightening step toward more UN style control too. Just one girl’s opinion. 🙂

  2. I suspect the public reaction to the press conference will be 180-degrees different from what yours is, as were the election returns and most polls since then, which show strong support for the President.

    You’re entitled to your opinion, but you should remember that you are far out of the mainstream in this as in most things. Until the Republican party stops listening to you guys, it will be viewed the way the vast majority of the American public do – as a collection of irrelevant, cranky oddballs like you. Real Americans think differently.

  3. It might help your credibility if you offered some evidence, from your point of view, for your thesis. In law school we teach, obviously, that you need to prove your case with evidence. As a writing instructor, I give bad grades to students who are as conclusory as you.

    What, in particular, in Obama’s press conference led you to believe he is waging a “war on prosperity”? (Has there been prosperity for the past year in the U.S. or the world? That’s another question, but I’ll let that slide.)

    Again, if you want to be viewed as something more than an oddball crank, you need to give your readers some evidence from the press conference. Quoting or paraphrasing lines that led you to your conclusion would be a good start.

    I’m sure if you look at intelligent conservative criticism of the press conference — or to leftist critics who believe that Obama has been far too subservient to Wall Street and corporate power, hardly distinguishable at all from the late Bush administration economic policies — you will find reasoned analysis.

    You present no analysis. It seems all gut feeling. You might as well have written the post without watching the press conference for all the substance – none – that you say about it.

    Do better next time. Intelligent criticism is always listened to. Are you up to that?

  4. Richard,

    Maybe the text of the press conference as reported by the Associate Press will help. I guess the bottom line in the post is do you trust the government to fix this problem? Or, is it better to let some of these institutions enter into bankruptcy or even fail out of the marketplace?

    I’d rather let them fail than have the federal government exacerbate the situation and take away our freedoms…

    You can also see the question asked about 6 minutes and 13 seconds into the press conference:

    All right. With that, let me take some questions. And I’ve got a list here.

    Let’s start off with Jennifer Loven, AP.

    Q: Thank you, Mr. President. Your treasury secretary and the Fed chairman were on Capitol Hill today asking for this new authority that you want to regulate big, complex financial institutions.

    But given the problems that the financial bailout program has had so far — banks not wanting to talk about how they’re spending the money, the AIG bonuses that you mentioned — why do you think the public should sign on for another new sweeping authority for the government to take over companies, essentially?

    OBAMA: Well, keep in mind that it is precisely because of the lack of this authority that the AIG situation has gotten worse.

    Now, understand that AIG is not a bank. It’s an insurance company. If it were a bank and it had effectively collapsed, then the FDIC could step in, as it does with a whole host of banks, as it did with IndyMac, and in a structured way renegotiate contracts, get rid of bad assets, strengthen capital requirements, resell it on the private marketplace.

    So we’ve got a regular mechanism whereby we deal with FDIC-insured banks. We don’t have that same capacity with an institution like AIG. And that’s part of the reason why it has proved so problematic.

    I think a lot of people understandably say, Well, if we’re putting all this money in there, and if it’s such a big systemic risk to allow AIG to liquidate, why is it that we can’t restructure some of these contracts? Why can’t we do some of the things that need to be done in a more orderly way?

    And the reason is, is because we have not obtained this authority. We should have obtained it much earlier so that any institution that poses a systemic risk that could bring down the financial system we can handle and we can do it in an orderly fashion that quarantines it from other institutions.

    We don’t have that power right now; that’s what Secretary Geithner was talking about. And I think that there’s going to be strong support from the American people and from Congress to provide that authority, so that we don’t find ourselves in a situation where we’ve got to choose between either allowing an enormous institution like AIG, which is not just insuring other banks, but is also insuring pension funds and potentially putting people’s 401(k)s at risk if it goes under, that’s one choice, and then the other choice is just to allow them to take taxpayer money without the kind of conditions that we’d like to see on it.

    So that’s — that’s why I think the authority is so important.

    Q: Why should the public trust the government to handle that authority well?

    OBAMA: Well, as I said before, if you look at how the FDIC has handled a situation like Indy bank, for example, it actually does these kinds of resolutions effectively when it’s got the tools to do it. We don’t have the tools right now.

  5. Richard,

    For one, let’s look at moral hazard. The Obama administration continues a bad policy (and seeks to expand it via the new powers that Geithner/Bernanke are requesting to take over “systemic risk” institutions)that was started in the Bush Administration. These policies have the side effect of subsidizing risk taking, that otherwise would not take place, in effect encouraging institutions to take riskier bets. Does that sound wise to you? Secondly, by raising taxes on success, Obama is punishing it. You can call it “fairness” or dress it up by any other name, but it is lessening the incentives for success, because the better you do, the more the government takes, and on the margin this reduces your incentive to work.

    The most dangerous steps taken by the Obama administration have been in the realm of the rule of law. The AIG bonus debacle, regardless of the merits of those bonuses, retroactive takings by the government is very harmful. The interference by government in private contracts, via mortgage “cramdowns”, compensation, and other actions is the most harmful, because it destroys the certainty that individuals and businesses need to invest. By and large, that’s what we mean by a war on prosperity.

    The Obama administration is creating winners and losers via government fiat, not based on actual success in the marketplace. That is a sure fire recipe for long term stagnation and poverty.

  6. DSW: “I’d rather let them fail than have the federal government exacerbate the situation and take away our freedoms…”

    You do realize that was the economic policy of the US Treasury from 1929 through 1932, right? They let bank after bank after bank go under, operating under the theory that those that failed didn’t deserve to exist.

    That policy was an utter disaster. Any economist you talk to will tell you that is precisely what turned the crash of ’29 from a recession to a depression. When the banks disappeared, they took available credit along with them. That stagnated the economy.

    Those who do not learn from history are doomed to repeat it. Bernanke is one of the foremost scholars on Depression-era policies, which is why he was such a strong advocate for bailing out banks. They tested their theory when they let Bear Stearns fail, and the fallout was swift and powerful.

  7. Let’s not forget that this is 2009 and not 1929. Also keep in mind that our Treasury is printing up and injecting TRILLIONS of dollars into circulation. That spells Hyper-inflation. In that sense, the word “exacerbate,” is an understatement.

  8. Fine — but injecting trillions of dollars into the market doesn’t make up for the lack of available credit, which is why the market has still been unable to recover. Letting myriad financial institutions collapse — as you said you would prefer — would make the credit freeze much worse than it is now. As in, almost no one could get any kind of credit.

    The Fed has been very clear in its actions to date that priority #1 is to keep the economy from going under. Once that is assured, they will combat inflation. I, for one, would rather deal with a couple years of inflation than see our national economy collapse and pull the global one down with it.

  9. Her?

    Can you please cite where credit for credit worthy borrowers is lacking? Based on the figures I’ve seen, the only place that it really shows up is in housing and interbank lending. It may be more expensive, but credit is still there. And also, can you please support your statement that credit would “freeze” much worse than it is now?

    As for your comment about Great Depression, in the 1930s, approximately 1/3rd of all banks collapsed (about 10k out of a total of 30k). Banks continued to fail after 1932, the difference was the FDIC. The purpose was not prop up failed banks but to forestall bank runs of healthy banks. Especially relevant in the 1930s when there were very few national or even regional banks.

    Also, Bear Stearns did not fail (it was swallowed via Fed assistance by JP Morgan), I think you are referring to Lehman brothers. Incidentally, the credit markets were not materially affected by Lehman’s bankruptcy. It wasn’t until Paulson’s little speech and subsequent panic that the markets began to shift.

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