Hounding Obama 10 – Rule by Decree
Executive directives ought to be issued in writing, not verbally and out of public view, as Hitler and Stalin did. Furthermore, such directives must be restricted to matters and agencies that by law report to the president, departments whose leaders are members of the president's cabinet, not to independent government agencies, let alone private institutions or companies.
The appropriate way for the executive branch of the government to interact with the private sector must be in the form of advice or open legal action such as accusation of fraud or crimes of coercion, followed by indictment, arrest, trial, jury verdict, judgment and execution of that judgment. If we are going to abide by the U.S. Consitution, federal crime consists of one thing: Treason (Article 3, section 3); we might add counterfeiting (Article 1, section 8, clause 6) which might be a kind of treason) and piracy and felonies committed on the high seas (Article 1, section 8, clause 10). Congress did not receive power to criminalize anything else. Nor did the President.
President Obama chose to blur this line and to usurp the power of Congress and the Courts, to legislate and adjudicate, to be judge and jury in the wrecking of what little remains of a market in this country. Private employers have to expect certain things in order to forge ahead with expansions which always carry inherent risks. They must be able to expect a continuity of fair treatment by government, or else they will not create and maintain long-term positions for new employees.
Last October government henchmen invited nineteen major bank heads to his office to make an offer they could not refuse. The premise was that all of the major banks must comply in a bailout that would shore up their assets to guard against a systemic failure. The true beneficiaries were the Wall Street investment banks, the money center banks. The main ones were Morgan Stanley (Treasury Secretary Paulson's previous employer), JPMorgan Chase, Citicorp, and Bank of America. Granted this started in the Bush administration and Fed Chairman Bernanke, Treasury Secretary Paulson and NY Fed President Geithner. However, it is continuing, stepped up under Obama, Treasury Secretary Geithner and the same Bernanke.
None of these banks could be allowed to be perceived as failing, among the major banks. The result of failure would be a one-by-one collapse, like dominos; one pulling down the next in claiming coverage of bond insurance deals, Credit Default Swaps, and other derivatives. If one of them made a claim against the swaps or insurance they would uncover the insurer unable to provide actual coverage. The defaulting bonds would not be made good. Covenants for debts would be broken, large loans would be called and federal asset ratios would trip the banks into insolvency, and suits for bankruptcy would ensue. Moreover, if any one of the major banks were to be blessed with a “safe” designation, the rest would be suspect and might be threatened by a “run.”
The final result: a number of bad banks would be gone. Their CEOs obviously had friends in high places.
However, the major banks did not all want to go along.
Wells Fargo's Chairman/CEO Dick Kovasevich refused to participate in the Trouble Assets Relief Program (TARP) funds, citing the above, but Bush demanded it. Government force was invoked. So Wells Fargo took the $25 billion as noted and used it for the Wachovia acquisition. From the Gazette Online. Wells Fargo's Kovacevich blasted changes to TARP program. From StarTribune.
A spokesman for BB&T Corp. said the company didn't like the federal government's $700 billion financial rescue plan and didn't want to participate but took $3.1 billion because the U.S. Treasury urged it to and some competitors are participating. BB&T - the largest bank in West Virginia - was asked how it justifies participating in the federal government's Troubled Asset Relief Program, or TARP, in light of BB&T Chairman John Allison's promotion of the late author Ayn Rand's philosophy of free market capitalism. From the Daily Mail. BB&T took federal rescue money at Treasury's urging, The Daily Mail. John Allison's letter to Congress, angrily but cogently protesting TARP. Gateway NC.
Chrysler Motors was maneuvered into the open arms of Fiat Motors. Fiat has been eager to re-enter the American market, if it could only live down the failures of the past. We are, everyone knows, a new market for smaller cars.
General Motors was headed for bankruptcy in some form. That was certain. Suddenly the CEO and Chairman of the Board was “removed.” There was no news about a vote by the Board. The path to bankruptcy seemed certain. The new CEO as much as said so. Support started to mount from many sides, based on the assumption that the most at risk stake-holders would be hurt the least. Suddenly the rules changed, the United Auto Workers end up the largest chunk of the firm (reward for huge campain donations to Obama?). An outrage! What happened to the constitutional protection of contracts?
We recently heard of Obama's proposals for health care reform being greeted with glee by many corporations that are part of the current system. With what form of knee-cap-cracking were they threatened?
We also heard about the Fed getting really serious about quantitative easing. This is where, in order to 1) ward off a deflationary trend and 2) fund the federal deficit spending, the Fed begins buying Treasury bonds, notes and bills. The only problem is that the world's confidence in those bonds and in the dollar is falling currently. A new up-trend in the price of gold underscores this. Look at last Thursday's and Friday's charts. Does the Fed have the cash to soak up all the Treasurys hitting the market?
What industry will be the target of Obama's next attack?
No one knows. All I can say is: government has never produced anything; it can provide defense of individual rights by establishing and operating an objective legal system, police and courts, and by providing national defense. Nothing more. Back off!
If you really want to “create or save 3.5 million jobs, quit intervening in business, stop hounding the slightly wealthier owners of businesses who create the jobs, forget about imposing the increased costs that “cap and trade” would require, cut back on regulations rather than increasing them. If you have any regard for the well-being of America, as individuals or as a taxable economy, don't herd us like stupid animals. Let the natural incentives of the market guide the economic recovery.
Neither Bush nor Obama have heeded the call, the cry of a market being screwed up by government. Laws were grown over more than a decade to entice (force) more people to become mortgage borrowers. Interest rates were kept far too low. Billions of dollars were poured into mal-investments. Those dollars want to flow to where they will be more productive. However, as is desribed in an article at the Daily Bell these mal-investments have been frozen. Just as Japan did, we are not allowing them to deflate. "By freezing non-performing assets, the country was unable to progress. We think the same sort of factors will be at work throughout the West." Get ready for the Great Kondratieff Winter!
Encourage us, don't pretend to be smarter just because you are in Washington, DC , but above all,
The road to hell is paved with good intentions...
Peter also writes for Ada Byron's Blog.