Vote the Bums Out
I have heard the rumor that the 700 Billion bailout package allows banks to maintain a reserve of zero rather than the ten percent the law previously required. In a free market, this would not perhaps be a disaster, because banks that failed would simply fail if they were so foolish as to leverage themselves to that level of risk. But the 700 Billion Bailout (now up to 810 Billion) socializes the risk and privatizes the profits. In effect, this allows banks to go from a situation where reserves of 10 million dollars allow them to lend out 90 million dollars, to a situation where reserves of zero allow them to lend out one unobtanibillion dollars.
My local congressman voted for this monster. He is a Republican. I am voting for his Democrat rival this election. I would vote for Joe Stalin, merely to get this traitor out of office.
We are borrowing from China and Saudi Arabia, both nations with a strong reason to call the debts in. In order to avoid annoying our creditors, ourforeign policy toward them will act in their best interests, not ours. So if China wants to exploit and enslave Africa, or if the House of Saud wants to fund terror, there is not much Uncle Sam can do by way of protest.
The circumstances that led to the mortgage loan crisis was exactly this: risk was socialized and profit was private. There was peculation at the top, of course, and the Democrats blocked attempts to regulate Freddie and Fannie, but those were ripples in the tidal wave, merely the insult added atop injury. The tidal wave was the ‘easy credit’ policy which allowed the government to encourage folks who could not afford it to take out mortgages.
You might think that no one was holding a gun to the head of these banks, that no one was forcing them to lend to borrowers who could not pay back. You would be mistaken: the "gun" was the Community Reinvestment Act and organizations like ACORN, who used the threat of lawsuits and investigation against any bank that did not lend to minorities. Imagine a thousand or ten thousand little Jessie Jacksons pulling his legal blackmail scheme on banks all over the country for over a decade.
The final bailout package was loaded with pork, including tax cuts for children’s wooden arrows, Virgin Island rum, tax breaks for Hollywood movie producers, for the Wool industry, and the list goes on.
What to do? This is something as big, as ugly, and as damaging to the Constitution as anything FDR ever dreamed, and it was rushed through in a week (because the congresscritters wanted to go home and were not willing to wait and debate the matter). The banking industry is now an arm of the national government.
Wachovia Bank was torpedoes by the Federal Reserve Board. One officer of the Federal Reserve board, a Citibank guy, publicly announced that the bank was "to be watched closely" and this created a run on the bank, wiping its assets out, or, at least, down below the ten percent fractional reserve. The Treasury department then cut a deal with Citibank so that Citibank could (ahem) save Wachovia, with some fiscal help from the Feds. Meanwhile, in a startlingly free market move, Wells Fargo makes a better offer for Wachovia, because the assets, so Wells Fargo thinks, are worth more than the book value: and lo and behold the Federal Government moves in to pressure Wachovia not to make the deal with Citibank!
This is a nightmare of corruption, an octopoid incestuous feast of paybacks and bribes and sweetheart deals, and the taxpayer is going to foot the bill, no matter how high the bill gets. This is what the Left has always feared and hated: the moneyed powers ending up running the government. This is what the Right has always feared and hated: the government ending up running the economy. It is the worst of both worlds.
We now officially have something that is the combination of a plutocracy and kleptocracy.
Not that voting matters much any more. You don’t vote for members of the Federal Reserve Board, and they now have more power than Congress.
About John C Wright
John C. Wright is a practicing philosopher, a retired attorney, newspaperman, and newspaper editor, and a published author of science fiction. Once a Houyhnhnm, he was expelled from the august ranks of purely rational beings when he fell in love; but retains an honorary title.
