Monday, April 23, 2012

The Biggest Mistakes in History Part 2

The Obama administration is making some of the biggest mistakes in history.  This is because it is systematically operating as a de facto dictatorship, running roughshod over the Bill of Rights.  In the previous blog post (Part 1, by the same title), I mentioned that the administration had taken the position, early on, that it was responsible for making all decisions in the economy.  This was a serious over-reach even beyond the incredibly oppressive Bush policies of 2008.  It was based upon an assumption made by President Obama that the election meant his views could override the Constitution.  The consequence is that he established a mindset among his appointees that Executive action was more important than the separation of powers, that political outcomes were more important than individual rights.

“By the time he joined the Obama administration, Tim Geithner had settled on a narrative of the financial crisis that had the virtue of being nearly correct.  As Geithner saw it, the government had faced two imperatives during that tumultuous time.  The first was to stop the panic and save the banks.  The second was to satisfy the country’s bloodlust toward Wall Street.  Geithner believed –and this was his real insight—that you could do only one or the other.  Anything truly vengeful, such as cleaning out whole floors of executives or other forms of what Geithner called “Old Testament justice,” could destroy the institutions you were trying to save.  But anything merely symbolic—a firing here, and a perp walk there—the public would dismiss as a stunt.” (1)

“And yet, when Geithner traveled a few hundred yards from his office to the White House for the daily senior staff meeting…he was surrounded, as it were, by petulance.  The president’s top aides were desperate to solve the crisis.  They were just as desperate to position the administration as resolutely  They pleaded with Geithner to fire a bailed-out CEO.  They begged him to hack away at executive pay.” (2)

In these two paragraphs, author Noam Scheiber has inadvertently exposed the erroneous view that the government can properly do such things as fire executives and meddle with salaries.  These people, the “aides” of our nation, appointed by the President, think they can do virtually anything they want.  They act like bullies drunk with power, completely ignorant of the “rule of law”.  They act as if they are the law.  The proper question, then, is “Who do they think they are?”

I would like to remind you that during previous periods of our history, many American Presidents had a deep respect for the Constitution and the rule of law.  There were times when an American President would never consider violating the rights of American citizens for the sake of a political goal.  Doing such a thing was considered uncivilized and immoral.  They knew that one of the cornerstones of a civilized society is respect for individual rights. Today such violations are done with impunity, as if they were normal.  The President's aides are barbarians who don't know it.

Contrary to the opinions of the President’s aides, our country, when it was founded, was not intended to be a dictatorship.  No one in government had the right or the authority to fire executives in the private sector.  No one, except a judge, had the authority to arrest any individual.  First, there must be probable cause that a law (passed by Congress) has been violated; then there must be an arrest, a charge, a trial in a court of law and evidence.  This does not come from the Treasury department.

Timothy Geithner cannot fire CEOs.  He has no authority to do that.  Neither does the government have the authority to deal with issues of executive pay.  Those issues are handled by private contracts.  Certainly, the government proclaimed that these companies had accepted government bailout money and that the bailout was a de facto government takeover.  But this line of reasoning only points out the ludicrous nature of the bailouts and what kind of things can happen when government oversteps its proper role.

Certainly, one could say that this dictatorship happened under Bush and that Obama had nothing to do with it.  I would remind people that by the time the bailouts were being considered by Congress, Obama had known that the election was swinging his way and he supported the bailouts, even participated in meetings about them as a candidate.  So, it cannot be said that Obama did not have a significant role to play in the bailouts. 

The government’s presumption that it had the right to intervene in the economy was one of the grossest violations of individual rights in the history of the nation; and it was justified, as are all usurpations of power, by a ginned up emergency that supposedly threatened the entire fabric of our society. 

The truth is that government actions taken by both Bush and Obama have prolonged the economic consequences of the housing crisis.  As of today, almost four years later, our economy still hangs on a thread.  Had we allowed those companies to fail, we would be farther along toward a recovery (if not fully recovered by now).  The government’s actions served the purpose of re-distributing the problem to all parties in the economy, even those who would not have been harmed by the collapse.  The money taken out of the economy for the bailout has also prolonged high levels of unemployment.

Had advisors in the Bush administration (and later in the Obama administration) refused to interfere in the dealings of private companies then these companies could have solved the issues of “insolvency” by normal private means; and this would have contained the damage.  Certainly, it would have meant hard times for some people but those who were not party to the housing crisis would not have been harmed.  Housing prices would have found their bottom and then recovered.  Those who held toxic assets would have held on to them or sold them at a loss; companies dependent upon the success of the failed banks and institutions would have found other places for their investment dollars.  The rights of all citizens to make their own economic decisions would have been preserved and the American economy would have quickly recovered.

But worse than the housing collapse and its effect on banking was the continuation of the re-distributive philosophy of the Obama administration.  In order to deal with the collapse caused by re-distribution, these very unwise men doubled down on re-distribution.  They ignored Fannie and Freddie by allowing it to continue its policies.  Then they re-distributed the American taxpayer’s money to the failed banks that were destroyed by Fannie and Freddie.  Then by means of stimulus programs, they redistributed more money to green energy debacles and leftist giveaways such as in the Pigford scandal.  They blocked banks from foreclosing on unpaid loans and they insisted that those banks re-finance loans to people who could not make payments on them.  To deal with the consequence of their policies on unemployment they increased unemployment and food stamp payments.  To further “stimulate” the economy, they re-distributed more money to their favorites in leftist organizations that were already wasting billions of dollars.  The examples of re-distribution are endless.

Finally, the government’s policy toward “fat-cats” was nothing more than show designed to divert attention from the fiasco that the government had caused.  It was not the fat-cats on Wall Street who caused the collapse, but government bureaucrats at Fannie Mae and Freddie Mac who had been issuing loans under the auspices of the Community Reinvestment Act.  This is the real scandal that even a person as "intelligent" a Timothy Geithner ignored.

The financial crisis, created by people whose philosophy of re-distribution matched that of the President, was the pretext for the government taking over the banking industry.  If you think these jokers can save the banking industry, you are mistaken.  They are the destroyers of it and their method of destruction is the same that caused the crisis: re-distribution.

The assumption of dictatorial power by the government in this crisis is what caused it to deepen and spread to the rest of the economy.  The use of enormous amounts of taxpayer dollars was a theft of money held by individuals in private accounts and this theft is what caused our present problems. 

(1)    The Escape Artists: How the Obama Team Fumbled the Recover by Noam Scheiber Page 115, ebook version
(2)    Ibid

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