Tuesday, November 18, 2008

***UPDATE*** Socialism Not on March; Paulson's Hubris, Conversely, Is

I didn't want to update my previous Socialism post because, like Socialism, it produced long lines and red tape and I didn't want to make it any longer and less efficient. So this is an update, but in a new post. If you want to know about Socialism from my old post, look here.

But for those of you wondering about the bank bailout and the government taking shares in troubled banking institutions, fear not:

As reported by that bastion of Marxism, Fox News, in this article, Treasury Secretary Paulson is up on the Hill with Ben Bernanke, his own personal Friedrich Engels, explaining the newfangled direction of the bailout to the folks. Hank and Ben went up the Hill to fetch a pail of money.

According to Hammerin' Hank, the banks receiving bailout money, even in the form of share purchase, will have the ability to use the money pretty much however they please. Sure, most of them will try to unfreeze credit lines for homes and small businesses and students and loans like those. Sure, some of them will try to build up a reserve to avoid running out of money - a Socialist "war chest" if you will.

But for all you "better dead than Red"ers out there, the time to panic has passed. You see, the banks will be able to use the money at their own discretion. They won't be nationalized. If they were, how could they use the money for things "such as buying other banks or paying dividends to investors."

Wait, what?? We're giving them money so they can purchase other failing banks, or pay shareholder dividends??? Um, no. Mr. Secretary, that's not Socialism. That's lunacy. Let me make sure I have this right:

My tax dollars. They go to Washington. They go to you, Hank. You give them to (fill in name of failing bank). They give them to (fill in name of shareholder of bank).

Well, at least that quells those war drums trumpeting the end of Capitalism. Perhaps we should be banging on the gong of "this is a really really really bad idea and we don't need to label it anything other than a really bad idea. The idea itself should scare you without a need for a label."


James said...

"even in the form of share purchase"

Not to dredge up this old argument, but just so we are clear, when someone owns preffered shares of stock in a company, they have an ownership stake with full voting and veto rights. When that someone is the federal government, that is a partial nationalization.

Will the government be able to make direct decisions with how to spend bailout money? No, the CEO and board of directors will.

But when they have to go to the stock holders to vote on a merger or buyout, the fed will have its say through its voting power. When they vote for board member replacement or rention, the fed will have its say through its voting rights.

With regards to the auto bailout, which will do the same thing, give the fed preferred stock in the big three, when those companies go to negotiate with UAW and need stock holder approval, the fed will have its say.

Now one has said its straight up marxist socialism. But it is a form of democratic socialism where the federal government has undo say over production.

James said...

I used the wrong term, the fed is not getting preferred stock, but voting share stock. My bad.