I read yesterday's Wall Street Journal piece detailing how the US government, primarily in the form of Fed Chairman Ben Bernanke, muscled BofA CEO Ken Lewis into a bad deal for his shareholders.
From the article, it's clear that Uncle Sam has rapidly replaced organized crime as a businessman's worst nightmare.
How in the world have we gone from a democracy of relatively freely-operating businesses, to a nation in which our own government coerces businessmen to behave against the best interest of their owners, in only a few months?
This is why I oppose continuing heavy Federal intervention in the private sector, under the excuse of a recession.
It's one thing to nationalize commercial banking in the long term interest of a more stable monetary and economic environment. But that doesn't require government purchase of those banks. Simply new operating rules, to which the affected firms' owners will adapt. As the value of commercial banking declines, so, too, will compensation, returns, profits, etc.
But to have government buy into firms, and then coerce their decisions with threats of replacing executives, withholding further funding, and who knows what else, is hardly how we, in America, have seemed to want to conduct private enterprise.
I found the article chilling in its description of how Bernanke and his colleagues rode roughshod over private property rights in the name of the 'public good.'
Perhaps better, further-seeing monetary supply management by the Fed, and more reasoned, less panicked reactions by Treasury and the Fed during 2007 & 2008 would have resulted in a smaller, but healthier financial services sector.
Anna Schwartz was right. The problem isn't liquidity, it's not knowing the long term solvency of commercial banks.
If affected shareholders and institutions had been allowed to fail, healthy banks allowed to assume the remnants, and bad loans written off, then there would now be room for whatever new capital is appropriate for the commercial banking sector.
Instead, we have a mess on our hands. We have the nation's money supply authority muscling private institutions to do the government's bidding, or else.
A very sad state of affairs.
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I follow the economy and the news with a passive interest, but I have to admit, this was the first piece of news about our current recession that really shook me. I mean, at this rate, we really might just be better if the banking sector simply collapsed, rather than having it swallow up so much public capital. And I say that fully aware of the integral role commercial banks have in the economy. To say the least, the whole sequence of events should at least silence the Gailbraith-esque liberals pointing towards greedy investors, because with this coming after TARP and all the other bailouts, there's no question that the fed has actively taken full responsibility for our economy. Unfortunately if we learned anything from the Great Depression it's such gov't expansion during crisis ends up being more permanent than it would seemed at the time.
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