Friday, October 17, 2008

Meanwhile, They're Sort of Nationalizing the banks...   [Jonah Goldberg]

From my column today:

The federal government’s mandatory quarter-trillion-dollar buy-in to the American banking system, we’re told, is a temporary measure. The terms of the loans rammed down the bankers’ throats are designed to encourage them to pay it all back within five years.

But who says those terms will stay that way? After all, the government now has a more real and explicit ownership position in these “private” banks than it ever did in Fannie and Freddie, which were so-called Government Sponsored Enterprises. More important, the Bush team is heading out the door. When the next squad comes in, they might discover they like being co-owners of America’s banking system.

Democrats in Congress had great fun using Fannie and Freddie as public policy piggy banks, rewarding constituencies, funding pet projects, forcing the private sector to dance to their tune. What’s to stop them from renegotiating this week’s deal after the election and using Bank of America, Wells Fargo, JPMorgan Chase and the others as Fannie Mae 2.0?

Please don’t say that the terms of the deal are set and the government can’t revise them. If there’s one thing the last month has hammered home, it’s that nothing is written in stone. Besides, the banks may grow to like the security of partial nationalization and even lobby to Congress to stay on as less-than-fully-silent partners.

Heck, that way they wouldn’t have to pay back the loans.

Barack Obama already has a strong record of sympathy for “public-private partnerships” and other schemes that put government in the driver’s seat. ACORN, the militant wing of the Democratic Party, has been trying to shake down banks for years, and Obama is on record as saying it and similar groups will have a major role in helping him craft policy. And it’s hardly reassuring that Barney Frank, Chris Dodd and Nancy Pelosi will be running Congress. It doesn’t seem crazy to suspect that a crowd that sees nationalization of health care as a vital public policy goal will not be dogmatically adverse to the nationalization of the credit markets.

John McCain is better about such things, but not by much. An avowed disciple of Teddy Roosevelt, McCain has a record of whipping the private sector — even Major League Baseball! — to do his bidding.
 
Teddy Roosevelt himself revised his faith in “trust-busting,” preferring instead to let big business grow bigger so long as it agreed to follow the orders of even bigger government.

In Wednesday’s night’s third presidential debate, CBS’s Bob Schieffer missed a vital opportunity to ask both candidates whether they would pledge not only to abide by the bailout’s sunset provisions but to further promise to get the government out of Wall Street as quickly as possible. Such pledges wouldn’t be legally binding, but they would help create political pressure from the right direction.

Here's an additional point I couldn't get to in the column. Lots of folks on the right object to government intervention in the economy, even during a crisis. I had a mini-spat with Glenn Beck about this on his show earlier this week. I understand the objection, particularly given how often the left tries to create or exploit crises for the purpose of creating another New Deal. 

Personally, I don't have a huge philosophical objection to suspending the normal rules of the market if A) There's a real crisis B) the proposed intervention will actually help end the crisis, rather than make it worse and C) if in fact it is actually temporary.

For some reason I keep thinking of Little House on the Prairie. Remember the episode  when the little girl fell down the well? All of the townsfolk raced into Oleson's General Store and took stuff, axes, shovels, lamps,  whatever they needed to rescue the girl. They didn't pay for any of it and the Oleson's didn't ask for money. They helped hand out their own wares for free.

The girl at the bottom of the well was eventually saved. And the supplies were returned. The townsfolk of Walnut Grove didn't keep their borrowed property. They didn't extend the crisis in perpetuity and say all property was community property. As I argue in my book, ever since William James concocted his argument about the Moral Equivalent of War, the American left has been desperate to find some crisis-paradigm that justifies either permanently suspending the rules of the free market or at least justifying a crisis-mode government.

If there's a real crisis,  I don't mind if a cop commandeers private property — i.e. your car — if he needs to catch a kidnapper. But I'd be horrified to live in a country where cops get to seize your car simply because they're cops. Once the girl is rescued from the well, give Mr. Oleson back his shovel or pay him for it. Alas, I don't trust that Washington — and particularly the Democrats — not to say, "but look at what good we can do if we just get to keep your shovel for a while longer."

10/17 12:02 PMShare