Arnold Kling weighs in:
We got into this crisis because power was overly concentrated relative to knowledge. What has been going on for the past several months is more consolidation of power. This is bound to make things worse. Just as Nixon’s bureaucrats did not have the knowledge to go along with the power they took when they instituted wage and price controls, the Fed and the Treasury cannot possibly have knowledge that is proportional to the power they currently exercise in financial markets.
He refers to Paulson as "the American Mussolini."
How long before Tyler decides Mussolini’s plan is not “better than nothing”?
Too much is being made of the “not voluntary” issue.
The treasury did speak to the banks beforehand and the banks likely agreed to the plan’s details (have you seen anyone complain???).
HOWEVER, no bank can ADMIT to needing/wanting the injection without sending a negative signal about its financial health. So… we will all pretend this is not required by the banks, or “non-voluntary”.
Power was already damn decentralized, across many banks, investment banks, mortgage originators, and hundreds of thousands of households.
http://finance.yahoo.com/tech-ticker/article/95602/Treasury-Seizing-Stakes-In-Nations-Biggest-Banks
“The collective force-feeding is designed to remove the stigma of taking government funds and blah blah blah”
Damn this trouble-making free market! We had a completely free market in banking until today. The free market is what got us here and the government will rescue us from it.
Agreed. Mussolini won an election or two.
sd is absolutely right. If the recapitalization is not marketed as involuntary, then a bank that avails itself sends a negative signal to the market.
What’s the alternative program?
At the same time, I agree with Kling who I paraphrase to saying to truly f@&k up you need power.
To sd and Chilton, I suppose I concede the point, but since when do government officials “market” their actions so as to make them appear unconstitutional?
Says Bush, “I got Pelosi to follow me on the bailout plan; of course, I would have killed her if she refused.”
Now, there are rumors that the Democrats plan to re-appoint Paulson as Treasury Secretary.
Garbage.
The good news: the people are so angered by the bailout that there’s no chance of a populist installment of fascist dictatorship.
I am concerned that the more “anger” there is floating around the more likely it is that we’ll get a fascist dictatorship.
Paulson as Mussolini?
There is an amusing parallel between the original Paulson Plan and Mussolini’s much trumpeted but disastrous invasion of Greece.
Both situations were retrieved by foreign intervention – in Mussolini’s case from Hitler; and in Paulson’s from the British Treasury.
“ust curious what the probability is that Team Bush will create some kind of ‘emergency powers’ act (a la Egypt) where he stays in power indefinitely and suspends the Constitution. Bloomberg’s making his own case for a third term.”
P(crackpot hypothesis) = 0. Bloomberg is going through democratic channels to change the term-limits law.
Dirk,
What about Gonzales?
Financial crisis often, usually, leads to bad political outcomes. Nazi Germany etc
In this case, it looks like Franks, Dodd, and Maxine will be writing new regulations for our financial institutions. That is scary. They are all for more regulation – the kind where the government redistributes wealth based on a political spoils system. I am afraid of the future direction as in fear we run to the left.
I agree with Arnold Kling.
What I’ve been wondering for years is how
we get out of this situation.
It seems to me that we need a government
biased to favor the small over the large.
Say, for example, a corporate tax rate indexed
to the gross sales of corporations within
the U.S. Below a certain size there’d be no
tax at all. While at the high end it would be
quite large.
A key question would be how to do this without
giving large foreign corporations an undue advantage
within the U.S. market.
About all one can do is I think tax foreign activities
within the U.S. at a rate keyed to their estimated
size. Their likely response, of course, would be to sell
through smaller intermediaries. Whether this is
really a gain for the U.S. is debatable.
But the likely effect on U.S. based companies seems
clearer. They’d have a strong incentive to split into
numerous smaller companies.
And that’s we need.
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