April 27, 2010
Financial Regulation
How difficult is it to write a bill that states the Federal government shall never bail out a private company again? Does it take the nearly 1,500 pages of Senator Chris Dodd’s so-called “Restoring American Financial Stability Act of 2010” (Senate Bill 3217) to prohibit future corporate bailouts? No, it takes one sentence: “A private corporation or business shall not be appropriated funds from the U.S. Treasury, except in exchange for competitively bid, contracted services or products; nor shall it be granted tax treatment that is preferential to any other corporation or business.”
Which raises the question: What is the real purpose of this nearly 1,500 page bill which will inevitably result in tens of thousands of pages of regulations? Answer: Another step towards a command and control economy, which concentrates arbitrary power into the hands of the elite political class.
As with other bills of this nature, in which the federal government annexes power outside its powers enumerated in the US Constitution, one or more centralized councils / commissions / bureaus are given the authority to make singlehanded decisions over vast chunks of our economy. These fiefdoms of power – examples in this case include the “Financial Stability Oversight Council,” an “Office of Financial Research,” an “Office of National Insurance,” an “Investor Advisory Committee,” a “Bureau of Consumer Financial Protection,” and an “Orderly Liquidation Authority Panel” – rest on the assumption that a handful of political appointees can somehow manage our entire financial industry by dictating how finance companies are run and determining when they should be bailed out or shutdown using arbitrary criteria.
What is also overlooked in this process is the extent to which the federal government’s interference in free markets is the real source of our economic woes. After all, it was politicians and political appointees in our federal government who insisted that banks make subprime loans to people who could not possibly repay them, under the justification that everyone is entitled to home ownership. These same politicians collected their campaign contributions from the Fannie Mae and Freddie Mac executives who were fattening their bonuses on the politically favored subprime mortgages that nearly destroyed our financial system.
The politicization of our economic life is poisoning our free markets. The proper role of government is the impartial, blind application of the rule of law and adjudication of contractual disputes, including bankruptcy reorganization or liquidation. A return to 100% private ownership and control, risk and reward – and the rule of law – is the only way to ensure the taxpayer will never again be obligated to bailout another private business. We must not tolerate expensive government “solutions” that will only expand the size, scope, and power of government. We must stop allowing the government to pick winners and losers – and stop providing politically well-connected companies with an endless supply of capital forcibly taken from taxpayers. It is vital that we insist instead on a return to our Founders’ vision of limited, constitutionally based government – and free ourselves of these legislative monstrosities.
