Adopt A Loser

The Democrats appear to be adopting another losing position when it comes to the Banking Bill.

With crucial midterm elections nearing, Democrats have lost the advantage they've held for years as the party the public trusts to steer the economy.

I wonder if that loss of trust has anything to do with the banking bill proposals? In theory (whose?) there are supposed to be strict limits on Government borrowing for bailouts. In practice? Well it may not work out that way.

The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate.

“The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn’t do anything of the sort. I’m going to run down the details for you, and reprint the legislative language so you can read it yourself,” writes Rep. Alan Grayson (D-Fla.).

It would not allow the GAO to look into the Fed’s massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions.

I'm convinced that there are never any accidents, oversights, or loopholes when it comes to drafting legislation. There are paid for holes and gratuitous holes. Never loop holes. Because if what Congress does is not intentional then what do we have? That would mean they do not even rise to the level of a Parliament of Whores.

The bail out "loop hole" is not the only criticism of the bill.

Relatively small institutions compared to the names often cited in the news, community banks typically operate in small towns, urban neighborhoods or the suburbs. Their remit usually involves funding small businesses that require credit in order to operate payrolls and to expand, and lending to families financing home purchases or college. Many of those familiar with the banking industry, overall, say that community banks bore little to no responsibility, on balance, for the financial meltdown that occurred in 2008. Nonetheless, an analysis of the Dodd bill indicates that if it passes, community banks will be subject to a whopping 27 new regulations that one individual who has worked with banks professionally and is closely tracking the legislation says “could threaten to put many community bankers out of business, thus reducing competition in the banking sector overall, and diminishing consumer choices.”

And that friends is how the government cartelizes the economy. They regulate the competition out of business.


And then there are the corporate governance issues.

Another handoff to unelected bureaucrats, this time at the SEC rather than at the Federal Reserve. They did so well with Madoff, why not give them the additional job of rewriting Amerian corporate governance? The "investors and pension holders" that Mr. Obama really has in mind are things like the New York and California state pension funds that have already been troubled by scandals and politicization. Shareholders have a role in corporations, as even good capitalists like Carl Icahn recognize. But using the proxy power to take control of companies away from management and directors and into the hands of radicals is straight out of the Saul Alinsky playbook.

The question is: why are these economy wreckers doing what they are doing? Is it really revolution by legislation? Stupidity? Campaign donations?

Or just help friends and hurt enemies.

Section 972 of the bill authorizes the SEC to require firms to allow shareholders to nominate directors in proxy statement. Such proxy access turns corporate board elections from a process designed to ensure that each board has a good mix of skills and experience into a popularity contest where the long-term interests of the stockholders become secondary to political agendas or corporate raiders. The process can also be used by labor unions, politicians who manage public pension funds, and others to force corporations to respond to pet social or political causes.

But that is not all. The real corker in my opinion is the silent Inspector General. You never heard what he didn't say? I think that is the point:

Does nothing to address problems at Fannie Mae and Freddie Mac. These two government-sponsored housing giants helped fuel the housing bubble. When it popped, taxpayers—because of an implicit guarantee by the U.S. Treasury—found themselves on the hook for some $125 billion in bailout money. Not only has little of this amount been paid back, but the Treasury Department recently eliminated the cap on how much more Fannie and Freddie can receive. Yet the bill does nothing to resolve the problem or reform these government-run enterprises.

I discussed some of that in The Best Congress Fannie Could Buy and Barney Frank Frankly Not Frank and ACORN Is Not About Nuts and probably a few other places.

The root cause of all this is the belief that a badly run corporation sucked dry by unions and management can be reformed by government intervention. I admit of the possibility. I deny the likelihood.

Cross Posted at Classical Values