The Agony and the Arrogance

Our government doesn't know what it's doing, but it keeps doing it anyway...

Here’s a bit of wisdom from that infamous economy wrecker, Senator Chris Dodd (D-Wall Street), upon passage of the Banking “Reform” Bill:

"It will take the next economic crisis, as certainly it will come, to determine whether or not the provisions of this bill will actually provide this generation or the next generation of regulators with the tools necessary to minimize the effects of that crisis." (Fox News)

Reminds me of Pelosi saying we’d have to pass health care so we can see what’s in it.  So they create hundreds of thousands of pages of red tape and tens of thousand of new bureaucratic overlords, and they don’t even know if it will work or not.   It wouldn’t be so bad if they were they were funding this progressive alchemy with their own money, on their own progressive commune out of sight of decent society...

Question: If this fixes “Too Big To Fail,” why does the bill include a huge fund for bailing out or dismantling banks that become too big to fail?


A Surplus of Government Arrogance, A Deficit of Humility
Amity Shlaes, as usual, provides a searchlight of reason that cuts through the progressive fog:

Good policy is what might be calledhumble policy. It starts with admitting what we don’t know. Thatincludes who will lead growth in 2011 or 2012, where that personlives, and how he or she will get capital. 

Humble policy thengoes on to concentrate on trying to let our economy become thatbroad space that future businesses and industries still unknown,might find inviting. 

Her steps to humility start with cutting taxes and regulation, "including the new health-care mandate."  This puts money in the hands of employers and removes uncertainty that this bureaucratic behemoth has created.  It puts more money and personal decision-making back where it belongs:  to the individual.

The next humble step would be to set policy to benefit theoverall economy, not any specific group.

The third humble policy is demanding a serious commitmentfrom lawmakers to abandon fiscal stimulus.

The fourth humble move is up to voters. It is to reduceexpectations about entitlements. 

Progressives lack the humility to acknowledge what Thomas Sowell has learned through a lifetime of study.  Each human being has a fundamental right to order his or her own life:

Freedom is not simply the right of intellectuals to circulate their merchandise. It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their 'betters.'" -- Dr. Thomas Sowell, Knowledge and Decisions

A free and orderly marketplace arrives at better decisions than any government program ever has.

"Out of every hundred new ideas ninety-nine or more will probably be inferior to the traditional responses which they propose to replace.

No one man, however brilliant or well-informed, can come in one lifetime to such fullness of understanding as to safely judge and dismiss the customs or institutions of his society, for those are the wisdom of generations after centuries of experiment in the laboratory of history." -- Thomas Sowell, The Vision of the Anointed, p. 112

For more on the topic of Government Hubris, I highly recommend George Will’s excellent column, The High Price of American Hubris

Obama Lies, Freedom Dies

WASHINGTON -- Regulatory overhaul legislation working its way through Congress will end taxpayer-funded bailouts "once and for all," President Barack Obama said Saturday.(WSJ)

The problem?  Nobody with a brain believes him.  Oh, don't take my word for it!  Let's see what National Public Radio has to say:

We at Planet Money did an informal survey of economists and regulatory experts on the left and the right. We couldn't find any who fully endorse the reforms backed by President Obama and Democrats in Congress.

Everyone thinks the reforms just aren't enough to solve the problem.Take, for example, "too big to fail" -- the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.

"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on ThursdayI cannot find any experts -- of any party -- who are willing to agree with Obama on this one.

Will at least one reporter in this country besides Jake Tapper get up off his knees long enough to ask Minister of Propaganda Gibbs this question:

If this ends bailouts, why is there a clause in the bill authorizing up to $4 Trillion in "secured loans," and why is congress not striking existing language in 12 U.S.C. 343 that authorizes the Federal Reserve to hand out taxpayer money to foundering businesses that are favored by the US Government? (BigGov - Obama's Backdoor Bailout)

Reform that doesn't take 1,300 pages of congressionally-produced bureaucratic BS
John Steele Gordon sees this for what it is:  More Crony Capitalism.  He touts the solution of Niall Ferguson and  Ted Forstmann:

(In a nutshell: moving derivatives trading from back rooms to exchanges and limiting the leverage that banks can use.)   

The Senate bill wouldn’t do that. Instead it would move most derivatives trading to exchanges but allow the chairman of the Commodity Futures Trading Commission to decide what derivatives can still be traded over the counter. Does anyone see there a hugely empowered federal official (not to mention a golden lobbying opportunity for banks and members of Congress alike)? Is a back room at the CFTC an improvement over a back room at Goldman Sachs?

You want real reform?  Let 'Em Fail!

The trouble with Wall Street isn't that too many bankers get rich in the booms. The trouble, rather, is that too few get poor -- really, suitably poor -- in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits. 

Happily, there's a ready-made and time-tested solution. Let the senior financiers keep their salaries and bonuses, and let them do with their banks what they will. If, however, their bank fails, let the bankers themselves fail. Let the value of their houses, cars, yachts, paintings, etc. be assigned to the firm's creditors. (WaPo - James Grant)

Personal Profits, Socialized Losses

No surprise, then, the perversity of Wall Street's incentives. For rolling the dice, the payoff is potentially immense. For failure, the personal cost -- while regrettable -- is manageable.

End the perverse incentive to gamble (Heads I win, tails the taxpayer loses), and the gambling will end.  The prospect of having to eat their immense losses will restore some needed sanity to the market.

Personal responsibility.  What a concept.