“I’M THINKING THESE PROBLEMS MIGHT GO AWAY IF YOU MAYBE ASKED PAULY TO BE YOUR PARTNER…”

10/14/08

There are several notable (amazing, really) points about the Bush Administration’s plan to take equity (preferred stock, to be specific) stakes in most of the country’s major financial institutions.

For the most part, we are talking about healthy (well, relatively healthy) financial institutions here. These are not institutions that are teetering on the precipice of financial disaster. Free Market Hank Paulson was concerned that the plan might not be sufficiently attractive to induce institutions to participate, and so carefully designed the plan to minimize chances of spooking common stock holders, and managements, of the affected firms. Note the strong element of choice on the part of the participants. Or maybe not: as the Wall Street Journal reported this morning (page A1): “Some of the big banks were unhappy about the government (sic) taking equity stakes, but acquiesced under pressure from Treasury Secretary Hank Paulson in a meeting Monday.” So the government is forcing, in some cases, healthy financial institutions to let the government take a stake in them.

Keep this plan in mind the next time you hear someone tell you he or she if voting for McCain because Obama is a socialist or because he is in favor of big government. Note that it is a Republican administration that is doing more to socialize our economy, and certainly our financial system, than any administration in history, including that of FDR. Enthusiasm for big government, and now even elements of outright socialism, is one of the few truly bipartisan traits remaining in Washington.

We also read in today’s Wall Street Journal (page A3) that European governments “are facing a new challenge: how to pay for it all.” “It all,” in this case, is the bailout of their banking systems. First, perhaps our friends (Ever notice how the Europeans are “friends” when we need their help but something else entirely when they are, say, counseling us against self-destructive foreign policy adventures? But I digress.) across the Atlantic should have thought about the cost before they rushed headlong into a new crusade, this one apparently designed to make capital more comfy in the Old World and thus to take financial business away from New York. Second, who else, do you suppose, will be “facing a new challenge: how to pay for it all”?

Hmm…thinking before acting, considering the consequences of one’s actions before engaging in such actions. These appear to be yet more quaint old notions that have been dispensed with in our brave new “Yes, indeed, our best years are ahead of us” world.