Lemon capitalism

GM loses billions in the fourth quarter of 2009. Didn't the federal government "lend" GM billions of tax payer funds?

Crony capitalism lives on with Obama

John Stossel on crony capitalism, regulatory capture, "green jobs," and the farce of the "Recovery Act."

Best post I've read today on Geitner and government intervention in the economy.

Do yourself a favor and read this great post. From Jeff Perren over at Shaving Leviathan:

When that disaster comes, and capitalism is blamed once again, there will be increasing pressure for out and out nationalization of the banks, something to which this Administration is already far too philosophically inclined. (Some reports have them mulling it over already and, of course, to a degree, the implementation of TARP has produced that as a fait accompli.)

...But allowing individuals the freedom to succeed or fail is contrary to the entire mindset in Washington, as it is to much of the country on most points of the political compass. Many, far far too many, delude themselves — despite enormous evidence to the contrary — that government control of such matters is practical. This represents the (let us hope, temporary) triumph of large swaths of the Progressive philosophy, made possible in large part by unhealthy acceptance of Pragmatism over the past 100 years.

The Importance of Failure

Tyler A. Watts over at Mises.org writes on the added danger of bailouts that our politicians can not grasp:


I don't buy the probailout folks' predictions of impending economic chaos. But what if they're right? What if the short-run pain in store is just too terrible to endure if we don't start bailing out key industries? After all, we're talking massive unemployment, a new wave of foreclosures, a shrinking economy — in a word, recession. If the dire forecasts of the bailouters are correct, we'd be stupid not to do it; we'd be like a beaver caught in a trap: slowly dying, yet too timid to chew off his own foot to escape.

Capitalism depends on three highly complementary, yet distinct, institutions: prices, property, and "profit and loss." Classical-liberal economists have demonstrated the essential role of these pillars of prosperity for centuries. These fundamental institutions of the market economy are like legs of a stool. If we gradually weaken one leg, we will eventually bring the stool toppling down — economic collapse.

In this light, the implications of bailout are clear. Bailouts are designed to insulate people from the effects of bad decisions. When market prices change dramatically, exposing yesterday's poor investment choices, bailouts come "to the rescue," promising those left holding the bag that they won't have to endure the full cost of their errors...

...Bailouts, then, attempt to erase the effects of losses, or economic failure. But such efforts inevitably undermine the loss aspect of "profit and loss." Profit and loss go together — like up and down, left and right, good and bad. If we try to do away with losses, we'll wind up diluting the meaning of profits. After all, why strive for profits if Uncle Sam will cover your losses with a bailout? Why bust your butt to compete and succeed if you can just clamor for a handout instead? Bailouts destroy the profit motive — and all the benefits of a competitive economy.

By removing the risk of failure, government inevitably creates an environment where crony-capitalism flourishes. And we end up with the same essential distortions in our economy that has lead to the financial crisis.

General Motors to Invest $1 Billion in Brazil Operations

My dear fellow taxpayer, here is another example of how our tax dollars (via corporate welfare) is going to be burned up by a large corporation. When it’s not your money it is soooo easy to spend:

General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

Welfare For Farmers

The majority of federal tax dollars used as subsidies for farmers ends up in the pockets of multi-billion dollar agri-business.

HT: Liberty Pen

More public funds for Bank of America

Bank of America has received another $20 billion from taxpayers to shore up their acquisition of Merrill Lynch. This should be an outrage to the average American taxpayer but since the country in under the swoon of the mantra that government must "do something" to get out of the economic doldrums, such massive transfers of taxpayer funds go with nary a protest. Didn't BOA vet the acquisition of Merrill Lynch properly?Or was it that the government implicit guarantee of billions of dollars made them drag their feet when it came to doing their due diligence? When government meddles, unintended consequences are always not far behind.

Oh, those sneaky Clinton's

Seems like the Clinton's know a thing or two about political patronage. From the NYT:

An upstate New York developer donated $100,000 to former President Bill Clinton’s foundation in November 2004, around the same time that Senator Hillary Rodham Clinton helped secure millions of dollars in federal assistance for the businessman’s mall project.

Mrs. Clinton helped enact legislation allowing the developer, Robert J. Congel, to use tax-exempt bonds to help finance the construction of the Destiny USA entertainment and shopping complex, an expansion of the Carousel Center in Syracuse.

More candidates for bailout

Companies that have gone under or have filed chapter 11 since the economy turned sour:

Bombay, Co.
Lehman Brothers
Aloha Airlines
Linen ‘N Things
Steve and Barry’s
Sharper Image
Mervyn’s
Circuit City

Should taxpayer’s bailout these companies? After all, they employ quite a bit of people and it could be argued that they are vital to the communities they serve.

The 2012 Pelosi GTxi SS/RT Sport Edition

Yes, siree! Here it is! The car we have been waiting for all these years. Let us praise the noble minds of hack politicians everywhere. You see, if you create the "right" incentives and pump gobs of tax dollars into the a failing industry that employs union workers you will reap great rewards. Hold on tight fellow taxpayers! We are in for a ride! Whoopee!

HT: Carpe Diem

Getting bigger and bigger...

A video by The Cato Institute on reasons why the federal government needs downsizing: can anyone think of a good reason why taxpayers subsidize the sugar industry?

And the rumba line just gets a little longer

Now commercial real estate developers are asking the government for financial assistance. The line for a taxpayer handout just keeps getting longer, folks. As predicted, a bad precedent was set when the Feds decided to bailout Wall Street.

Thanks for nothing , Mr. President

Bush approves $17.4 billion in aid to automakers.

"I've abandoned free-market principles to save the free-market system"

A no surprise statement from George W. Bush: Mr. Bush's "compassionate conservatism" was never much of a small government ideology to begin with (no matter what Progressives will tell you); the massive bailouts and the feckless stimulus packages have sealed the Bush administration as a big government administration.

We need a "Car Czar" like we need bullets to our heads

Despite polls showing that most Americans have an unfavorable view of bailing out GM, Ford, and Chrysler, Democratic congressional leaders and White House officials "agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry." Perfect. While our political class is busy spending our tax dollars on bad businesses, maybe we can also have ourselves an "energy czar" to boot

The line just gets longer, folks! Now its Citigroup's turn!

And now Citigroup gets to line up at the trough! Of course, Wall Street loved the crony-capitalism and had a great day. The taxpayer on the other hand gets screwed again.

The line just gets longer, folks!

If you didn't hear the latest news on the bailout fiasco, American Express recently got the green light to become a bank holding company. Of course, this move gives one of the largest credit card companies a juicy opportunity to lobby for government funding. Well, guess what?

AmEx received approval earlier this week from the Federal Reserve to become a bank holding company, which is a similar structure to traditional commercial banks. The credit card company now has access to financing from the Fed and the ability to grow a large deposit base.

The company is said to be asking the government for an investment, according to a report in The Wall Street Journal citing unnamed sources. A spokeswoman for AmEx declined to comment, and telephone calls to the Treasury Department, which is running the $700 billion financial bailout program, did not immediately return telephone calls.

The increased funding opportunities through government programs, including the potential $3.5 billion investment, could be a huge boost to American Express as one of its primary sources of funding has nearly disappeared amid the ongoing credit crisis.

American Express relied on packaging pools of credit card debt and selling them to investors in the securitization market. As investors have shied away from purchasing all but the safest forms of debt, the market for credit card-backed securities has dwindled.

American Express is also facing a slowdown in the broader economy, which has led to more customers missing payments and cutting back on spending, hurting the company's profitability.

I can see a congo line way off in the distance of well-dressed executives making their way to Washington, D.C.

Democrats ready to reward unions

Congressional Democrats are already trying to move on some of their crony-capitalist ideals by announcing that they intend to double the aid to U.S. automakers. The aid would be included as part of a second stimulus package; the first stimulus package did very little to prop the ailing economy but maybe if they try it again, it might just work, right? Democrats are beholden to union members (a very small portion--7.5%--of private sector workers and responsible for spending $400 million on the election) for their support during this last election, so it is no surprise that such a tasty little aid plan ($50 billion in taxpayer funds) would be brought to the feet of the United Auto Workers and the fledgling car companies. Ask yourself, would Democrats do the same for other industries that didn't pass their ideological muster? A better question is should government be aiding any failed business at the expense of others? We have already seen what the $700 billion bailout has borne out, should our government be allowed to play favorites again?

Our economy in the hands of politicians does not bode well

A great post from Jim Cardoza at Liberty Pen:

The inmates are definitely running the asylum these days. It seems if any business succeeds wildly, like Exxon, government quickly moves to punish them, using weapons like the windfall profit tax. Politicians cite fairness as their motive.

However, when a business fails miserably, like AIG, government is willing to give them boatloads of money---the former property of individual Americans. Politicians cite our best interest as the motive, arguing that they have brilliantly averted an even worse scenario.

Such an economic policy should be recognized as absurd on its face. The idea that the free market doesn't work, and that the better way to run the economy is to have a handful of all-knowing central planners at the helm, has been proven by history to be a surefire recipe for the destruction of liberty.

The problems with political interference in the everyday economic behavior of people pursuing their own interests are primarily twofold. First, by themselves making the rules, politicians have unlimited opportunity to dispense favors. Why does one business get bailed out and another not?

And secondly, the considerations that weigh most heavily to politicians, when making essential economic decisions, completely lack the component of restraint. In other words, why should a politician, whose vision routinely does not extend beyond the next election season, ever curb spending? After all, government can simply print money.

The ability of politicians to manipulate the markets has brought us to the economic mess of today. And yet, this situation has worked out well for those big government advocates. At great price to the American people, ownership of our nation's financial system has been transferred to the very politicians who destroyed the last one.

Ten times out of ten, the central planners responsible will blame the "lack of regulation" for their failures. The Great Depression was no different. But, how can the free market be responsible? The Federal Reserve was established in 1913. It has been 95 years since we have had one.

Funny but true...so true

HT: Liberty Pen