National Review and Obama Agree on Nationalizing Financial Sector?
Writing at The American Spectator, John Berlau says that National Review and President Obama are peas in a pod when it comes to giving the government the power to seize financial holding companies.
What the NR editors might be expressing is a form of "buyers remorse" on the original Bush-Paulson financial bailout they forcefully supported last fall. And not only did they strongly back that bailout, they berated GOP members of Congress who dared oppose it. In a September 29 Corner entry entitled "I'm Stunned" posted immediately after GOP conservatives and populist Democrats combined to vote down the bailout in the House (before a second package was approved there four days later), NR editor Rich Lowry exclaimed, "House Republicans will get blamed, and the likes of Mike Pence [R-Ind.] indeed played an extremely irresponsible role."
Now, National Review tells us that Obama's resolution authority, "done right, would at least put us back on the road to a rule-based system." Its editorialists lecture sanctimoniously that "in post-bailout America, we have bad and less-bad options to choose from and we've seen the alternative: a series of ad hoc and largely lawless bailouts jerry-rigged by the Treasury and the Fed."
But there is every reason to believe that nationalization, or resolution, or whatever NR and the Obama administration wish to call this new authority, would be just as "ad hoc" and "lawless" as the previous bailouts and nationalizations.
Both NR and Obama justify the ability to seize firms based on the fact that the government already has similar powers regarding commercial banks. A government takeover "is essentially what the Federal Deposit Insurance Corporation does when it determines that a depository bank is on the brink of failing," NR intones in its editorial. Similarly, Obama argued in his speech: "If a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. … And it works. Yet we don't have any effective system in place to contain the failure of an AIG [American International Group]."
It should be noted that contrary to Obama and NR's assertions, the FDIC process of seizing banks is far from perfect. FDIC Chairwoman Sheila Bair, whom Obama held over because of the liberal policies she pursued in the latter half of the Bush administration (such as strong backing of the Community Reinvestment Act, as Matt Vadum reported in TAS yesterday), disregarded taxpayer interests upon seizing the large thrift Indymac and other banks and created a "model" mortgage modifcation program for thousands of borrowers that wrote off principlal on the loans and reduced interest payments to well below market rates. Initial results show a redefault rate in programs like these of more than 50 percent, but Bair and Obama show no signs of stopping this flawed experiment with taxpayer dollars.