Catastrophe - Dick Morris [42]
“implement tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms.”137
That’s not a typo. The last item speaks of regulating the “pay and compensation” and “corporate social responsibility” of “all firms.” All. Every one. As in: the entire economy!
Meet Mario Draghi, our new boss. He is the head of the Financial Stability Forum, on which the new board is to be based. He is the governor of the Banca d’Italia. The IMF and the Financial Stability Forum—and now the FSB—will be headed by Europeans. Traditionally, the United States has controlled the World Bank, while Europe got the IMF. Now Draghi and the other European central bankers will have tremendous power over the United States and its financial institutions.
This is the price Obama and the leaders of the world are making us pay for being the nation where the global financial crisis began: we are no longer our own masters.
ACTION AGENDA
The stakes in the outcome of the bank rescue plan dwarf those involved in even the president’s big-spending stimulus package and the supplemental appropriations we discussed earlier. The risk of those plans is that they could force us to endure a painful cycle of inflation and recession while saddling future generations with high bills for interest and debt repayment.
But the risks and dangers involved in nationalizing the banks would be of a different order of magnitude. If the bank bailout leads to nationalization and the politicians don’t follow Sweden’s lead and return them to private ownership as soon as possible, the Obama administration will effectively have transformed the United States into a socialist democracy. Businesses that need operating cash to grow will have to go hat in hand to government-owned banks for loans. And the politicians making the decisions will attach whatever conditions they like to these loans (as, indeed, they’re already doing with the TARP loans).
Soon Washington will be telling bankers to give preference to certain types of loans over others. Sometimes the politicians will make the mistake of betting on the wrong horse economically (as Japan did in the 1990s, when it steered investment toward companies developing big mainframe computers and away from laptops). Other times, they will substitute short-term, populist economic demands for long-term investments. And they will always be subject to the temptation to appoint somebody like Rod Blagojevich (the corrupt ex-governor of Illinois) to run the program, allowing the lending to be guided by hidden motives.
In any event, our elected officials aren’t bankers—they’re politicians. They’re bound to get it wrong. And they’ll end up costing our nation billions of dollars in lost assets.
(Some may ask, But isn’t that exactly what the privately owned banks just did? The answer is: yes. But they did so after giving us sixty years of solid prosperity and economic growth, with few interruptions, because for the most part they heeded the demands of the marketplace. In the process, they left the world’s state-driven economies in the dust.)
The stakes couldn’t be higher.
That means that it’s our job to be vigilant. We have to be alive to any effort to keep the banks under federal control. Nationalization could be acceptable if it is short term. But the minute we see any sign that Washington wants to hang on to the banks indefinitely—and that’s a real threat—we need to take a strong stand against it.
How are we supposed to do this? The simple answer is to elect men and women to Congress who don’t want the government to own the banks. Whatever both parties may claim about their fiscal responsibility, the only ones who can be reliably counted upon to keep American business in the hands of the private sector are the Republicans.
In the short term, nationalization of the banks may be inevitable. But to allow this takeover to occur under Democrats would be to invite a plunge into a socialism that could take