Tag: ayn rand

Geithner’s Desperate Power Grab

People have to understand that government-made crises always precipitate a grab for more power by the very institution who causes them. Thus, in a predictable and mindless effort … U.S. Seeks Expanded Power to Seize Firms:

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

The administration’s proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed’s other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG’s most troubled unit.

The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

Geithner plans to lay out the administration’s broader strategy for overhauling financial regulation at another hearing on Thursday.

The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG.

“We’re very late in doing this, but we’ve got to move quickly to try and do this because, again, it’s a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they’re systemic,” Geithner said last night at a forum held by the Wall Street Journal.

The powers would parallel the government’s existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government’s plans.

Tim Geithner’s lack of understanding is truly astonishing. I haven’t heard him say a single thing that made sense. He is as lost as Ben Bernanke when it comes to understanding the workings behing credit expansion, and its inevitable result, the credit crunch.

His actions are nothing new. Ayn Rand wrote in Atlas Shrugged in 1957:

“Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.”

Ludwig von Mises wrote in his analysis Interventionism in 1940:

The various measures, by which interventionism tries to direct business, cannot achieve the aims its honest advocates are seeking by their application. Interventionist measures lead to conditions which, from the standpoint of those who recommend them, are actually less desirable than those they are designed to alleviate. They create unemployment, depression, monopoly, dis­tress. They may make a few people richer, but they make all others poorer and less satisfied. If governments do not give them up and return to the unhampered market economy, if they stubbornly persist in the attempt to compensate by further interventions for the short­comings of earlier interventions, they will find eventually that they have adopted socialism.

The Obama administration is doing everything it can to continue the interventionist path that the U.S. has been on since the beginning of the 20th century. There is absolutely no change coming in this matter. The outcome of these policies is pre-ordained. Ayn Rand and von Mises are just a few among many who predicted long ago what would happen.

Our leaders would be well advised to pick up some of their books, book a trip to the Bahamas, and just read for a couple of months. That would be the best possible stimulus plan I could think of.


Price for Will Tim Geithner depart as Secretary of the Treasury? at intrade.com

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The Self Hatred of the Masses

The average person does not in any way have an impact on major developments in the world. Be accomplishments in politics, science, business, architecture, literature, the common man does not contribute in any major way. He listens to what he is told in the media and by his favorite politicians. He doesn’t question, reason or think. He follows and takes orders, he doesn’t lead, change or create. He thinks and stays inside the box.

Only very few people have the drive and the ability to create, change, and improve things. The greatest technological accomplishments in this world, such as electricity, motor vehicles, aviation, or computers were not made by a collective herd of compliant individuals. They were the work of a few innovative, industrious, and contrarian researchers and businessmen.

Today the American worker enjoys goods and services that a Croesus or the Medici would have envied him for. But he doesn’t realize that it was very few brilliant people before him who made this possible. He mostly takes these things for granted. He doesn’t acknowledge his deficiency when compared to these individuals, in fact he generally scorns them as intellectual elitists.

Those few who create, change, and innovate are caught in a precarious predicament. They need to produce for a large number of people who generally display poor judgment, bad taste, and consume goods of little intellectual value. This is particularly true in the fields of entertainment and literature. The majority of people prefers shallow movies and novels. But in a relatively free system the producers have no choice. They have to serve their consumers as they please and subordinate their will to the wishes of the masses.

Nobody likes to accept the fact that he himself is a tiny cog in a huge machine and that he has contributed nothing to the accomplishments of his age. Thus he finds refuge in the words of the politicians. The people who tell him that all humans are equal. That no one person contributes more than another. Thus he falls for the soothsayers of collectivism. He begins to sympathize with the mindless blather of the worshipers of nature, the people who tell him that human accomplishments will always be inferior to the creations of the seas, the earth, and the winds, that the merely man-made New York skyline is dwarfed by the colossal beauty of the Alps, the Sierra Nevada mountains, or the redwood trees of the Yosemite valley. He finds comfort in the words of religions that tell him that in the end we’ll all be judged by god in heaven and that mundane accomplishments won’t matter anyway.

Thus he begins placing his trust in government instead of in his own capacities. The government, as the mystical force that can conjure up wealth out of nothing. The government that tells him everything he wants to hear. The government that represents the mighty collective versus the callous and rugged individual. The government that will fix all his problems. The thought of that is way too appealing to be cast aside as a result of any logical reasoning. Plus an army of self styled intellectuals stands ready with simple and shallow justifications for any government policy, no matter how mindless and harmful it will be.

Thus he begins placing his trust in the god almighty instead of human logic and reason. God, the ultimate judge of all his inferior children. God who will welcome him in his benign aegis as one among equals once his sorry mundane life is over. Again an army of self styled intellectuals stands ready with simple and shallow justifications for any particular religion one happens to have fallen prey to.

Justification for one’s relevance unwittingly turns into a genuine hatred of mankind in general, and ultimately self hatred.

Ayn Rand put it best in The Fountainhead. When the opportunistic, yet brilliant publisher Gail Wynand tells his soon to be wife Dominique on their romantic excursion on his yacht:

“[T]he person who loves everybody and feels at home everywhere is the true hater of mankind. He expects nothing of men, so no form of depravity can outrage him.”
“You mean the person who says that there’s some good in the worst of us?”
“I mean the person who has the filthy insolence to claim that he loves equally the man who made that statue of you and the man who makes a Mickey Mouse balloon to sell on street corners. I mean the person who loves the men who prefer the Mickey Mouse to your statue-and there are many of that kind. I mean the person who loves Joan of Arc and the salesgirls in dress shops on Broadway-with equal fervor. I mean the person who loves your beauty and the women he sees in a subway-the kind that can’t cross their knees and show flesh hanging publicly over their garters-with the same sense of exaltation. I mean the person who loves the clean, steady, unfrightened eyes of man looking through a telescope and the white stare of an imbecile-equally.”

(…)

“You’ve never felt how small you were when looking at the ocean.”

“Never. Nor looking at the planets. Nor at mountain peaks. Nor at the Grand Canyon. Why should I? When I look at the ocean, I feel the greatness of man. I think of man’s magnificent capacity that created this ship to conquer all that senseless space. When I look at mountain peaks, I think of tunnels and dynamite. When I look at the planets, I think of airplanes.”

(…)

“It’s interesting to speculate on the reasons that make men so anxious to debase themselves. As in that idea of feeling small before nature. It’s not a bromide, it’s practically an institution. Have you noticed how self-righteous a man sounds when he tells you about it? Look, he seems to say, I’m so glad to be a pygmy, that’s how virtuous I am. Have you heard with what delight people quote some great celebrity who’s proclaimed that he’s not so great when he looks at Niagara Falls? It’s as if they were smacking their lips in sheer glee that their best is dust before the brute force of an earthquake. As if they were sprawling on all fours, rubbing their foreheads in the mud to the majesty of a hurricane. But that’s not the spirit that leashed fire, steam, electricity, that crossed oceans in sailing sloops, that built airplanes and dams . . . and skyscrapers. What is it they fear? What is it they hate so much, those who love to crawl? And why?”

It is ultimately their own deficiency they hate. It is what makes them follow false ideas. But ultimately there is no problem with deficiency per se, so long as one accepts it and makes an effort to improve. The problems only arise when people reject reality, refuse to improve, and begin to delude themselves.

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Bank of America Shrugged

Bank of America, struggling with all the stupid and horrendous acquisitions they made over the past year, is now asking the government to help them again.

Andrew Jefferey draws a nice parallel between what is going on today and what Ayn Rand wrote over 50 years ago in Atlas Shrugged:

The phrase “buyer beware” no longer applies in the American banking system.

Last September, as the financial markets skidded out of control, Merrill Lynch CEO John Thain sought to keep his firm from going the way of rival Lehman Brothers by selling out to Bank of America (BAC). At the time, B of A chief Ken Lewis was touted as a shrewd opportunist who seized upon a desperate rival.

Now, it appears, Lewis is the one groping for a helping hand.

According to the Wall Street Journal, the Treasury Department is preparing to offer up billions of dollars to help Bank of America complete the transaction. As in Citigroup’s (C) recent bailout, where the federal government assumed the risk for a pool of distressed assets, taxpayers are about to buy Merrill’s book of truly toxic debt.

Bank of America approached the Treasury Department in December, claiming it might have trouble closing the sale after learning Merrill’s fourth-quarter losses would be larger than expected. Fearing the deal’s collapse could inflict irreparable damage on the already wounded financial system, the Treasury is continuing to spend TARP money it doesn’t have. With the first $350 billion already allocated, Treasury Secretary Hank Paulson is dipping into funds earmarked for a second round of capital allocation that hasn’t yet been authorized.

The fact that Bank of America needs yet more money — on top of the $25 billion it received just last October — is evidence that, once again, regulators and bank executives have underestimated the scope of the debt crisis gripping the country’s financial system. Deleveraging is underway – and it’s gaining momentum. Nevertheless, lawmakers and regulators alike insist on using taxpayer money to try and slow down the accelerating juggernaut of bad debt.

To quote a recent op-ed in the Journal, which likened the government response to the current financial crisis to the circumstances described in Ayn Rand’s Atlas Shrugged,

“Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.”

The similarities are so striking, it almost seems like regulators are using Atlas Shrugged as a playbook for their policy response to the crisis. They must not have waded through all 1,000 pages to see how the story ended.

To this I would like to add: Not only are they following the Atlas Shrugged playbook. They are also borrowing from The Fountainhead‘s Ellsworth Toohey when it comes to convincing the public of their nonsense:

” Reason can be fought with reason. How are you going to fight with the unreasonable? The trouble with you, my dear, and with most people is that you don’t have sufficient respect for the senseless…”

It is safe to say that Toohey would be delighted about the unconditional respect that today’s politicians have for the senseless.

In the meantime, people with sense may consider The Economics of Corporate Bailouts to get an understanding of what all this intervention will precipitate.

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