The financial world is reeling from another body blow delivered by native son, Bernie Maddof , who stands accused of orchestrating a record breaking Ponzi scheme.
A Ponzi scheme involves paying established “investors” with money taken from new investors to perpetuate a ”business” that does not actually generate promised returns. The only way to prolong the scheme is to continually bring in new investor money. The sham collapses when “management” can no longer bring in new “investors.”
President Bush announced today that he will usurp the ”power of the purse” given to Congress by the Constitution, by giving $14 Billion to the auto industry.
Bush will take money from taxpayers ( investors ) and use the money to sustain two sham companies, GM and Chrysler, which, like Madoff Securities, exist not to enrich shareholders but to sustain the parasitic UAW. In 4 months they will need more cash or they will be forced to declare bankruptcy.
Absent the halo of government benevolence that accompanies all extra constitutional redistribution of wealth these days, what exactly is the difference between White House actions today the actions Bernie Madoff was arrested for?
Comical and vaguely unsettling at the same time to see the reduction of American Capitalism to this scene. “Captains of Industry” driving 10 hours in tiny wind-up clown cars for an opportunity to exhibit greater meekness and contrition before Congress and the American people; neither of which can apparently do basic math. If Alan Mulally makes $20 million a year, the extra 6 hours it takes him to drive to Washington costs the shareholders ( remember the shareholders ) about $60,000. It’s the same kind of logic that makes it okay for Pelosi and Reid to pour $34 billion down the Detroit drain if only the executives are solicitous enough. If they dress up in big clown shoes and wear a dunce cap, can they get more cash? Somehow this self-flagellation is all the political cover needed to compensate for “business plans” which involve taxpayers contributing billions while the automakers keep doing the same thing for a few more months.
Behind the silly stunts and play acting this is a serious high stakes deal in which the Congress is spending money we don’t have to buy the loyalty of misinformed and misguided union voters. The American automakers are bankrupt now not because of the economic downturn but because they are bad businesses. We are not going to right the American economy by artifically animating dead businesses.
Since union labor is working so well for Detroit, expanding their influence in the rest of the economy only makes sense right?
As Holman Jenkins, points out in the WSJ this week, It’s well within the realm of possibility to make cars in the nation that God and capitalism built and earn a healthy profit doing it. Unions however have proven to be a back-breaker. As the financial crisis spins ever more wildly out of control, American auto makers pose a real systemic threat. The threat is almost completely self-imposed and unions are mostly to blame. Detroit will always be a shadow of its former glory, hooked up to life support if it can’t normalize its cost structure.
President elect Obama now must solidify his agenda and that means paying up. Unions are near the front of the payback line and they expect President Obama to support the Employee Free Choice Act, which eliminates private ballots as unions try to organize. It’s obviously a lot easier for the union muscle to target their “recruiting” efforts if they know who is standing in the way of the workers utopia.
It really makes you wonder how all the Americans making cars for Mercedes, Toyota and Honda are surviving the squalor and the depravity of those non-unionized plants. Where are the 20/20 exposes about the abuses and misery of these non-unionized workers? The New York Times can’t even make something up?
The Employee Free Choice Act raises another question. How long until we liberate some other special interest groups by making elections totally free and open and public? When will we address unjust ballot initiatives like proposition 8 by ensuring that everyone can see their fellow citizens’ vote? Isn’t that the only way to ensure fairness and “free choice?”
Politicians, especially liberals, always say “it’s not a slippery slope” when it really is.
Recent government interference in the markets aimed at supressing the inevitable effects of our collective financial excess, offer a shocking example of this principle in practice.
Members of Congress were apparently deluged with opposition to the initial $700 billion government “bailout” of the credit markets. Just days later and incredibly hundreds of billions of dollars in additional spending later, the bills passed; our outrage exhausted.
A few more days of bad fianncial news spawned a new plot to make banks part of the Federal Government for a mere $250 billion; an awesome amount of money to which the public had in the course of a few days become completely desensitized.
Whatever pillar of the economy the Bush, Paulson, Bernanke, Axis of Socialism next propose to annex, expect disinterested yawns from a tired and numb middle class.
The widening probe of insider trading on Wall Street is expected to examine transactions at Steven A. Cohen's SAC, one of America's largest and most successful hedge funds.
Traditionally, the super-rich didn't bother with mortgages, but that changed in the boom years -- and it is still going on. Recent big-time borrowers include hedge-fund titans and baseball magnates.
Obama will face new friction in China over his choice to limit Chinese imports to the U.S. and views that he hasn't done enough to overhaul the financial system.
PELOSI’S HEALTH MONSTER: As senators remained in the dark late last week about the details of the huge committee-approved Senate healthcare bill, over on the House side of Capitol Hill, Speaker Pelosi last Friday unveiled a 1,990-page bill that, not surprisingly, is loaded with mandates, tax increases and a government-run public option and. . .
