GioBlog

Ultimately, Government Is Always About Control

I fundamentally believe that, ultimately, government is always about control. Yes, there's plenty of rhetoric about helping people, doing good, creating jobs, protecting people from bad stuff, etc., but ultimately the result of almost everything government does is control.

Accordingly, about a month ago it occurred to me that the feds were going to quickly come to enjoy all the control they had gained over banks and financial institutions as a result of the bailouts, the TARP money, etc., and that they weren't going to want to give it up. It occurred to me that they were going to make it as difficult as possible for financial institutions to pay back the money, because they want to maintain control. They like being able to fire CEOs, replace boards, set salaries and compensation policies, etc.  I'm sure they've already got plans about dictating lending practices to an even greater degree than they already do through existing legislation. And so it occurred to me that we were going to start hearing stories about banks having a hard time getting government to take the money back.

I should have blogged something about it at the time, just to show you all how smart and prescient I am, but it's too late now, because it's already happening.

In an op/ed in Saturday's Wall Street Journal, Stuart Varney relates how banks that are ready, now, to pay the money back with interest are being refused that possibility by the feds. Read the whole article, but here's the key section:

I must be naive. I really thought the administration would welcome the return of bank bailout money.

. . .

Here's a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics.

This is no shock at all to me, of course, given my (and the Founder's) assumptions about government.

When government becomes accustomed to control, its appetite only grows larger. Just today there is a story in the Wall Street Journal about the IRS warning nonprofit organizations about their compensation packages. Why non-profits? Because, since their funds are tax-deductible, they're" kinda, quasi-government supported institutions," goes the logic. It's not a big leap, in the logic of government, that if it can control organizations that receive direct government money, it can also control organizations that receive a "subsidy" in the form of tax exemption.

Now, I don't believe for a minute that the absence of taxation is the same as government subsidy. Such logic would indicate that any non-taxed activity is actually government subsidized. In other words, every possible economic activity is part of the tax base, and if it's not taxed, that means the government is subsidizing it. Nonsense.

We're seeing a case study in why socialism doesn't work, or in why socialism results in much less economic efficiency. What government funds, government controls, and government will direct the things it controls toward political ends, rather than toward economic ends.