October 14, 2008: The Day the Economy as We Knew It Died
The "gun to the head" was obvious: "You really have a nice bank there. But if you walk out without signing this document, right here, right now, we will bring all of the regulatory and law-enforcement powers of the United States government to bear on your institution. Your depositors and shareholders will suffer immensely. Your bank won't survive. It would really be a shame if that were to happen. But we promise you, it will."
Hank Paulson's defenders will probably claim that provision (B) above gave him authorization to do what he did, and that the preferred shares the banks were forced to issue count as "financial instruments." The problem with that "logic" is that these weren't "purchases." They were extorted ownership interests -- and in case you're wondering, there is no authorization to extort anywhere in the legislation.
The economy as we knew it died that day -- and virtually no one objected. As Michelle Malkin wrote: "If you don’t feel like throwing up today, you’re not paying attention."
That the establishment media had no problem with Paulson's "purchases" is no surprise. The Associated Press almost admiringly described the meeting as "remarkable." Democratic presidential candidate Barack Obama, along with many Democrats and far-leftists (a virtually redundant term), likely and quite privately thought they had died and gone to heaven with the sudden progress just achieved towards completing the fifth plank of the Communist Manifesto -- on a Republican president's watch.
So where was Republican presidential candidate John McCain, who only weeks earlier had infamously and suicidally suspended his presidential run to help pass the TARP we didn't get? Was there some kind of gag rule against saying anything harsh during the final weeks of the campaign? Where were GOP Senate Leader Mitch McConnell and House Minority Leader John Boehner when the reputation-damaging bailout program they pushed through to passage was unilaterally altered by fiat? Their near if not total silence, and that of so many others, was deafening -- and sickening.
Hank Paulson's bloodless banking coup demonstrated that a nearly all-powerful government which believes it is untouchable can and will do anything once it gins up enough of a crisis atmosphere. Paulson's putsch gave cover to the long list of heavy-handed actions which have followed during the Obama administration, from arbitrarily changing the pecking order in bankruptcy, to preventing nonunion manufacturing plants from opening, to defying direct court orders, to Dodd-Frank's attempt to permanently keep the government in banks' boardrooms -- and much, much more.
Even beyond what we can see with regulations gone wild, failed stimulus, and outright corruption, our government's authoritarian overhang and its destructive psychological effect on business and investor behavior largely explain why the economy won't acceptably grow. Meaningful, generalized prosperity won't return until we permanently shame and where possible prosecute those involved, and cast each and every one of them from the powerful perches they currently occupy.
(Thumbnail image on PJM homepage based on modified Shutterstock.com image.)