As Congress continues to debate extending billions more in emergency lending and financial aid to the “Big 3” automakers, the latter are intensifying their pleas for government aid. Needless to say but worth pointing out again, they’re a far cry from being the “engines” of US employment and economic growth that they once were.
And doing so would add to the government’s increasingly dangerous bailout-minded policy stance, one that stretches back to the federal bailout of Chrysler in the mid-eighties, then Federal Reserve chairman Greenspan’s bailout of Long-Term Capital Management in the 1990s, and the multi-headed “hydra” of federal bailouts currently being enacted and expanded upon.
Where’s all that “free market” rhetoric that Pres. Bush, his Republican brethren and the swelled ranks of “neo-liberal” financial “conservatives” are so famous for? The latest crisis points out the hollowness of what amounts only to populist rhetoric.
It also points out the risks and dangers, not only of moral hazard but of the incessant drive to realize “economies of scale” by giving managements, whose desires are fueled with easy access to credit and equity, to integrate vertically and horizontally. Of course lax and negligent government oversight, along with excessively easy monetary policy, paved the way, as did the government letting Fannie Mae, Freddie Mac ride so freely for so long on their implicit government guarantee, one that the banking and housing industries, as well as American consumers, were all too happy to take advantage of for as long as it lasted.
Now, the argument goes, they’re too big too fail. At its crux, that apparently means that their bankers, lenders and investors are too deep into them, having given them so much capital for so long that they’d wind up failing as well, an economic “domino effect” that would come just as we’re watching another one of unprecedented size and scope sweep through the banking and housing finance industries.
It seems right intuitively that the government should do something, if at all possible, to help protect jobs and the “masses” from the breaking economic storm. Following the largely specious “trickle down” theory made famous during Reagan’s administration, that apparently means handing over even more taxpayer and public funds raised through Treasury debt securities sales and handing it over to the managements of banks and businesses that have led the economy right over the brink.
There has to be a better way. Moreover, in order to convey any sense of economic equity and justice when it comes to national policy, the executives and management’s of failed and failing businesses need to be held accountable. Remember those stories about Japanese executives committing ritual suicide when scandals broke out and their companies failed? In America, unfortunately, there are no losers if you’re at the top. You can lead your company to destruction and then count on the government to use public funds to save your bacon, or just walk into the sunset with a generous golden parachute and your portfolio intact.