The Hidden Cost of Apathy

If I were to describe a country where the leader and one of his advisors had the power to take over any financial institution without providing a single piece of objective evidence for his actions, what would you call that form of government? Well, you may have just described the form of government Congress may be getting ready to bestow upon you.

Last year the House passed the Financial Regulation bill. The focus by the media and Democrats who are promoting the bill has been on the consumer protection features. In all fairness, most of them aren’t bad. Yet, there has been almost no mention of the expansion of executive power. Most Americans don’t have a clue what Congress is trying to sneak by them, but they better wake up and pay attention.

If this bill becomes law, the President and his Treasury Secretary will have the power to take over any financial institution they want to provided that, in their opinion, it’s both “too big to fail” and it’s on the brink of insolvency. There’s no judicial review required nor are they required to supply any objective evidence before taking it over.

Once the government has taken over a company, it can replace the entire board of directors, fire anyone in management, wipe out stockholder equity, and sell off parts of the company. The bill gives the federal government the power to takeover any financial institution it wants to without any risk and there’s no poison pill or other counter-measures available to use to fight the unfriendly seizure.
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In other words, this law will give the federal government powers that are supposed to belong exclusively to state and local governments. This new power is way beyond the traditional federal regulatory powers and the repercussions deserve some serious consideration. As you consider possible repercussions, ask yourself if you would be willing to bestow such power on the most deceitful president you can name. With that in mind, ask yourself:

Do you want a president you don’t trust to have the power to go after companies that are vocal about their opposition to his policies or who make generous campaign donations to the opposing party or an opposing candidate?

Will this power cause companies to hesitate about growing? How many companies will want to have the attention of federal government on them for simply being successful?

How will the way a company does business be influenced by this power? Will there be unspoken pressure to, for example, just trade government paper? After all, consumer loans, mortgages and business lending could be viewed as too risky and invite a federal takeover.

Let’s be honest – politicians and political parties are constantly looking for campaign contributions and many huge contributions come from financial institutions. Wouldn’t this new power give the president and his party the ability to pressure institutions simply by reminding them he has the power to take over any institution he wants to and can fire anybody? You don’t think so? Goldman-Sachs donated $954,795 to Obama’s campaign. There’s growing evidence that Goldman-Sachs profited in no small way when Bush’s Treasury Secretary Henry Paulson decided to allow Lehman Brothers to go under. And neither Bush nor Paulson had the powers this new legislation grants.

So the question you have to ask yourself is whether or not you’re comfortable with any president having such unlimited and subjective power. If you aren’t, you better find a way to become active because Congress has shown a willingness to hand over their responsibilities without a backward glance and that attitude is going to cost you, your children, and future generations more than higher taxes.
Posted by LG 04/21/2010

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