A Lesson about Crony Capitalism for the OWS Crowd

Unless you identify your economic enemy correctly, you cannot succeed in defeating him.  The typical Occupy Wall Street sap, the radical left's modern incarnation of the useful idiot, thinks his enemy is an evil Wall Street billionaire.

But Wall Street banking firms did not survive the financial collapse of 2008 -- virtually unscathed -- by bailing themselves out. With only one major exception (Lehman Brothers), incompetently managed banks were not forced into bankruptcy by the government.   Bondholders and shareholders were not told to pick up their crumbs, suffer debilitating losses, and learn their lesson for the next time.

No, the government, the same irresistible and evil force that OWS now wants to manage our entire economy, decided instead to bail out the banks. Taxes paid by the occupiers, or more likely their parents, were looted to accomplish this. The government chose to double down on moral hazard. Goldman Sachs, GE, AIG, and their ilk were unjustly saved and rewarded by the government for their mismanagement, with democrats leading the charge.  Democrats voted overwhelming for TARP, while the republicans largely demurred.

The Democrats in government played first economic responder because their power is sustained by the largely Democrat donor base that comprises Wall Street and hedge fund royalty.   Virtually everyone on Wall Street comes from same the leftist universe as the occupiers.  John Mack, Chairman of Morgan Stanley was a Hillary supporter and fundraiser.  Jamie Dimon, CEO of JP Morgan, was an Obama supporter and fundraiser.  Wall Street is a leftist Democrat playground , as surely as is San Francisco.

Comrade Obama raised more money from the financial industry than any other candidate in American political history.  Indeed, Obama amassed a treasure trove so vast from these and other mega-wealthy donors (like labor unions) that he decided to forego public financing of his campaign, a first for presidential nominees since the system began.

The existence of crony capitalism, as evidenced by these cozy banking/government partnerships, is the name of the real enemy OWS should be fighting.  Crony capitalism is the most putrid kind of partnership between industry and government and it was most famously and successfully championed by the regimes of fascist Italy and Nazi Germany long ago.  Crony capitalists support government expecting economic protection and favors.  After doling out its protection and favors, the government expects to win financial support from the cronies now comfortably and securely protected from market forces and competition.

The cronies are extremely clever in gaming this corrupt and immoral system.  But cronies like GE, and GM merely exploit the system. They did not create it.  Only the government through law and force could do that.

For example, it was Democrats in government that created, nurtured and protected Fannie Mae Freddie Mac as they underwrote subprime mortgages that would never have been issued in a free market by uncoerced lenders.   As noted by Peter Wallison, at the height of the subprime fiasco, "half of all mortgages in the US were subprime.... and 70% of those were held or guaranteed by government agencies." Those mortgages obligations once subsumed by government guarantees could be repackaged by crony bankers to investors the world over at great profit, and seemingly little downside risk.

The CEO's who managed these corrupt and compromised government organizations, were almost always left wing Democrat insiders like Jamie Gorelick (Hillary supporter) and Harold Raines (Obama supporter).  When they retired from their executive duties at Freddie they received tens of millions in payouts, and they left behind heavily indebted carcasses that continue to rot uncontrollably even today, three years after the mortgage-induced financial crisis of 2008.

It is this hopelessly corrupt form of corporate cronyism, abetted by government that OWS should be clamoring to dismantle, not capitalism. And their rightful targets are mostly democrats reigning in the Capitol Building and in the White House,  not the Wall Street bankers residing in upper eastside Manhattan townhouses.

Once they succeed is relegating crony capitalism to the dustbin of history, accomplished only after severely diminishing both the size of government and its legitimate scope of action, can a disinfected occupier be free at last to pursue his creative aspirations. Their only limitations should be their ambition and intelligence, not the government connection of their would-be employers. 

Undoubtedly, it would help the OWS cause immensely, if their members showered, deloused, and seriously began to hunt for a job, which will be much easier to accomplish if they acquire some kind of marketable skill.  Drum beating and bizarre chanting just won't do.

 Claude can be reached at csandroff@gmail.com

Unless you identify your economic enemy correctly, you cannot succeed in defeating him.  The typical Occupy Wall Street sap, the radical left's modern incarnation of the useful idiot, thinks his enemy is an evil Wall Street billionaire.

But Wall Street banking firms did not survive the financial collapse of 2008 -- virtually unscathed -- by bailing themselves out. With only one major exception (Lehman Brothers), incompetently managed banks were not forced into bankruptcy by the government.   Bondholders and shareholders were not told to pick up their crumbs, suffer debilitating losses, and learn their lesson for the next time.

No, the government, the same irresistible and evil force that OWS now wants to manage our entire economy, decided instead to bail out the banks. Taxes paid by the occupiers, or more likely their parents, were looted to accomplish this. The government chose to double down on moral hazard. Goldman Sachs, GE, AIG, and their ilk were unjustly saved and rewarded by the government for their mismanagement, with democrats leading the charge.  Democrats voted overwhelming for TARP, while the republicans largely demurred.

The Democrats in government played first economic responder because their power is sustained by the largely Democrat donor base that comprises Wall Street and hedge fund royalty.   Virtually everyone on Wall Street comes from same the leftist universe as the occupiers.  John Mack, Chairman of Morgan Stanley was a Hillary supporter and fundraiser.  Jamie Dimon, CEO of JP Morgan, was an Obama supporter and fundraiser.  Wall Street is a leftist Democrat playground , as surely as is San Francisco.

Comrade Obama raised more money from the financial industry than any other candidate in American political history.  Indeed, Obama amassed a treasure trove so vast from these and other mega-wealthy donors (like labor unions) that he decided to forego public financing of his campaign, a first for presidential nominees since the system began.

The existence of crony capitalism, as evidenced by these cozy banking/government partnerships, is the name of the real enemy OWS should be fighting.  Crony capitalism is the most putrid kind of partnership between industry and government and it was most famously and successfully championed by the regimes of fascist Italy and Nazi Germany long ago.  Crony capitalists support government expecting economic protection and favors.  After doling out its protection and favors, the government expects to win financial support from the cronies now comfortably and securely protected from market forces and competition.

The cronies are extremely clever in gaming this corrupt and immoral system.  But cronies like GE, and GM merely exploit the system. They did not create it.  Only the government through law and force could do that.

For example, it was Democrats in government that created, nurtured and protected Fannie Mae Freddie Mac as they underwrote subprime mortgages that would never have been issued in a free market by uncoerced lenders.   As noted by Peter Wallison, at the height of the subprime fiasco, "half of all mortgages in the US were subprime.... and 70% of those were held or guaranteed by government agencies." Those mortgages obligations once subsumed by government guarantees could be repackaged by crony bankers to investors the world over at great profit, and seemingly little downside risk.

The CEO's who managed these corrupt and compromised government organizations, were almost always left wing Democrat insiders like Jamie Gorelick (Hillary supporter) and Harold Raines (Obama supporter).  When they retired from their executive duties at Freddie they received tens of millions in payouts, and they left behind heavily indebted carcasses that continue to rot uncontrollably even today, three years after the mortgage-induced financial crisis of 2008.

It is this hopelessly corrupt form of corporate cronyism, abetted by government that OWS should be clamoring to dismantle, not capitalism. And their rightful targets are mostly democrats reigning in the Capitol Building and in the White House,  not the Wall Street bankers residing in upper eastside Manhattan townhouses.

Once they succeed is relegating crony capitalism to the dustbin of history, accomplished only after severely diminishing both the size of government and its legitimate scope of action, can a disinfected occupier be free at last to pursue his creative aspirations. Their only limitations should be their ambition and intelligence, not the government connection of their would-be employers. 

Undoubtedly, it would help the OWS cause immensely, if their members showered, deloused, and seriously began to hunt for a job, which will be much easier to accomplish if they acquire some kind of marketable skill.  Drum beating and bizarre chanting just won't do.

 Claude can be reached at csandroff@gmail.com