Carnival of Crony Capitalism

There is a huge difference between a government that is “business-friendly” and a government that is “market-friendly.” The Obama Administration resides squarely in the former category.

First from American Thinker’s Gary Jason: “Crony Car Capitalism“, which examines the results of the government’s historic bailout and forced reorganization of General Motors. I’ll spare you the pain of digesting the Obama Administration’s deliberate flouting of standard bankruptcy procedures and the actual amount of taxpayer dollars squandered in order to fill the UAW’s coffers (it’s all in the article) and just cut straight to the conclusion:

The Obama administration rigged the bankruptcy to favor the union, rigged the IPO to favor the union, and has purchased much of the inventory unsalable in the free market, again to benefit the union (and the environmentalists). But of course, the unions (and the environmentalists) pumped many millions of dollars into Obama’s campaign. They also and pumped many millions into trying to keep Democratic candidates in office in the last election.

This is corrupt, crony car capitalism, all paid for by coerced taxation, from an administration that promised a new era of transparency and honesty in government. But at the end of the day, the cabal at the top behaves just like the dirty Chicago machine that spawned it.

Okay, okay … I’ll briefly tell you this: the government allowed “new GM” to carry forward and write off $45 billion in “old GM” losses (which means they may pay no taxes for up to 20 years) and set up the “new GM” IPO so that the UAW could earn an immediate $3.4 billion by selling a third of the GM shares it was given by the government. And over the last two years, the Federal government has purchased over 25% of the hybrid automobiles sold by GM and Ford.

Now let’s look at the banking industry, and the New York Post’s Charles Gasparino: “Obamanomics: Only The Fatcats Prosper“:

A senior official at Goldman Sachs will only say he’s “cautiously optimistic” about employment prospects in 2011. But Nick Leopard, the chief executive of a Wall Street outsourcing firm, Accordion Partners, says he expects the huge backlog of deals and business to trigger a serious hiring spree among the mid-sized and large investment firms — something in the neighborhood of a 5 percent rise in Wall Street employment next year.

Why? Obama’s policies, insiders tell me, may be bad for the middle class — but they’ve been pretty good for the banking class.

The bankers may not like parts of the new financial reform law (i.e., no more “proprietary trading”), but they love the fact that the White House has gone out of its way to support (some people think prod) Ben Bernanke’s policies of 1) keeping interest rates at rock-bottom levels and 2) pumping the banking system with $600 billion in cash, known in economic circles as “quantitative easing” and in less formal circles as “printing money.”

Both measures are supposed to spur lending to small business as banks, flush with cash, start to lend again and businesses can expand. But the direct beneficiaries of the “easy money” are the banks — which continue to hoard the cash, and (according to Leopard) are ready to rake in billions of dollars in fees as that backlog of deals starts to emerge next year.

Big bankers also don’t mind the inflation that Bernanke’s policies risk: Inflation usually pushes (nominal) stock prices up — and when the stock market rises, financiers and traders make a killing, even if the rest of us need a wheelbarrow filled with cash to buy a loaf of bread.

Gasparino also points out that while the rest of the nation suffers under the worst “post recession” employment situation since WWII, Wall Street bonuses are expected to hit record highs this year. Our own HughS wrote a number of excellent pieces last year about the Obama Administration’s smelly bank bailout plans, and it looks as though every one of his predictions about the banks raking in huge profits at the expense of taxpayers (again!) is coming true.

There is one very important aspect of both of these stories that should be repeatedly shouted from the highest rooftops — all of this comes as a direct result of specific Obama Administration policies. None of it can be blamed on Bush, or the incoming Republicans. It was the Obama Administration and Congressional Democrats who put the financial geniuses who oversaw the Wall Street and banking industry collapse in charge of reforming the system; it was Tim Geithner who put together the TALF and PIPP bank bailout programs; it was Steve Rattner who orchestrated the bailout and restructuring of General Motors. And it was Obama’s Justice Department that walked away from prosecuting the officers and directors of corporations like Countrywide and Washington Mutual.

Yes, the Obama Administration has been very good to the “too big to fail” auto and banking/investment giants, but their generosity has fallen squarely on the backs of the American taxpayer.

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