Senator McCain often says he is opposed to government control. Then he turns right around, when any problem arises, and advocates... wait for it... government controls.
"I do not believe in government intervention, I do not believe in government control, I do not believe that. But I do believe we should take steps to increase transparency and also shareholder input into the compensation of CEOs."Who is we that the Senator here references? I'm thinking that would be "We, the Federal Government." The blatant contradiction does not — isn't the human mind a neverending miracle — occur to him.
He repeats his point here:
"So, first, it means that we have to require a heightened level of transparency and accountability by Wall Street firms."And, worst of all, here.
"Too many people on Wall Street have been recklessly wagering instead of making the sound investments we expected of them,'' McCain told a crowd today in Tampa, Florida. "If I am president, we are not going to tolerate that anymore."Mr. McCain's expectations aside, he is neither qualified, nor morally privileged to dictate what bets Wall Street investors should or should not take. He should be advocating instead that they be free to fail all on their own and not be bailed out by the taxpayers if they do.
We can only hope that after he becomes President in January, 2009 he invites some knowledgeable individuals into the Administration to give him better advice than he has been getting to date, and that he will listen to them. Slim hope, I admit. But, still...
The fact is that no one who works on Wall Street (or in any business elsewhere) is morally obligated to be "transparent." Nor do they have any obligation to invest how and where anyone but their shareholders wish. (And, if the shareholders don't like it — and can't persuade others to change the executives' decisions — they can sell their shares.)
- When you are playing poker do you inform the other players of the contents of your hand? Do you call the local police department before you bet?
- When you contemplate buying an item on eBay would you telegraph to the other bidders how high you will go before giving up? Should you call the mayor before you click the mouse?
- When you negotiate to buy a car do you tell the salesperson how low he must go to persuade you to buy? Should either ask the city controller?
- If you run a local coffee shop are you obligated to announce new grinds to the other shops in town before you advertise to your customers? Are you obligated to notify the town council?
- When you overextend yourself gambling at the track do you owe an accounting to anyone other than your spouse?
No business is required to tell anyone other than those to whom they have a fiduciary duty what they have in mind or how they are conducting business. Most particularly, they have no obligation whatever to tell Washington anything.
Anyone against whom there is evidence of fraud, and that includes the executives of Lehman, AIG, and who knows who tomorrow, should be tried on the basis of existing laws and sent to jail — if found guilty. But those executives are (a) innocent until proven guilty, (b) have a right not to be subjected to ex-post facto law, and above all (c) have a right to be left alone to deal with the impacts of their choices in cooperation with their shareholders unless they have committed a criminal act. Bad business judgment is not criminal.
None of it is any damn business of the Feds, no matter how big the problem unless — and no one has suggested this — there is fraud involved.
By the same token, the Federal government has no business giving them a dime. If Bear Stearns got themselves in trouble, it's not up to the taxpayer to make up for their mistaken judgments. It will only make the situation worse for everyone.
The numbers are adding up.
- For AIG, $85 billion in loans in exchange for an 80% stake in the company. (Since when is the U.S. Treasury supposed to be competing in the stock market by bidding for shares in a private company?)
- Soon, $25 billion in loans to U.S. automakers. (Since when is the U.S. taxpayer the lender of last resort to car manufacturers?)
- That doesn't even count the biggest boondoggle of all: $200 billion in guarantees to those quasi-private companies at the center of the storm, Fannie and Freddie. (Why is the taxpayer backstopping home loans for every Tom, Juanita, and Shondell?)
The taxpayer doesn't owe these companies a dollar and the companies don't owe the general public an electron of information. Until and unless — yes, I know I'm dreaming here — the Federal government gets out of the way and gets back to its proper job — the problem will not go away.
Those truths should be transparently obvious.