A Temporary Government Takeover?

National Review Online: We Can Only Hope The Partial Nationalization Of Banks Will Remain Temporary

(National Review Online)  This column was written by Jonah Goldberg.

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‘There’s nothing so permanent,” Milton Friedman famously said, “as a temporary government program.” For instance, I grew up in a rent-controlled apartment thanks to a temporary measure enacted during WWII.

I was born nearly three decades after the war ended.

Let’s hope that the partial nationalization of America’s banking system isn’t equally “temporary.” In a dramatic meeting Monday between Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke and the heads of the nine biggest banks, the U.S. government made the financial industry an offer it couldn’t refuse: Uncle Sam is buying big chunks of your banks whether you like it or not. Paulson didn’t say, “I can either have your signature on this contract or your brains,” the way Don Corleone explained things to Johnny Fontaine’s bandleader in The Godfather, but you get the picture.

Extraordinary crises sometimes require extraordinary measures. The danger is that the extraordinary could become merely ordinary.

Fannie Mae and related institutions were created during the New Deal to help expand homeownership. It was - and is - a laudable goal, and the government can point to some real successes, particularly when such programs were fundamentally conservative in their practices. But even then, the government was simultaneously subsidizing bad risks - hence making them seem less risky than they really were - while delaying the day when those toxic loans would reach critical mass.

We’ve hit that day, and it has cost us trillions of dollars.

The Bush administration’s shock trauma team has been doing things they once considered unimaginable and even today find philosophically repugnant. But again, we do things to patients in an emergency that we would never do when they’re healthy.

The federal government’s mandatory quarter-trillion-dollar buy-in to the American banking system, we’re told, is a temporary measure. The terms of the loans rammed down the bankers’ throats are designed to encourage them to pay it all back within five years.

But who says those terms will stay that way? After all, the government now has a more real and explicit ownership position in these “private” banks than it ever did in Fannie and Freddie, which were so-called Government Sponsored Enterprises. More important, the Bush team is heading out the door. When the next squad comes in, they might discover they like being co-owners of America’s banking system.

Democrats in Congress had great fun using Fannie and Freddie as public policy piggy banks, rewarding constituencies, funding pet projects, forcing the private sector to dance to their tune. What’s to stop them from renegotiating this week’s deal after the election and using Bank of America, Wells Fargo, JPMorgan Chase and the others as Fannie Mae 2.0?

Please don’t say that the terms of the deal are set and the government can’t revise them. If there’s one thing the last month has hammered home, it’s that nothing is written in stone. Besides, the banks may grow to like the security of partial nationalization and even lobby to Congress to stay on as less-than-fully-silent partners.

Heck, that way they wouldn’t have to pay back the loans.

Barack Obama already has a strong record of sympathy for “public-private partnerships” and other schemes that put government in the driver’s seat. ACORN, the militant wing of the Democratic Party, has been trying to shake down banks for years, and Obama is on record as saying it and similar groups will have a major role in helping him craft policy. And it’s hardly reassuring that Barney Frank, Chris Dodd and Nancy Pelosi will be running Congress. It doesn’t seem crazy to suspect that a crowd that sees nationalization of health care as a vital public policy goal will not be dogmatically adverse to the nationalization of the credit markets.

John McCain is better about such things, but not by much. An avowed disciple of Teddy Roosevelt, McCain has a record of whipping the private sector - even Major League Baseball! - to do his bidding.

Teddy Roosevelt himself revised his faith in “trust-busting,” preferring instead to let big business grow bigger so long as it agreed to follow the orders of even bigger government.

In Wednesday’s night’s third presidential debate, CBS’s Bob Schieffer missed a vital opportunity to ask both candidates whether they would pledge not only to abide by the bailout’s sunset provisions but to further promise to get the government out of Wall Street as quickly as possible. Such pledges wouldn’t be legally binding, but they would help create political pressure from the right direction.

That didn’t happen. So now we’ll just have to trust that the politicians and Wall Street won’t mess things up. Anyone feeling good about that?

[pollroller1]

I don''t think you can just blame one party for this mess. It was both parties. Both parties voted to give the president the authority to go to war. Just remember, we the people really don''t have much say in how the country is run. When the bailout came up for a vote, I said then that it wouldn''t pass until more pork was added. Guess what, more pork was added and it passed. I also think that the nationalization of the banks will most likely be permanent. No I''m not very smart, but I did stay at a Holiday Inn last night.LOL

[Redoubt]

Three decades of reduced funding for education has paid off rather handsomely, no? Here we have a congress that completely ignores the will of the people by knocking over the national till in favor of banks... and no real majority of the electorate has the slightest idea what it means to unelect those behind it.

[keiths_cj7]

6 of the last 8 years we had a good economy and
job growth.Its only been the last 2 years its
gotten bad and maybe just maybe the last 2 years
we have had democrats in charge of the senate and
congress.If our politicians had listened to McCain
in 2005 maybe we could have avoided all this bad
economy.He saw this comming with freddie mac and
fannie mae and NOBODY would listen and all u
democrats are still in denial.Congress makes the
laws and the president signs or veto`s it.Bush
hatred has blinded so many to the truth.

[ubrew12]

''There%u2019s nothing so permanent,'' Milton Friedman famously said, ''as a temporary government program.''

Oh, I don''t know, Friedman''s supply-side economics programs have more or less PERMANENTLY scr*wed an entire generation of Americans.

For Friedman, it was ''morning in America''

For them, it''s turned into ''mourning in America''

[ubrew12]

NRO would prefer that the taxpayer just GIVE his money to the banks, no strings attached.

Call it a ''reverse stick-up'', cuz thats what it is.

[hypnotoad72]

If the profits help to go back to repaying the national debt, who bloody cares?

[we6870]

Americans; Where and who are they? What has happened to the Adults in our nation? Can any of you imagine what the younger generation must be thinking about now? One of the first things they will ask, what is wrong with all of these people? We don''t live like that anymore this is 2008. How do we answer them? How do we defend telling them that Sen McCain''s reference to Sen Obama as that person over there( as though Sen Obama was an object instead of a human being) was because he was under pressure. I watched McCain and it took all he had not to use the N word you could see it all over his face., his eyes got so big I thought he was going to have a heart attack. How do we explain to them there is a great majority of the white ethnic group who are struggling with the fact that we could have a black man as president. Interesting I had to say black man because if his skin tone were such that you couldn''t tell the difference like mine is I wouldn''t have to write this. We are not acting like mature adults who should be able to see the qualities,strenghts and weaknesses in both men and go from there. Why does skin color always become an issue. With all of this garbage being aired all over the world what do you think other nations are thinking? But, the bigger question what are you thinking?

[Razzl]

Don''t you dare go around blaming the Democrats in Congress for the condition of Fannie/Freddie when all that happened under Republican Congressional majorities prior to 2006, and at the insistence of Republican interests. It''s this kind of knee-jerk lying idiocy that is burying your party, haven''t you learned a single thing from the disaster you''ve created for yourselves?