Bring Back the Robber Barons

by Jerry O’Driscoll 

That is the title of yesterday’s “Wonderland” column by Daniel Henninger in the Wall Street Journal.   

Henninger distinguishes between market entrepreneurs and political entrepreneurs.  Market entrepreneurs innovate and create new products.  Political entrepreneurs make money by gaming the political system. “We need vision, vitality and commercial moxie. The government is draining it away.” 

Bravo!  

The real cost of TARP and stimulus is the diversion of resources and talent from creating value into transferring money from one pocket to another.  The stimulus bill was a cover for a massive income transfer from the productive to the unproductive classes in society. TARP transferred money from profitable firms and hardworking Americans to profligate bankers.  

Market entrepreneurs create products that generate the revenue needed to reproduce themselves and then grow.  The political variety creates dependency and the need for new tax revenues to sustain unproductive activities.  Markets create wealth and governments transfer it for a fee.

Tarred by TARP

by Mario Rizzo

My long-time friend and coauthor, Jerry O’Driscoll, has an excellent post at Cato-at-Liberty on TARP. In a relatively few words he gets to the heart of the matter. Take a look here.

 

TARP, TALF, TIP, et al.

by Sandy Ikeda

I came across this “handy guide” to the bail-out acronym soup.  The list appears to be current, at least up to April 13th but, sure as the sun rises in the east, it will grow longer. Stay tuned.

Hope amid Bailout Blues

By Chidem Kurdas

 

It is hard to find another example in history of so much taxpayer money spent with so little understanding as has been the case with the Treasury’s Troubled Asset Relief Fund—though the new stimulus package may involve even more money and less  understanding, as Mario’s posting on the Macroeconomic Knowledge Problem suggests. A few questions posed by Anna Schwartz offer remarkably lucid insight to the TARP mess.

 

TARP was originally supposed to relieve bank balance sheets by buying financial paper for which the demand has disappeared. Instead, the first installment was used to buy the equity of financial companies, making the federal government a big shareholder. Then the automakers went to Washington with their hands out and got a piece of TARP. It is not clear how the Obama administration will spend the rest of the money, but they’re speaking about channeling it to households that are defaulting on mortgages. Meanwhile, toxic debt continues to weigh down bank balance sheets.

Hayek Explains Bush on the Auto Bailout

by Mario Rizzo

Today from George Bush’s remarks announcing to use of TARP funds to bailout the auto industry —  until they ask Obama for more later next year:    

… [M]y administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability. This legislation earned bipartisan support from majorities in both houses of Congress.

Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year.

This means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I. So today, I’m announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.