Big financial companies are a problem. More accurately, Big Financial company executives are a problem.
A previous article brought to light some details re: how executives at big financial firms often manage to parachute out with millions in their pocket even though the companies they're leaving are in severe distress. Jon Corzine wrecked MF Global and left with $12 million. Freddie Mac CEO, Charles "Ed" Haldeman Jr., will leave his post with at least a $3.9 million parachute while FRMC needs another $6 billion in taxpayer money just to survive. We've seen numerous other examples of big financial institutions mismanage to the point of insolvency while top execs go home with big payouts finance with taxpayer and investor money. It's just wrong.
So when President Obama rails against "fat cat bankers on Wall Street", he's tapping into a far-reaching dissatisfaction and anger against the some of the most wealthy individuals in the country who have become richer while their companies have approached failure or failed altogether. Many people can relate to this. Even I can relate to this even though I'm a staunch free market, small government voter.
Yet, three points need to be noted:
- President Obama works diligently to extend this dissatisfaction with "fat cat bankers on Wall Street" to anyone with any notable wealth, the idea being that because these woefully misbehaving bankers are wealthy and undeserving, all wealthy people are, by extension, also undeserving. While liberals have insisted for decades that it's wrong to label an entire class of people based on a few bad actors, they gladly do so when it's a class of people they don't support. We'll have a separate article one day soon that looks into from where today's wealthy have come.
- While Obama openly disdains "fat cats", bankers' ability to parachute out of failing entities with big payouts hasn't been stopped or even slowed. The two cases mentioned above are glaring examples. Earlier this week, it was announced the Federal Housing Authority has a fifty percent chance of needing a federal bailout before the end of 2012. Any bets we'll see a few high ranking FHA executives jump ship with big payouts beforehand or shortly thereafter? This isn't just Obama's or even the democrats' faults. Republicans will fight any effort to constrain any private sector compensation. In any other case, I'd agree with them. In the financial services area, however, no other option exists to keep executives from getting rich while sacrificing investors and/or taxpayers.
- He'll never admit it, but the truth of the matter is that Obama needs big banks, and desperately.
He needs them because big banks are part of the Obama vision for the consolidated, centralized management of the country.
This will shock people to hear, but Obama is not a socialist. Under socialism, a country's means of production are commonly owned, primarily by the government. Obama has been labeled a socialist since forcing through the largely unpopular health care law which vastly increased government control of the health care sector of our economy. For Obama to truly be a socialist, he'd need to do the same with most large industries including banking, manufacturing, oil, etc. Obama knows he could never achieve such takeovers unless he first engineered a crisis of the worst magnitude (stay tuned!).
No, he's not a socialist. Obama knows that's much too big of a step for our country. He is, however, what's known as a corporatist. Corporatism is an economic system primarily run by big entities. Big government, big business, big unions, big health care and, of course, big banks. By keeping the country's economic engine focused through a small number of very large entities, all of which are tied to big government, Obama sets up a system that he and his liberal friends can directly influence and indirectly manipulate.
This is why he needed the health care law so desperately. This is why democrats were willing to cut almost any deal to get the law passed. They knew they had a once in a lifetime chance with a fully democratic government to forge a cornerstone of their corporatist, centralized government. Unlike the banking or other industries, health care was highly decentralized and uncontrollable. The only option was to make the government the centerpiece.
The corporatist philosophy also explains why Obama has little interest in doing anything for small or medium-sized businesses. Historically, when an American president has spoken about getting people back to work, it was implicit that this meant working for businesses. Obama has redefined this, however, to primarily mean getting more people working for the government. After all, why increase the ranks of small and medium-sized businesses he can't directly control when all those people can work under his direct government control? Non-large businesses are also not commonly unionized. No union. No control. Big union. Big government influence. Big control.
So why, if banks are so patently critical to the Obama corporatist vision, does he bad mouth them like he does. Two reasons:
- It's fashionable and quite effective. Bank executives deserve to be lambasted. They were a big contributor to the 2008 crisis and still took millions home. As witnessed over the past month, they're still doing it.
- Admitting any kind of partnership with big banks would go over with his base about as well as if he told them Bush was actually a fair president.
How does Obama get beyond this roadblock to his vision? The only path I can see is to get his own guys at the helm of these big banks. People that are more than willing to get rich while quietly playing ball with the government's economic remolding. But this isn't Europe. Most financial "wizards" are staunch capitalists. Will Obama succeed in established this cornerstone? No one can really say. He won't in this term. Given another, maybe.
But this entire scenario gives us another big reason to move and keep our money out of the big financial institutions. As discussed in another article, the big bank execs have demonstrated repeatedly they will gladly lose our money as long as they can bring home the pot of gold when they step down. They know the chances of legal recriminations are small so their risk is minimal.
However, we not only empower these crooked financial market pirates by keeping our money in their banks, we also provide the foundation for a fundamental shift away from capitalism by doing so. The corporatists of our country, namely President Obama and company, envision a United States ruled by large entities, much like the setup in Germany and France, where small business is irrelevant and government-related employment is king.
I personally have no interest in the corporatist model. It's wrong for the US.
In contrast to a market economy, which prospers through competition, a corporatist economy works through collective bargaining among large entities to try to achieve social justice. Instead of people working hard to innovate and create in their own self interest, decisions about our economic choices are made at a macro level.
Social justice is a misleading term that means everybody gets the same, regardless of ability or effort, which itself is a paradox. Justice is when you get rewarded based on the effort and creativity you put into something. Social justice just homogenizes everyone for the purpose of creating "equality" and assumes all humans are essentially the same, which we're not. When the best you can get is the same as everyone else, innovation and the desire to improve on one's lot in life fade. This is what Obama and company want. This, to me, is hell.
I don't know if clarifying this will make anyone more or less likely to stop using big banks. If punishing badly behaving financial executives that would sell us out in a heartbeat isn't enough impetus to stop using big banks, perhaps realizing that, by making big banks big, we're funding the collapse of capitalism will.