Dismantling capitalism: substituting government decisions for market prices

The WSJ has an interesting article on what it means to insert the government into decisions that used to be made by the price system.

• Cabela, the hunting goods store, got TALF money. So now it’s encouraging customers to buy more guns to shoot gophers, etc.
• Deere bought a bank so it got a government guarantee on $2 billion of its debt. But Caterpillar didn’t own a bank. So its trade group got TALF expanded to include Caterpillar and other equipment makers. Funny how government backing of credit cards turned into a government subsidy of equipment makers.
• But smaller equipment-leasing firms that can't get the high ratings didn’t qualify and now must pay four percentage points more than higher-rated firms to borrow – a three points higher gap than before the crisis. One company that didn’t qualify “is slashing expenses by about 25% to try to stay alive.”
• Small insurance companies that could qualify to buy thrifts got bank bailout money. Others missed the cut.  So insurance company survival will now depend on whether they own banks.
• Spending on lobbying this year is 80% higher than 2002, when businesses were fighting SOX.
• A California telecom entrepreneur scrapped his plan to sell equipment in emerging markets and hired Patton Boggs to figure out how to get government money to build broadband networks in the U.S.
• And now "systemically important" institutions will get money at lower rates but with more regulation, including of executive pay. (Here's the WSJ on the questions surrounding the latter plan, as well as Bebchuk's proposal). So now firms, instead of just deciding whether to make money, will have to decide whether they want to be systemically important, whatever that turns out to mean.

Comments

[save_the_rustbelt]

Keep in mind there would be no TARP or TALF or any of this discussion were it not for the incompetence and malfeasance of those on Wall Street and many corporate officers.

And where was the legal profession when this orgy of malfeasance was in progress? Answer: the nose was in the trough.

Where were the CPAs? Quivering before Congress and designing illegal tax shelters, apparently.