Bureaucrats Know Best

At the heart of progressive/liberal thought lies the belief that a big government is essential to guarantee true freedom. In the progressive's bible, The Promise of American Life, Herbert Croly describes the ideal form of government as using "Hamiltonian means"(a powerful central government) to achieve "Jeffersonian ends"(individual liberty). Croly understood that such a centralized government required a modern equivalent of the guardians from Plato's Republic(a highly educated and cultured elite) to function properly. We know this unelected, yet powerful elite by the less prosiac term of bureaucrat.

The progressive triumvirate running our country, Obama/Pelosi/Reid understand all too well that while political majorities come and go, bureaucracies last forever. They also understand that because the bureaucracy is not subject to the will of the American people, it is not constrained from acting in ways that politicians who must face the voters are. In the first year plus of the Obama administration the bureaucracy, with a wink and a nod from the president, has been very busy enacting Croly's vision for America.

EPA administrator Lisa Jackson has decided that she must regulate CO2 as a pollutant and with it the entire American economy. The FDA has decided that its mission isn't solely to make sure the food and drugs sold in our country are safe, but to regulate how much salt Americans can consume per day. The FCC evidently growing bored waiting for a wardrobe malfunction on Dancing with the Stars to fine, has decided to regulate the internet. After being rebuffed by a US Court of Appeals in his first takeover bid, FCC Chairman Genachowski has simply decided to reclassify ISP's as telephone networks and regulate them that way. Both the health care law and the proposed financial reform legislation create new federal regulating authorities and yet more bureaucrats to oversee the health care and financial sectors of our economy.

The late William F. Buckley Jr. famously quipped: "I'd rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.". Mr. Buckley's statement was not a condemnation of intellectuals, he simply understood human nature better than Mr. Croly. He realized that while one may posess a first rate mind, it doesn't mean they are free of idealogical blinders and their decisions will be negatively affected by this bias. A Democratic government that is representative of our collective and varied knowledge and skills is a better guarantor of individual liberty than one composed of a largely self-selected and perpetuating elite, however benignly they may rule. We must rein the bureaucrats in before they remake our Democracy into their ideal of good government, leaving the voters on the outside looking in.

The Bailout Bill

Now that Senator Shelby (R-AL) has decided that Sen. Chris Dodd (D-CT) has gone as far as President Obama will let him go in negotiating the "financial reform" bill he has ended the talks. He released the following statement:

“I thank Leader McConnell and my Republican colleagues for providing an opportunity for my negotiations with Chairman Dodd to run their course. I believe we owed the American people our best effort to make whatever changes we could to this incredibly complex piece of legislation because it will have wide ranging implications for our economy. Chairman Dodd has assured me that he will address a number of concerns I have expressed with respect to ending bailouts. We have been unable, however, to make any meaningful progress on other important components of the legislation. It is now my belief that further negotiations will not produce additional results.

“This bill still contains a sprawling new consumer protection bureau that will find and force its way into facets of our economy that had nothing to do with the housing crisis. This massive new bureaucracy would have unchecked authority to regulate whatever it wants, whenever it wants, however it wants. I am aware of no other arm of the federal government this powerful, yet so unaccountable. In my negotiations with Chairman Dodd, I have consistently supported strengthening consumer protections. I have also advocated for a sensible and meaningful role for safety and soundness regulators in this new agency’s operations. Unfortunately, despite my demonstrated willingness to propose compromise solutions, this sensible step has proved to be a bridge too far.”

You might want to know what all the haggling was about. According to the Heritage Foundation the bill would:

Creates a protected class of too big to fail firms. Section 113 of the bill establishes a "Financial Stability Oversight Council," charged with identifying firms that would "pose a threat to the financial security of the United States" if they encounter "material financial distress." While these firms would be subject to enhanced regulation, such a designation would also signal to the marketplace that these firms are too important to be allowed to fail and, perversely, allow them to take on undue risk.

Creates permanent bailout authority. Section 204 of the bill authorizes the Federal Deposit Insurance Corporation (FDIC) to "make available … funds for the orderly liquidation of [a] covered financial institution." Although no funds could be provided to compensate a firm's shareholders, the firm's other creditors would be eligible for a cash bailout. The situation is much like the bailout AIG in 2008, in which the largest beneficiaries were not stockholders but rather other creditors, such as Deutsche Bank and Goldman Sachs.

Provides for seizure of private property without meaningful judicial review. The bill, in Section 203(b), authorizes the Secretary of the Treasury to order the seizure of any financial firm that he finds is "in danger of default" and whose failure would have "serious adverse effects on financial stability." This determination would be virtually irreversible in court.

Establishes a $50 billion fund to pay for bailouts. Funding for bailouts is to come from a $50 billion "Orderly Resolution Fund" created within the U.S. Treasury in Section 210(n)(1), funded by taxes on financial firms. However, according to the Congressional Budget Office, the ultimate cost of bank taxes will fall on the customers, employees and investors of each firm.

Opens a "line of credit" to the Treasury for additional government funding. Under Section 210(n)(9), the FDIC is effectively granted a line of credit to the Treasury Department that is secured by the value of failing firms in its control, providing another taxpayer financial support.

Authorizes regulators to guarantee the debt of solvent banks. Bailout authority is not limited to debt of failing institutions. Under Section 1155, the FDIC is authorized to guarantee the debt of "solvent depository institutions" if regulators declare that a liquidity crisis ("event") exists.

Imposes one-size-fits-all reform in derivative markets. Derivatives are already increasingly being traded on clearinghouses thanks to private efforts coordinated by the New York Fed. But the Senate bill would require virtually all derivative contracts to be settled through a clearinghouse rather than directly between the parties. Applying such ill-designed blanket regulation would make financial derivatives more costly, more difficult to customize, and, consequently, less widely used—which would increase overall risk in the economy.

Evidently Chairman Dodd was unwilling to compromise on the "consumer protection" aka economy wide regulating agency. What the FDA is doing in trying to limit the amount of salt an American can consume in a day and the EPA deciding it has the power to regulate the amount of CO2 produced in America. Now we will have an agency that regulates all our financial transactions and limits our decisions. If this bill passes the Democrats will have the trifecta, they'll be able to control what we eat, that our job is green and how we spend our money, after we pay our taxes of course.