Capitalism for the Poor, Socialism for the Wealthy
Most Americans believe they possess a natural aversion to socialism. Charges of "socialized medicine" have derailed much-needed health care reforms for years.
After all, we are a capitalist society, we believe in personal responsibility, lifting ourselves by our bootstraps -- at least that is the stereotype we like to promote.
The version closer to reality is America offers capitalism to low-income individuals, but is more than willing to unleash its socialist impulses for the wealthy.
If we were truly a capitalist society Chrysler would not exist today, making cars that don't sell. It would have gone out of business decades ago. By passing the $1.5 billion "Chrysler Corporation Loan Guarantee Act of 1979," Congress allowed Chrysler to avoid bankruptcy, stay in business, and save jobs.
However one feels about the Chrysler bailout, it was not capitalism. But recent Wall Street financial fiascos may cause us to long for the return of the Chrysler K-car.
Congress is now on the verge of bailing out Fannie Mae and Freddie Mac, the government created but privately owned, profit-making housing finance companies responsible for nearly half of the U.S. mortgage market. Collectively, they own or guarantee an estimated $5 trillion of debt.
Fannie Mae was created in 1938, under President Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.
In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.
Fannie and Freddie were able to borrow money at a discount based on the assumption that the government would stand behind their debts if need be. Their operations were regulated, limited by laws detailing what mortgages they could assume.
But as these institutions grew and profited, they became more powerful behaving more like a publicly traded company than regulated government entity. The executives of each institution were compensated like any other Fortune 500 CEO, pocketing huge salaries.
It was reported that Freddie Mac Chair, Richard Syron received more than $18 million in compensation last year, while Fannie Mae CEO Daniel Mudd received $13.4 million in 2007 while the company lost $2.1 billion and its shares fell 33 percent.
But with foreclosures soaring, Freddie and Fannie have sustained billions in losses, their shares have plummeted, there is also talk that bankruptcy in the future of these two institutions designed to maintain confidence in the lending markets. The American taxpayer is being asked to step in and save the day.
But Fannie and Freddie are different in that they are private when they want to be and public when they need to be.
As former Treasury Secretary, Lawrence Summers recently opined, "The illusion that the companies (Fannie and Freddie) were doing virtuous work made it impossible to build a political case for serious regulation."
He adds, "When there were social failures the companies always blamed their need to perform for the shareholders. When there were business failures it was always the result of their social obligations."
This leads Summers to conclude that the gains were being privatized and the losses socialized. This is great for the shareholder, but hardly in the best interest of the society as a whole.
With the lending markets already experiencing a lack of confidence, there is the anticipation that the home mortgage crisis will worsen. The problems created by the subprime lending are expected to bleed into the more traditional lending markets.
I believe the government must step in order to restore confidence. But there is bit of irony in its doing so.
Like Fannie and Freddie, the American economy is also a hybrid of private and public participation. We are hardly a socialist society, but we are not paragons of capitalisms.
The American taxpayer cannot continue to serve as the ultimate guarantor to otherwise unregulated companies. But we tend to be much more forgiving of the failures of Wall Street than those in need of public assistance.
To the poor we say: "Get a job!" To Wall Street we say: "How much do you need?"
Follow Byron Williams on Twitter: www.twitter.com/byronspeaks
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Fannie and Freddie are pretty much a hybrid between goverment/
This is just a sign of things to come with socialized health care, when there is no risk for private business they take chances.
"This is just a sign of things to come with socialized health care, when there is no risk for private business they take chances."
????? there is no private business in socialized health care, that's why the western countries that have socialized health care live longer .... They want you to get better, not die.
Chrysler has jobs to this very day, although it's currently in trouble. That well thought out bailout provided decent employment and taxpayers for over 20 yrs. I wouldn't call that a mistake. The government was paid back and we saved an industry for decades.
Hoover dam continues to this day to provide low cost power to the west. etc. You rightwingers speak in absolutism on everything, and ignore that which doesn't fit your theories.
P.S. Enjoy your socialized police dept. and fire dept. Both cases the citizens got together and created and paid for that as a public service. Same with public schools such as they are, they were once the envy of the world and public.
Unlike today, Lee Iacocca and his management had a genuine interest in saving the company, and rolled up their sleeves and went about doing it
Dr Z and Daimler bailed out at the first sign of trouble and sold to the modern day equivalent of the robber baron era trusts - private equity - whose sole mission is to strip and flip. Private equity hasno such desire as the Iacocca team in actually reviving the company. They will chop it to the bone sell off assets and whats left they will sell to likely the chinese or indians
There is no real leadership in industry today - management has been transformed into mercenary MBAs who only know whow to chop budgets, downsize, close plants and outsource. There is no innovation, creation, building of industry any more.
"Free" markets do not reward or encourage creation and innovation - they favor the path of least resistance and the entropy that ensues.
Yikes - you again, unbiased. How ironic since you seem the most biased of us all. But for anyone else listening let me say this about health care. If you don't have insurance - if you can't afford the premiums or work where insurance is not provided on the job - then hear this -
If you get cancer you will not get treatment unless you find some way to pay for that treatment yourself. Many people falsely believe that medicaid will pick up the slack should they fall ill (I know our stupid president does). Well, it won't. Even if you live in a 'liberal' state like NY if you have no insurance and you get cancer this is what will happen in one of the most advanced nations on earth: you will die.
Because you will not be treated without the means to pay. Many think, no, this can't happen in the US. But this is exactly what happens. The only care you get is in the emergency Dept. because they can't turn you away (see EMTALA ) but once you are stabilized, i.e. in no danger of dying on the spot, out the door you go. And cancer is not an emergency as envisioned by EMTALA. So, f-you Unbiased. I hope you are insured (not).
corporations are given citizen status, but citizens are not granted corporation status.
i can't base my headquarters in the islands, for instance, like KBR did.
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http://www
CAYMAN ISLANDS - Kellogg Brown & Root, the nation's top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.
More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands.
When Texas pipe-fitter Danny Langford applied for unemployment compensation after being let go by Service Employers International Inc., he was rejected, he was told, because he worked for a foreign company.
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This is like something out of a Joseph Heller novel - if it weren't so tragic, it would be funny.
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