As senior debt holders, the taxpayers would get first in line privilege for any repayments through bankruptcy. Such language never made it into the final bill. The crisis was too great to delay action on TARP during the sky-is-falling rush to pass the bailout bill. Besides, no one would take common stock over interest-paying preferred stock. Doing so would place them in the position of junior debt holders, and at the back of the payout line.
So, why would Obama violate his fiduciary responsibility to the taxpayers? Because for Obama, it is not about the money. It never was. It is about control. Preferred stock may have more value, but common stock has voting privilege. As holder of the largest block of voting shares, Barack Obama can direct how the businesses are run. Barack Obama gets to say who sits on the boards of directors, and who are the CEOs. Barack Obama can dictate what types of loans are made, at what interest rates, and set required qualifications.
That Obama admitted he was considering this open power grab for control of the financial institutions, was quickly decried by conservatives as proof that Obama is really a socialist and Marxist. They are incorrect in their assessment. Obama understands he doesn't need to completely nationalize industries like Venezuela's Hugo Chavez, or even “socialize” them as Maxine Waters threatened oil executives. He only needs to own a big enough chunk to drive an industry in the direction he wants it to go. Or more simply, Obama is an economic fascist.
The economic philosophy of fascism is most accurately described by Sheldon Richmond at Library of Economics and Liberty as “socialism with a capitalist veneer.” As Richmond explains:
Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it.... Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically. In doing all this, fascism denatured the marketplace. Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions.Now comes the Obama engineered, structured bankruptcy for Chrysler. The directing body for the hybridized Chrysler/Fiat will have nine seats – six of which are reserved for Obama appointees. Obama will also have control over naming the new CEO. That leaves Obama in position to dictate the type of cars the company can build, the type of technology to be used, how many unit per year, the selling price, even minimum and maximum wages for Chrysler employees. Government control without resorting to direct state operation – more economic fascism.
Washington DC 2009 is starting to look a lot like Rome 1922.
Dennis P. O'Neil
Originally posted at TownHall.com on May 02, 2009.