Friday, November 27, 2009
In March I thought we were slouching towards corporatism. It now seems like a full-out run.
First, the Fed announced that it will evaluate bankers� pay on the basis of how well they manage risk. How better to be a good risk manger in a bureaucrat�s eyes than to take no risk? Purchasing Treasury obligations and federal agency paper is the sure way to avoid risk. The Fed has a second policy to make that strategy profitable: zero interest-rate borrowing to finance Treasury and agency debt yielding 3%.or more. The Fed continues to signal it will keep rates low, diminishing interest-rate risk.
These policies are choking off the supply of credit to the private sector, espcially small business. To add to the problem of small business, the Fed and the Treasury have a third policy of credit allocation to major banks like Citigroup, Bank of America and JP Morgan Chase; large industrial firms like GM and Chrysler; and such entities as money-market mutual funds.
The government crowds out the private sector overall, and Wall Street crowds out Main Street.Melloan doesn�t state it, but there is a name for this economic policy: corporatism. Big government favors selected big business and rewards big labor as a junior partner. It�s not socialism, but the economic component of a fascist political program.
Cff. Steven Malanga from last April. I prefer corporatism to socialism as a description of Obama's policies, and when I said so on radio last July, boy did I catch heck! I wonder if it's because it blurs the distinction between our two major parties?