Thursday, March 26, 2009

Reaching for more arbitrary power

The Obama administration has announced, with TreasSec little Timmy Geithner confirming it on Capitol Hill that they're reaching seriously, that it wants to give the government the same authority to seize and run all kinds of financial institutions the same way the FDIC now has the power to seize banks, try to work off the bad paper and either close them or sell them. The FDIC does this ona fairly regular basis now, though it's almost always small banks that it seizes. When there was a widespread problem with S&Ls in the 1980s (a problem set up by the government when it increased the amount of deposits the FDIC insured, thereby putting all the risk on the taxpayers and inviting S&Ls to behave more riskily than they otherwise would have), the government set up a special temporary agency. the Resolution Trust Corp., to handle the problem and then go out of business. But the keepers of Obama Nation want this power to be permanent.

As this Register editorial argues, not only would the move expand the power of the Federal Reserve, which was the main cause of the financial crisis in the first place (but in government nothing succeeds like failure), it would keep any number of businesses that would do better to go bankrupt or out of business sputtering along on the taxpayers' dime, diverting cap[ital and other resources from more productive uses. Expect stagnation if this stinker passes.

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