Friday, July 27, 2012

Wall Street, Crony Capitalism and the Department of the Treasury

Constitutionally speaking, the Secretary of the Treasury is supposed to be nothing more than the nations chief bean counter and it's a job that certainly shouldn't be controlled, influenced or held by Wall Street and the Banksters. The tragic reality is that Wall Street has pretty much always controlled the Department of the Treasury.

At the George Mason University Mercatus Center, David R. Henderson published a fascinating study on crony capitalism titled The Economics and History of Cronyism which is definitely worth reading. Henderson devotes considerable time to defining cronyism and explaining how it works, notably through the mechanism of lobbying which destroys wealth.
If a company spends $10 million on lobbying for tariffs or subsidies, it is investing in reducing wealth. Although the gain in wealth to the firm is likely to exceed $10 million, the $10 million expenditure represents a loss to society. In 2009 the total amount of lobbying expenditures reported by registered federal lobbyists was $3.47 billion.
While Henderson provides numerous documented examples of crony capitalism, his disclosure of Geithner and his deep ties to Wall Street sheds considerable light on how thoroughly corrupt our political system really is:
On November 21, 2008, word leaked that president-elect Barack Obama had chosen Timothy Geithner as his treasury secretary. the 10 days following the November 21 leak, financial firms that had a preexisting connection with Geithner had “a cumulative abnormal return” of about 15 percent. Translation: the value of the stock of these Geithner connected firms rose 15 percent after people learned that Geithner was named Treasury Secretary.
Geithner, of course, is also the former president of the New York Federal Reserve and he personally engineered the massive transfer of wealth to the 1%, Wall Street, AIG and just about every power player in NY and the District of Crime (DC).

It's clear from reading Henderson's article that America is nothing more than a plutocracy, an oligarcy and a nation where the 1% lord over the 99% with raw and absolute power.

One final note. Henderson also documents how Lyndon Johnson got rich.
It is not difficult to find many examples of cronyism in the 20th-century United States. One famous example not reported until decades after it occurred is the case of young Texas congressman whose wife became the nominal owner of a business that he used his political power to help her obtain.

Here’s what happened. Between December 1939 and January 1943, despite countless attempts, the owners of Austin, Texas, radio station KTBC were unable to get permission from the Federal Communications Commission (FCC) to sell the station. But on January 3, 1943, the wife of a Texas congressman filed her application to buy the station and 24 days later, after waiting more than three years, the owners were allowed to sell. The congressman’s wife paid $17,500 for the radio station. In June 1943, she applied for permission to operate 24 hours a day, up from daylight hours only, and at a much better part of the AM frequency. The FCC granted permission one month later. While all this was happening, the FCC was under attack by another powerful congressman, Eugene Cox of Georgia. The aforementioned Texas congressman strategized secretly with FCC official Red James and used his influence with Speaker of the House Sam Rayburn to deflect the attack. In fact, James later admitted that he had recommended to the congressman’s wife that she apply for the license. In 1943, the congressman and his wife had a net worth of approximately zero. But by 1964, when this congressman was elected president of the United States, Lyndon Baines Johnson and his wife’s net worth was at least $14 million. The radio station’s value accounted for about half of this $14 million.
Americans get high talking about American exceptionalism. Indeed!

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