I won’t provide much commentary on this, which would just be piling on.
On a near party-line vote, the House recently approved the purchase of an almost 3,000 acre beach in St. Croix from a private owner. You read that right. As Fox News reports:
Two weeks ago, on a near party line vote, a huge Democratic majority in the House agreed to spend $50 million to buy the former cotton plantation on the island of St. Croix.
Here’s a shot of the newest park (courtesy of Fox News):
Newest National Park
We’re running trillion dollar deficits at the federal level exactly for reasons like this. I don’t think most Americans would object to having national parks: it is reasonable to think that such a department might even serve a worthy purpose in preserving important American natural resources. As Fox reported, however, the National Park Service hadn’t even completed a study of the purchase.
This is how William Black, a former federal bank regulator, described the actions of Senator Robert Menendez (D, N.J.), in prodding the Federal Reserve to approve the takeover of a New Jersey bank. As the article from the Wall Street Journal noted:
While lawmakers routinely forward requests from constituents to government agencies, it is rare for them to make specific requests along the lines of this letter asking specific actions, bank attorneys and congressional aides said. One reason is to avoid any appearance of trying to influence the regulatory process for political ends.
What the Senator failed to mention in his letter was that the bank’s Chairman and Vice Chairman were large donors to his political campaign. While the outcome in this story was that the Fed didn’t act on behalf of the Senator and the bank ended up failing, the Senator’s remarks are worth noting:
In a written statement, Mr. Menendez said helping the community bank, which mostly served Hispanics, was the right thing to do. “If any New Jersey constituent—regardless if it is a family or a local community bank—comes to me seeking assistance with a legitimate federal matter, not only is it important to help, I was elected to help,” he said. “Telling them ‘no’ would be abdicating my responsibility.”
The matter worth disputing is if the success or failure of a private company, even if that company is a bank, is a “legitimate federal matter.” If you accept Madison as an authority on the Constitution and the specific responsibilities of the federal government, it is not.
And if you accept P.J. O’Rourke as an authority on political humor, then you’d likely chuckle at his observation that “When buying and selling are controlled by legislation, then the first things to be bought and sold are Legislators.”
President Obama recently announced that he desires more robust regulation of banks, particularly as it relates to their size and the types of investments they can make. As reported, he is embracing Depression-era policies.
Be careful what you ask for.
This story highlights the problem we encounter when we decide as a society to bail out private corporations. As has been discussed here before, bailouts are inconsistent with founding principles. The irony is that, in a way, the Administration has a point. Once a private corporation accepts public money, the public becomes a constituent with an interest in how the company operates. Since the “government” acted as the public’s investment advisor (willingly or not on behalf of the public), these companies have the challenge of either paying the money back, and quickly, or answering to another master.
More problematic than the bailout itself is the fact that we have large imbalanced government making these decisions; the government in Washington D.C. was never intended to be a creditor to private companies. The proper thing to do is to let good managers and owners succeed and bad managers and owners fail. As we have said before: it is bad business supporting bad businesses. Yet, if a private business was so critical as to merit a bailout, the employees and communities most effected should be the parties to make that determination.
