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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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Crony Socialism

by

You’ve got to hand it to Bush and Cheney. They are loyal to their friends.

They commuted Scooter Libby’s prison sentence after a jury convicted him of perjury and obstruction of justice.

They secured criminal immunity for federal agents who tortured or sexually abused people.

They secured civil immunity for the telecoms who served as illegal snitches for the federal government.

But perhaps the most audacious act of misguided loyalty of all is the bailout of Wall Street cronies with taxpayer money.

Make no mistake about it: This bailout plan is nothing more than a way to get Wall Street friends and cronies off the hook for bad investment decisions they made. That’s it, pure and simple. And it’s all dressed up in “crisis” garb to scare Congress into enacting it and inducing the American people into supporting it.

Also, don’t forget that those cronies made their bad investment decisions while seeking federal largess. After all, Fannie Mae and Freddie Mac are creations of the federal government, not the free market. The implicit guarantee of their debts came from the federal government, not the free market. Mandating loans to bad-risk customers came from the federal government, not the free market.

Despite all the tripe we’re hearing about “deregulation” and “unfettered capitalism,” especially from the liberals, this is nothing more than a failure of interventionism.

So, now that their plan to use federal intervention to line the pockets of their buddies has failed, they turn to crony socialism to bail out their buddies, who will undoubtedly return the favor with nice campaign contributions down the line.

Don’t look to the Democrats for help. Oh, they’ll make a big fuss about Bush’s bailout plan, but their socialist predilections will ultimately cause them to cave in and go along, just as they did when Bush, Cheney, and Powell scared them with Saddam’s (nonexistent) WMDs into delegating their power to declare war on Iraq on the eve of the 2002 congressional elections. Anyway, Democrats will see the bailout bill as an opportunity to extend federal control into the private sector, another reason they will end up supporting it.

What should actually be done? They should just let all those companies that made the bad bets bear the consequences. Why shouldn’t those who made wrong investment decisions, especially in order to benefit from federal largess, be the ones to bear the responsibility? Why should people who had nothing to do with those decisions have to cover their bad bets? If they go under, so be it. As the New York Times pointed out this week, there are many young companies, which didn’t make the bad investment decisions that the crony companies made, that are ready to step in and take their place in the marketplace.

Once again, we are seeing the economic and moral bankruptcy of the welfare-state, regulated-economy way of life, to which both conservatives and liberals remain incorrigibly committed. Hopefully, this latest “crisis,” which is being used to transfer massive amounts of wealth from the poor and middle class to the wealthy, will cause more Americans to join up with us libertarians as we do our best to restore economic liberty and genuine free markets to our land.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.