Yesterday the WSJ had an opinion entry by Senator Charles Schumer that just isn’t getting enough attention. Effectively, it was a declaration of war on boards of directors all across the country (or at least at every financial institution.)
Never one to admit wrongdoing or involvement in the worst financial crisis to hit the free market since the Great Depression, Sen. Schumer writes about how he and the other Fannie and Freddie champions devised the liquidity plan “days before” Paulson. So as not to misquote his hysteria, he writes:
“I pointed this out on the Senate floor a few days before Mr. Paulson came to Congress to ask for authority to spend as much as $700 billion to buy up troubled assets. Later, Democratic leaders Sen. Chris Dodd, Rep. Barney Frank and I made explicit our desire to make direct infusions of capital a part of the approach to solving the crisis during our negotiations with the Treasury.”
So where is the war you say? And what’s with the title of Schumer as the new chairman of the board? That comes a little further down in his editorial, buried in a quick blurb, like most of his earmarks in the bills he drives through the Senate.
Schumer states that under any federally sponsored “rescue” plan, the government must ensure that no federal funds end up in the hands of investors or executives. Seems reasonable? Right? He states:
“This means that under any capital injection plan that Treasury pursues, dividends must be eliminated, executive compensation must be constrained, and normal banking activities must be emphasized.”
Let’s be absolutely clear. The “rescue” is not optional. Banks are being told that they will participate. The federal government is not asking, “hey, do you need a little scratch?” to these banks. They are telling them that they will participate. That means that even if the firm doesn’t need the capital, they are now effectively under the control of the Treasury, and potentially (if current polling is any indication of the election outcome) President Obama and the Democrat controlled Congress.
So what will that potentially mean? It means that Schumer and his other financial experts (cough, cough) can effectively suspend the board’s power at every banking institution. Can you effectively imagine what the suspension of dividends from bank stocks would do to these companies? Talk about a financial crisis. Their stocks will collapse, thus driving their need for further capital infusions, and then it’s back to the Treasury for more funds.
Vicious cycle socialism is.