January 22, 2010 – The Obama administration is launching a rabble-rousing assault on big banks. Thus we see on display in Washington another example of how ideas have an impetus of their own that drives those who hold them to predictable deeds. These acts need not be destructive, but in this case they definitely are.
The attempt by the Democrats in Congress and the Obama administration to take over America’s health care system was derailed when the election of Republican Scott Brown as Massachusetts senator deprived the Democrats of a filibuster-proof majority. One reason for Brown’s victory was voters’ fears that the bloated, irresponsible, debt-ridden federal government would run doctors’ offices and hospitals like it does the Postal Service. Another reason was the sheer arrogant, sleazy, closed-door, bribe-ridden process of putting Obamacare together.
The day after House Speaker Nancy Pelosi announced that she didn’t have the votes to foist Obamacare on unwilling Americans—many in her own caucus understand that the Massachusetts revolt could place them in the ranks of the unemployed in the fall 2010 elections—President Obama launched his war on the banks. In doing so, Obama turned to the chief weapon—and frequent motivation—of the paternalist: envy.
In 2009, as part of their plan to “save” the economy from collapse, Obama officials strong-armed many banks into taking federal loans that many did not want. Most banks paid those forced loans back, with interest, as fast as they could.
Obama and Bush enacted bailouts against the wishes of many Americans.
Yet after the failure of his health care takeover, Obama needed a new cause. So at a January 21 press conference he argued that the current economic crisis “began as a financial crisis, when banks and financial institutions took huge, reckless risks in pursuit of profit and massive bonuses.” No mention here, of course, of the fact that it was bad housing loans, encouraged and facilitated by the federal government, along with too-loose Federal Reserve monetary policy, that sparked the crisis. But of course there is mention of bankers seeking profits and bonuses, part of Obama’s appeal to the envy of Americans.
He continued, saying: “To avoid calamity, the American people … were forced to rescue financial firms.” No, it was politicians like you, Mr. President, and your predecessor George W. Bush who decided on bailouts against the wishes of many Americans.
He declared: “Never again will the American taxpayer be held hostage by a bank that is ‘too big to fail.’” Again, it’s politicians who bailed them out and, in any case, this statement means cutting down the size and activities of banks, which will make many too small to succeed.
Of course, this is part of a statist game. Politicians decide which banks are “too big to fail.” The government, which already regulates financial institutions, gives guarantees that also give it an even greater excuse to regulate; to decide what behavior is too risky; and perhaps, in the end, to simply take over banks that are failing. Why not, Mr. President, work to get the government out of both the regulation and guarantee business and let the owners take the risks?
With chutzpah pouring out of his every pore, Obama announced support for restrictions on what he defines as risky bank activities “that are central to the legislation that has passed the House under the leadership of Chairman Barney Frank, and that we’re working to pass in the Senate under the leadership of Chairman Chris Dodd.” Here he named the two members of Congress who most of all laid the groundwork for the current economic crisis. Both worked for years to force banks to make risky home loans to individuals who couldn’t afford them and both took campaign funds from the government-chartered Fannie Mae, which was making money packaging and marketing those bad loans. They sold the crack, and now they want to be deputized as drug-busting police.
Obama argued that banks enjoy special government privileges and thus should be under more government control. Of course, many of these “privileges” are freedoms that so far the government has not managed to stamp out. Others are protections—such as FDIC insurance—that the government requires.
In any case, Obama concluded that banks should not be allowed to use what he calls “cheap” money that results from “privileges” in order to “trade for profit.”
The motivations and tactics of Obama and all paternalists are frighteningly revealed in his banking policies.
Paternalists want power.
His proposed restrictions on banks will further constrain capital investment in the American economy and reduce so-called “risky” lending. These constraints will certainly slow economic growth. They will especially make it tough for entrepreneurs to create whole new industries that are by their nature risky ventures, for which they bear the costs of the risk, and by which they hope to make huge, well-deserved profits. But it really isn’t economic growth and prosperity that paternalists seek.
Obama is shameless to suggest that his government, which is overseeing the most irresponsible and wasteful spending spree with taxpayer money in American history, should be imposing discipline on private bank responsibility. But it’s not responsible, efficient, and honest government that paternalists seek.
Paternalists want power. They are obsessed by the need to control every aspect of our lives. That’s why Leftists reacted as they did to the Supreme Court’s ruling—released on the same day as Obama’s anti-bank press conference—that corporations have free speech rights to make their thoughts about candidates known during elections. Obama is vowing to find ways to stamp out these First Amendment freedoms. The freedom of others to criticize is a grave danger to control-freak paternalists.
One of the principal tactics that paternalists use to induce individuals to surrender their freedom is to stoke their envy, resentment, and hate against some scapegoat and to promise that they, the paternalists, are the only ones who can punish the villains. “Look, that one is richer than you! Let’s get ‘em!”
Envy, of course, is an essentially nihilistic sentiment that revels in tearing down. It is a form of social relativism that teaches that one’s worth or status is always in comparison to others. And the easiest way to raise one’s own pseudo-sense of worth and status is to tear down others, to judge one’s self as better off only if others are worse off. Envy is a path to individual and social destruction.
It was inevitable that paternalist Obama would ramp up the envy offensive. In this case the envy is aimed at banks, but this is only because his attempt to seize power over our health care failed, so demonizing insurers is passé. This is what can be expected out of the paternalists, and it is the envy that they peddle as a narcotic to loll us into servitude that we must reject.
Edward Hudgins is research director at the Heartland Institute and former director of advocacy and senior scholar at The Atlas Society.