Category: insider corruption

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insider corruption

On the Other Hand

To start off this New Year, I admit that I missed some very thrifty actions taken by elected officials in 2011.

Though I often commented on California legislators, regrettably, I failed to mention their frugality. Last May, they unequivocally said, “No” to Senate Bill 18, which would have cost $200,000 for enforcement of the legislation’s gift ban.

These eminent elected officials would doubtless like to have SB-18’s restriction on lobbyists and special interests plying them with free tickets to sporting events, rock concerts, and other expensive entertainment venues, but were unwilling to place the high cost of policing their behavior onto the backs of taxpayers.

Nor are politicians always careless with tax dollars. In Washington, D.C., Council Chairman Kwame Brown gets the city’s money’s worth.

He had the city order him a Lincoln Navigator, loaded with a DVD entertainment system, power moon-​roof and polished aluminum wheels. But, when the vehicle and its $1,900 a month lease arrived, the interior was gray — not black as requested. Brown wouldn’t stand for being shortchanged. So, a new SUV was ordered, with both exterior and interior black. It was driven from Michigan to Washington for an extra $1,500.

The city was stuck paying two luxury vehicle leases, but it’s the principle that counts. Chairman Brown informed the Washington Post that dark interiors hold their value better.

This year, let’s acknowledge the good elected officials do and not just harp on the bad. After all, nobody’s perfect.

This is Common Sense. I’m Paul Jacob.

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insider corruption national politics & policies

A Newt Public-​Private Partnership

For nine years, from 1999 until 2008, Newt Gingrich worked helping Freddie Mac, the government – created, bubble-​creating housing corporation. Newt’s outfit, The Gingrich Group, knocked down more than $1.6 million dollars in consulting fees during that time.

Newt says he warned the government-​sponsored giant that the bubble it was busy blowing up would burst badly.

For all those years? He was either mind-​numbingly repetitive or must have really drawn out his words. He is from Georgia, but still.

Folks at Freddie tell a different story. They say former Speaker Gingrich helped “build bridges” to Republicans on Capitol Hill, hoping to prevent congressional efforts to rein in the mortgage giant. Those efforts proved successful — there was no powering down of the Frankenstein mortgage monster. The Gingrich Group’s contract wasn’t canceled until the 2008 crash, when the U.S. Treasury took control of Freddie Mac and his sister housing financier, Fannie Mae.

In last weekend’s GOP presidential debate, Congressman Ron Paul argued that Newt Gingrich’s position with Freddie Mac is “something people ought to know about.”

“While he was earning a lot of money from Freddie Mac,” explained Rep. Paul, “I was fighting, over a decade, to try to explain to people where the housing bubble was coming from.”

Newt responded that, like Dr. Paul, he wanted to audit the Fed. As for his Freddie role, “I offered strategic advice,” claimed Newt, adding, “I was in the private sector.”

Laughter erupted throughout the hall. Even Mr. Gingrich couldn’t keep a straight face.

This is Common Sense. I’m Paul Jacob.

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insider corruption too much government

Resigned to Graft?

It has been alleged that Brazil’s Labor Minister, Carlos Lupi, had demanded kickbacks from “charities and non-​governmental organizations in exchange for funding from the ministry.” He has also been accused of receiving both a state and a federal government salary. Such talk has undermined his ability to work for the already-​beleaguered government of President Dilma Rousseff. So he resigned.

We’ll see what happens to Lupi. But the charges reveal a problem we will always have as long as governments are big. The very ability to “make or break” a project, business or career is itself an opportunity to charge a premium for such service.

The bigger and more arbitrary government is by design, the more opportunity there is for corruption.

So why isn’t all government corrupt?

Well, separation of powers allows one government sector to watch over the others, perhaps jealously. And, as Brazil’s case shows, a free press helps.

But there’s also the cultural element.

A generally honest culture where people follow higher principles as a matter of habit can offset the dangers of governmental arbitrariness. This explains, perhaps, why Scandinavian countries managed under big government as successfully as they did, for so long. Going into the modern welfare state, Scandinavians were generally honest and morally upright.

Over time, though, this element recedes, as opportunities for corruption work their way into every level of society. As has happened in northern Europe generally.

Small, limited, citizen-​controlled government is less corruptible. It also encourages a culture of honest dealing.

This is Common Sense. I’m Paul Jacob.

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folly free trade & free markets insider corruption national politics & policies

A $13 Billion Reward

The Federal Reserve, our central bank, hit the news big last week.

Beginning in August 2007 and continuing for the next two and a half years, the Fed lent the world’s biggest banks something like $7.77 trillion dollars at the barely perceptible interest rate of 0.01 percent. With that money, the banks bought Treasury bonds (federal debt) and made $13 billion in profit.

I reported on this multi-​trillion-​dollar loan figure in December 2008, a few weeks after the biggest day ever of Fed bailout fever. For some reason this information didn’t become widespread or understood until this December, when Judge Andrew Napolitano and Jon Stewart made a big deal of it on their respective TV shows, after Bloomberg reported the profits banks made off all that bailout money.

What does this figure represent? To me, it represents the outrageous amount of magic money a sick and corrupt fiat-​dollar/​bailout-​based system of moral hazard requires when it implodes.

I think we can all justifiably roll our eyes, now, when some rah-​rah boy for big government tells us how absolutely necessary it is to have a central bank. The old gold standard never fell apart this badly. The gold requirement itself placed a huge check on out-​of-​control banking.

But a $13 billion reward for the biggest financial mess in world history? That’s the very opposite of a check or balance on risk-​taking, greed, or downright stupidity.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets insider corruption national politics & policies too much government

Self-​Interest Wins Every Time

Incentives work. Because people are self-interested.

Even the seemingly altruistic protagonist played by Kevin Costner in the movie Field of Dreams exclaims, “I haven’t once asked what’s in it for me,” only to then ask, “What’s in it for me?”

That line comes to mind when I hear politicians and business folks talk about private-​public partnerships, from subsidies for ethanol to billions in government loans to supposedly spur “green” technology.

The bankruptcy of the solar panel maker Solyndra cost taxpayers more than half a billion dollars. But it’s not merely that government is less than stellar at picking investment winners; it’s that the interests of politicians and businesspeople aren’t “the public interest.”

Never will be.

Sure, Energy Secretary Steven Chu told Congress yesterday, “I did not make any decision based on political considerations.” But internal company emails feature complaints about pressure from the Obama Administration to delay announcing layoffs until after the 2010 elections.

Whose interest did that serve?

Documents also uncover Solyndra executives hiding bad news the better to win additional federal funds and, alternatively, threatening that the company was about to go under hoping the potential bad press for Obama might shake down additional bucks.

Companies have an interest in the big money the federal government dangles before them. Politicians have an interest in appearing to be economic wizards creating jobs and spurring a new world with bright green hues.

Neither incentive promotes sound business behavior nor equates with the public interest.

This is Common Sense. I’m Paul Jacob.

Categories
insider corruption

Is Congress the “One Percent”?

Splitting the country between the “99 percent” and the “1 percent” scapegoats successful people. Being rich is a good thing … unless the wealth is obtained dishonestly.

Which brings me to Congress.

Last Sunday, 60 Minutes featured Peter Schweizer, author of Throw Them All Out, a new book detailing what he calls “soft corruption” — unethical behavior that may not quite qualify as illegal.

Schweizer points out that members of Congress are not covered by laws against insider trading, thus legally able to “leverage” the information they receive to “enrich themselves.” At the cusp of the 2008 financial meltdown, Rep. Spencer Bacchus (R‑Ala.) was receiving special briefings from the Treasury Secretary and the Chairman of the Federal Reserve and “buying option funds that would go up in value if the market went down.”

Bacchus is hardly alone. During the healthcare debate, numerous congressmen traded healthcare stocks.

Then there are IPOs — initial public offerings of stock — which are usually available only to major investors. Somehow Speaker Nancy Pelosi was cut in on a least eight IPOs, including a lucrative one from VISA … at a time major credit card legislation was pending in the House.

None of “our” representatives deigned to openly discuss their amazing financial acumen. But as 60 Minutes correspondent Steve Croft confirmed, “Most former congressmen and senators manage to leave Washington, if they ever leave Washington, with more money in their pockets than they had when they arrived.”

Funny, they haven’t done nearly so well handling the country’s finances.

This is Common Sense. I’m Paul Jacob.