Posted by
Andrews on Saturday, June 06, 2009 10:50:27 AM
It is a characteristic of dictatorships that they are never satisfied with the power they inherit from the government which came before. But unless they come to power in some sort of coup, they find themselves hemmed in by the laws of that preceding regime. Even when taking over from an expansive, powerful regime, they will inevitably find they need powers that either the written constitution or political traditions of their land do not grant them. And so they will find a way to create extra-legal authority to circumvent those precedents.
The Nazis did this through several means, the party courts, for example, which had jurisdiction over the ~30% of the populace who belonged to the party, or the racial laws, which opened up whole new avenues of prosecution. Similarly, Iran, despite inheriting the very powerful police state of the Shah found the religious shadow government lacked direct authority, and so they instituted religious police, to give the religious authorities a direct enforcement arm. Similarly, the Roman emperors, having established themselves through military might, felt threatened by the tradition which kept the legions out of Rome (though they simply ignored the laws keeping provincial armies out of Italia itself), and so they created the praetorian guard, to give them a military fore to do their bidding in Rome. (Though in the end that turned out badly for a number of later emperors.) Time and again, those seeking extra power, but restrained by traditional limitations, have looked to subvert those traditions by creating new institutions giving them extra power.
And such, in the end, is the TARP money being handed out.
Obama and his staff know that were they simply to dictate to manufacturers and banks that there would be court challenges, maybe even challenges in congress. But if they can get those banks and manufacturers to accept money from the government, they can suddenly claim that the government as an "investor" has every right to force the companies to do anything they want. Fire the CEO, force GM to make "green cars", enforce a series of mergers and divestments, all are possible once the government controls not through law but through the purse strings. It is similar tot he way the government previously enacted rules by applying them only to those who accepted government funds or took government contracts. It is a clever way to avoid any questions of political authority. Where previously any such action had to be shoe-horned into the commerce clause, they now have the authority to act without justification, as they are just another "investor".
Which is why I doubt the banks will ever be allowed to pay back their TARP funds. The funds simply provide too convenient a way to control the banks without the need for formal regulations, or even manipulating the Fed to change their guidelines. With TARP funds the biggest banks are under direct government control, giving Washington what it wanted, direct control of banking comparable to the control European nations have through their central banks. Similarly, the TARP funds given to GM and Chrysler give Obama an easy route to imposing his "green" vision on automakers without the need to fight for any laws. Granted, Ford ruined part of the the plan through refusing funds, but the government still controls 2 of the 3 big manufacturers directly, giving them quite a bit of influence over what is manufactured.
The worst part is that the actions the government has taken are almost guaranteed to continue the economic downturn, most likely through inflation ("
More Signs of Inflation?"), which will only increase public unhappiness and create new calls for additional "funding". And once the government funding reaches out into new areas of the economy, we will see ever more extra-legal channels through which the government can exercise power. If the economy continues to worsen and nothing checks government bailouts, a large part of the economy could easily come under government control.