Paulson’s Beer Hall Putsch

Drawing by Georg Grosz

On the night John Kerry ceded the election to Bush’s second term, I can still see W smirking while his smiling brain, Karl Rove looked on with smug satisfaction. Opined Bush, “I earned some political capital and I’m gonna spend it.” Spend it he did and his administration has nearly bankrupted the trust, treasure and security of this country.

As the United States limps to the blessed close of 8 years of the Bush Administration and the rule of a party that professes a disdain for government while demonstrating a striking ineptitude for governance; American’s are left holding a massive bag of bad debts reaping the painful yields of much squandered political and economic capital.

The regime that has refused to govern has left the door unguarded. Making it possible for a clique of collective interests that has the will, intelligence, verisimilitude and motive to take the reigns of state and to guide it in a dire hour of need.

Paulson’s bank bailout might just be a bloodless putsch of financial elites led by an alumni of investment and merchant bankers and their well placed confederates. The monied interests who have enriched themselves by gorging at the public troughs creating unfathomable pools of wealth for themselves are now trying to seize the country as their grandest prize. To be sure they remain hungry for returns, crave capital preservation and see the crisis as a great investment play to enlarge their riches. They smell the stench from the stinking corpse of the US banking system and are looking to claim the opportunity of a lifetime. They will go to great lengths to achieve their objectives. They are ready to employ economic blackmail to extort a massive tribute from multiple generations of US taxpayers to finance a takeover of the banking system.

This is the triumph of state capitalism. It is a similar model utilized by China, the EU, OPEC and other countries practicing the fine art of a state managed economy. This is not socialism. If this where socialism, all American’s would be receiving stock certificates and purchase warrants in the companies the Treasury is looking to finance. That is not in the cards. China is managed by a class of technocrats embedded in a centralized political party. America will now be ruled by a class of managers employed by Americas financial services whose sole goal is to maximize shareholder returns.

Is this a grand fleecing of America? The powerful and well placed are raiding the public treasury to fix past mistakes of their making and to bankroll their next bold move. When the state assets of the former Soviet Union were privatized, a class of oligarch’s arose out of the depths of the CCCP to seize control of them. The bank bailout is an event that bears similar characteristics. In Russia the private sector took control of state assets expropriating state ownership. Our bank rescue plan will provide US Treasury assets to the private sector so they can recapitalize and buy distressed bank assets on the cheap. No doubt sometime in the future, these privateers will be lauded by our elected officials as capital market heroes who single handedly rescued America by rationalizing the banking system.

Under normal circumstances the public trust would be secured by the social compact we have entered into with our Federal Government. Tragically, our three branches of government have all failed in their fiduciary duty to protect and serve the interests of American citizens. Special interests, ideologies, privilege and the rights of the stronger has trumped and crushed the will and interest of “We the People.” We are a representative democracy; republicans all, who believe in the democratic ideal who freely give our informed consent to be governed in exchange for the protection of public interest. This trust has been grievously violated. Our consent needs to be revoked.

Chris Dodd the Senator from Connecticut emerged from a weekend meeting with his head shaking. Said Dodd on the need to bail out the banks, “they painted a picture that was absolutely frightening and devastating for America. We must do this deal.”

The monied interests are holding the promise of America hostage. They say if we don’t comply with their demands, we will not be able to send our children to school, our retirement system and social security program will collapse, interest rates will go to double digits causing a cascade of mortgage defaults and bank failures. There will be anarchy in the streets. Sovereign Wealth Funds and other well heeled global investors will liquidate their holdings in US Treasuries and place the Federal Government in default. We’ll be no better then a banana republic.

It all looks very suspicious. Hank Paulson fully in control at the US Treasury making major moves to drastically alter our nations books and ledgers. Robert Rubin, former GS Chair and current well placed executive at Citicorp is now seen escorting Barack Obama no doubt offering real time sage advice. Jon Corzine, Mike Bloomberg and Governor Paterson are all bewailing the pending doom state and city budgets will suffer. State governments all over the country are growing more concerned each day as tax revenues fall, expenditures increase and the angst of American’s grow.

I’m having a hard time with this one. If its only about writing that $1 Trillion check to acquire a bunch of worthless assets I’m down with it. It’s only funny money anyway. Whats another $1T on a Federal debt of $11T. But this rescue plan serves a special interest more then it serves the general good of the common polity. As Alexander Hamilton taught us, debtor nations cede political liberty. It is unconscionable to saddle our country with this debt burden. Doing this deal will bind future generations to cover an obligation that condemns them to a life of indentured servitude.

This is not the way of free people. There is a better way.

Music: Bertolt Brecht’s Alabama Song Performed by The Doors

Risk: Democracy, Federalism, Free Markets, Debt, managed economy, state capitalism