Nothing causes a more dramatic shift in rhetoric than an opportunity to pass emergency legislation in the middle of the night to reward your friends, punish your enemies, and screw the taxpayers. As one, the Bush administration mouthpieces have turned 180 degrees from, “problems? The economy is strong!” to, “man the battle stations! Something has to be done now!”
The first talking points outlets are beginning the “this couldn't wait for Monday” chant right now, leading to what, I'm sure, will be a Sunday morning full court press of anti-capitalist nonsense and a closed-door drubbing of your wallet Sunday afternoon. Bill Kristol gives us the first taste, telling us “what congress has to do now.”
I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:
The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.
Of course, the Billionaire Bailout will do nothing to address Fortis or Wachovia, stop bank runs, provide liquidity, or stop sell-offs, as Kristol points out. So, Kristol calls for not one, but two additional blank checks before banks open on Monday:
1. Giving the FDIC authority to provide unlimited deposit insurance through the FDIC for transaction accounts in banks.
2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury's exchange stabilization fund.
This should come as no surprise to anyone. The problem with the Billionaire Bailout isn't that the economy couldn't overcome any government intervention, it is that it will open the door for never-ending intervention leading to a depression lasting decades. This isn't just a slippery slope anymore; it's an Olympic ski jump ramp into a bottomless pit of despair.
Larry “Iraq war will cost $200B” Lindsey has a mixed history, but he is certainly not economically ignorant. He fought Greenspan when the Fed was busy blowing up the bubble in the 90s. Lindsey knows that government-created problems beget government-created problems. He knows that he's calling for nothing short of planned destruction of savings and wealth along with perverse incentives to rape and pillage on the way.
Of course, all this has to happen before Monday morning so you and I don't have a chance to get out of the way. Kristol, like his father, has always been opposed to the idea of private property, but why is Lindsey so hot on opening the floodgates of socialism? Is he having trouble getting a tee time at the club?