Parasites of society, democracy and free market economies. Legalized bribery of public officials. If we cannot crack down on it democracy will fail.

I share much of murigeo's sentiment.

We could solve this in one of two ways. First, we could keep trying to regulate it. Get the money out of politics a la Johnnie McCain. That has proven to never work.


Second, we could reduce the power and size of government (and thus politicians). Lobbyists are a natural unintended consequence of our bastardized tax code.


Flat tax them to death.

Don,

It is sickening but nothing new and certainly not even recent.

I first noticed as a young boy growing up in rural America that when you put a full trough out in the pen all the pigs come running whether they might have just eaten or not. The big fat ones simply crowded in and took more but even the smaller leaner ones still scurried around looking for their opening to grab what they could. There was no honor, no pride, no spirit of equality, no fairness, no concern over the source of the slop, and in all it was the pigs and their sense of entitlement.

Once I grew older and somewhat wiser I began to understand that there are two kinds of people in the world, the makers (capitalist) and the takers (socialist).

The makers slop the trough and the takers push in to get what they can.

Those things are evident to anyone with even a modicum of intelligence; so, what really puzzled me and I still haven't arrived at an adequate answer is how do some grow up to be takers, the pigs at the trough? Are they simply broken in their wiring? Have they deliberately disabled the circuits of pride, honor, and self reliance?

No matter what label they put on themselves, the pigs at the Washington trough did not come from conservative capitalist America. They came from the carefully enculturated socialist side.

"When buying and selling is put under legislation, the first thing to be bought and sold is legislators."

P.J. O'R.

Vidyohs,

"I still haven't arrived at an adequate answer is how do some grow up to be takers, the pigs at the trough?"

I've been working on roughly the same idea. I refer to it as a propensity for dependency. I think that Will Durant was on the right track in his statement that civilizations are born stoic and die epicurean.

Randy,

I know this sounds silly at first but run it around anyway.

Even a newborn babe will actively seek the teat. He will wave his arms and roll his head trying to find the nipple, when the breast is put where he can feel it that activity becomes even greater until he has what he needs.....he is making his meal in the only way he can. You can observe that in most anyone newborn animal.

Now at what point in the child's life is he taught to just lay back, make no effort, and have everything brought to him? In other words when is he taught to be a taker?

I personally do not believe, except in maybe rare cases, that humans are born takers. I believe that those who become takers (pigs at the trouigh) are carefully taught that preying on their fellow man either personal and physical thuggery, or through legal means via the vote is perfectly acceptable and even desirable behavior.

For the common mass of people there really is only one philosoplhy that teaches humans that, socialism.

Socialism creates the pigs at the trough, and then in its usual hypocrisy complains loudly about the pigs at the trough.

The pigs in Washington are creatures of socialist enculturation, no more, no less.

"If we cannot crack down on it democracy will fail."

Good riddance. Maybe next time we can try a free market instead. Then people can have the representation they earn.

The TARP has already abandoned its stated purpose of buying "troubled assets from banks". I suspect this has something to do with the plan not actually recapitalizing banks. If you buy $1 of assets from the bank, the bank has $1 less in capital. The only way to recapitalize them by buying "troubled assets" is to overpay for those assets.

As per Paulson's speech earlier today, the TARP will now take direct equity stakes in banks and "support financial markets" (read: desperately try to re-inflate the credit bubble at all cost) which provide credit to consumers, et. al. In other words, he just called "Come 'n get it!!" over the bullhorn. So, I expect to see more such headlines and more such behaviour.

What a free for all.

The sense of entitlement comes from letting politicians manage resources. Once our money is separated from us, it then belongs to all.

Tocqueville warned of this.

Have no fear! A mere day after pushing for a handout to his own lobby, Obama has vowed to eliminate the influence of lobbyists from politics. Change is on the march.

Muirgeo,

You say:

Parasites of society, democracy and free market economies.

What do bail-outs have to do with the concept of free-market economies?

As for democracy...well, it's only a problem when public treasure via the label of "democracy" is allowed to be used for such purposes.

If we cannot crack down on it democracy will fail.

Good luck with that Muirgeo. Some people think that's hopeless and would rather limit the power of the state so as to deny the parasites their host.

Methinks,

If TARP buys $1 of market value assets at $1 the bank's capital does not change. If it buys $1 of market value assets at $2 the bank's capital increases by $1. "Market value" is not necessarily easy to determine so it may actually make sense to be putting the capital in rather than buying troubled assets. Which is not to say the bailout in any form makes sense. I wonder what we are paying for our capital position in these banks?

Watching all the pigs running to the trough makes me wonder how many business people that claim to be free market capitalists turn into socialists when they are in trouble or even if they smell a free lunch. Not much pride out there in some parts of corporate america. I am deathly afraid that true believers in the free market have now become a serious minority. I wonder if an economy in a democracy run by pigs will fall behind an economy in whatever China is? Which one has more motivation to produce? Which one has a growing % of producers and which one has a growing % of pigs?

Methinks and PS,

The problem, it seems to me, is that the financial institutions are, in effect, government institutions. They have been granted monopoly rights to act in the interests of the government. This was never stated explicitly, but that has been the effect of generations of government involvement. But when the monopoly begins to fail, the situation becomes explicit. It isn't just the financial institutions that are failing, it is the government itself. The government is bailing itself out - it has no choice. A similar situation exists with the auto makers. There is no homegrown alternative to the big 3 - that is, no competitor that the government can manipulate to its ends. So the government will bailout the automakers - because, again, it is bailing out itself - and it has no choice.

Vidyohs,

Although I usually agree with you, I'm going to opine that we are all born "takers." Those of us who learn that self reliance is infinitely more rewarding become "producers." Our nature is to take full advantage of all the opportunuties that are available for our maximum benefit, including resources, technology, and, yes, government handouts.

Good parents tech their children self reliance because it is in their (the parents) best interest. What parent want to wipe their kids arse or spoon feed them any longer than is absolutley necessary? Parents have an incentive to teach self reliance.

The problem with government is its current form is that they don't recognize any incentive to make its citizery self reliant. I would argue that they need a dependent citizery to acquire votes, power and money. Politicians have failed to learn that a self reliant citizenry holds any benefit to them. As long as they have producers to steal from their needs will be satisfied.

Kevin S. (not Kevin)

P.S. Don't flame me for suggesting that I see gov't as my parent. I don't. I use the analogy as a comparison between entities that make rules, enforce rules and distribute justice....and to continue with your use of childhood weaning.

PS,

Marking to market is not insurmountably difficult. Trust me - the boys marking the book aren't undermarking it. Whether buying a $1 asset at $2 "makes sense" or not depends on your goal. If your goal is to enter into a positive expectancy trade, then you would pay a little less than $1. If your goal is to break even, then you'd pay $1. If your goal is to hand out money to banks and transfer all the risk to the investors in your fund (in this case, taxpayers) then it makes sense to buy an asset worth $1 for $2, $3, $4 or any amount you want. What do you care? It's not your money anyway. But if you're going to overpay, then just be honest and hand out money to the banks. The charade doesn't make government look smarter. In any case, I think the moral hazard is pretty obvious. Even in the brief ten seconds between the time the TARP was passed and it became just another government slush fund, all and sundry were lining up to lay claim to it.

Randy,

I don't know that I agree that the banks are government monopolies. Not all lenders are banks and not all banks do the same thing. Certainly, regulation has raised barriers to entry but there are still plenty boutique banks and other financial institutions. The government did mangle incentives mightily, but particularly investment banks and Hedge Funds (which are not getting bailed out - yet!) had a lot more discretion and didn't act prudently. They continued to provide demand for securitized debt obligations without appropriate due diligence.

Personally, I think the government has plenty of choice to do a lot less than it's doing now. When the credit bubble popped, everyone had to delever. Deleveraging leads to sales which lead to decreased asset prices which leads the government to panic and mangle incentives even more. So, now that the private sector is deleveraging, the government is levering up to provide credit to every zombie with a strong enough lobby. None of this is mandatory.

So, now that the private sector is deleveraging, the government is levering up to provide credit to every zombie with a strong enough lobby.

No kidding. Buffett pretty much said exactly that (although with a different thrust) when he was telling everyone how bullish he was of the TARP fund. Wonder if he'll weigh in again now that Paulson's revised the prospectus.

Methinks,

Okay, this is your business, and I'm just surmising. Question then; are the specialists and boutiques capable of carrying the load? Cause if they're not, then I think that maybe I'm surmising correctly. I think there's a reason for the panic among the government types.

Kevin, I think I remember Buffet saying something like government "must" lever up when private business delevers. Huh? Since when? Self serving much, Warren? He's truly brilliant. He's the only person I can think of who can engage in all sorts of self-serving tripe and the public will unquestioningly follow him off the cliff like lemmings.

Randy, I'm not sure I understand what load boutiques must carry. As far as I'm concerned, I don't think anyone should ever carry the load of lending to people who will never pay them back. That's the game the government is now playing in place of private lenders. It's trying to convince people who have every incentive to abandon their mortgages not to do so (good luck!). The only way to do that is to reduce the price of their houses and somebody has to pay the difference. Think you and I will get a thank you note? The government types get all stressed out by events like these (which they do their best to help create) because the public tends to blame them for all and sundry. The voting public may not be able to do anything about the falling value of their houses, but they can vote an incumbent right out of office.

speaking of which...the home buyers are getting a pretty sweet bailout too. Announced this week. All you have to do to qualify is quit your high paying job (or you may have already gotten your pink slip) and stop paying your mortgage for 3 months and PRESTO! the government makes the mortgage fit your needs rather than making you and your lender go through the unpleasantness of paying for your mistakes.

I've got to figure out how to get in on this action to recoup some of the taxes I pay for this thing.

Kevin S.,

Perhaps the difference in our opinions vis a vis being born a maker or a taker is a matter of perspective more than anything else.

For instance if you are as much as 10 years younger than myself you would, I believe, have a dramtically different perspective than I; then, if you were middle class or better through your early childhood we would have a different perspective; then, if you were urban rather than rural as I was we would most likely have a different perspective; then, if your interest never extended to anthropology as mine did that too would give us a different perspective. If all those things are true then we would truly have a different perspective of considerable magnitude.

I don't know those differences exist but I think it would be fun and educational to kick back with a pint of bitters and spend some time exploring the idea.

I believe that we may be getting a little off topic now, so let's leave at the agreement that there are makers and takers; and leave whether it is birth or enculturation to another day.

Methinks,

"I'm not sure I understand what load boutiques must carry. As far as I'm concerned, I don't think anyone should ever carry the load of lending to people who will never pay them back."

I agree, but lending isn't the business that these folks are in. They are in the business of complying with the wishes of the government. Let me give you an example. The system I work on has an option to process credit cards, but we can't do it directly. We have to go through a third party company that specializes in being in compliance with government regulations. We tried for awhile, but the rules change so frequently that it was impossible for us to keep up and remain focused on our core business. The government won't admit to owning this company, and the people who work there probably don't like to admit that they work for a defacto government operation, but that is nonetheless the reality of the situation. The lending institutions may like to think that they have the option to just stop lending to high risk borrowers, but if they try it the government will simply replace them with someone who will. And in effect this is exactly what they are doing now. The government is dropping the pretense of being a lender of last resort and becoming the lender of first resort. They screwed up, and now the relationship has become explicit.

GM can't survive bankruptcy, according to Chris Isidore at CNNMoney.com. Why? Because the company is in such dire financial straits that it can't obtain "debtor-in-possession" (DIB) financing to continue operating during the reorganization. On the other hand, the Treasury can hand GM a few tens of billions to keep it afloat without reorganization.

This analysis begs an obvious question. Aside from the obvious political considerations, why can't the Treasury provide DIB financing or guarantee this financing from other creditors during a bankruptcy reorganization? As I understand the problem, GM needs protection primarily from its own pensioners and contracts with its employees.

Since GM seems likely soon to become the bailout of the week and top story tonight, I'd like to hear someone expert in bankruptcy and GM's debt burdens discuss this issue.

This is the best post from Dr. Boudreaux in a while, especially the headline. But nobody seems to be getting the point.

The NY Times headline should read: "Predictably, as we're handing out money, people are lining up to get it."

Why are we calling the lobbyists rotten, and the government rotten, when they are, in the basic parlance of economics, responding to incentives?

I don't get the rampant undercurrent of distrust and dislike in the comments. This dance, whether you think it's pretty or not, is basic behavioral economics perfectly illustrated.

What we ought to be doing is debating what incentives are smart for government to offer, and how to get government to offer them, no?

Paul, besides Muirgeo's response (which you will find is always something along the same lines of "kill the lobbyists"), I don't know why you think nobody is getting the point of the headline.

As for better incentives...I think it would be better if the government didn't mangle incentives by providing guarantees and virtually forcing creditors to extend credit to poor credit risks on loose terms. To provide disincentive for engaging in poor business practices, the government should step aside and allow poorly managed firms to face the natural consequences of bad decisions - failure. This is my suggestion for the type of smart incentives the government can offer.

Randy,

Unless I misread your post, you are saying that via regulation, the government is indirectly controlling productive resources . If that's what you're saying, then I have made that argument myself, so I obviously agree with you. As I read it, you are also saying that firms are manipulated to offer the amount of credit the government wishes on terms the government wishes, thus these firms are merely fronts for the government. I think that's more true of commercial banks and much less true for investment banks. Investment banks don't lend directly. Their primary roll is to facilitate asset allocation. They may also choose to hold securities like MBSs as well as perform the secularization and sell them to customers. The ability to sell these types of ABS adds to the demand for such loans, which provides incentive for originators to lend more, but the I-banks are not primary lenders and can't be forced to secularize, sell and hold mortgages (or any other asset). The best the government can do there (as far as I know) is to provide guarantees and add other sweeteners to the market to rustle up demand. But, I think the investment banks have a lot of culpability in this mortgage thing as they clearly performed no due diligence on the assets they were securitizing. Small investment banks stayed out of this dangerous game and they are not going under, but they are paying for the bailout of the large banks which played fast and loose.

Methinks,

Certainly I was generalizing (just a bit). Playing with ideas. Thanks for the breakdown.

"The pigs in Washington are creatures of socialist enculturation, no more, no less."

After 8 years of what many consider a fascist regime in Washington, his/her comment is outrageous and absurd.

I find Vidyohs to be the dumbest, most obnoxious commenter. He or she is a broken record calling everybody in government and whom he doesn't understand or agree with "a socialist pig" or worse. That's a variation on 'capitalist pig' which is the usual dipiction of those that clamour at the trough via lobbyists or through outrageous executive pay feeding bins.

Vidyohs is over the top in insults/ad hominems, and he casts a pall over the comments section here at the Cafe. I would cast him/her adrift, if I could, by cutting the tether to this blog. Get your own boorish blog of utter opacity, indeed!

Trumpit why do you say the executive pay is outrageous? The folks paying the executives don't think it is.

Oh Trumpit, my sweetling; did I touch the pig in you?

LOL!

Truth cuts deep, eh?

But, remember my trumplet, we are supposed to behave and give rational for our posts.

So, tell us how capitalism caused the mess at fannie mae and freddie mac. Tell us how it is capitalism that causes pigs to crowd up to the trough for what they haven't earned.

Sorry son, but your intellect isn't up to the effort.

vidyohs,

"...your intellect isn't up to the effort."

Which makes me think... did you ever notice how incredibly complex the takers' rationalizations are? That is, they tend to apply an incredible percentage of their available intellect to rationalizing their behavior. Think of the volumes written to justify (rationalize) socialism, fascism, communism, progressivism (not to mention various forms of theism), and many of them are among the most famous writings in all of literary history. So perhaps intellectualism isn't all its cracked up to be. It may, in fact, be nothing but a symptom of an underlying pathology. The truly rational person keeps it short and to the point, because the rational is seldom overly complex.

Oh absolutely Randy.

In addition, the radical left...darn redundant again, the left has the modus operendi of blowing up the building, then decrying the wanton use of explosives by vicious radicals and demands laws to restrict explosives. And, all that without ever admitting that it was they that blew up the buidling in the first place.

Of course the sycophantic press reports it as, "Building blown up, could it be a right-wing conspriacy?" even though the press knows the truth because it was they who held the fuse steady as the radical left....darn there I am redundant again, the left put the match to the fuse.

There is no retreat or compromise with those who wish to enslave you, or destroy you if they fail to enslave you. We have nothing to gain from retreat or compromise except failure.

I know I am preaching to the choir but I stumbled on this soap box and the rest is history.