The unprecedented bailout and a parallel to fascism
Posted by Charles II on March 16, 2008
The decision of the Fed to provide capital indirectly to Bear Stearns is, if I am correct, completely unprecedented. On the Econbrowser boards, a poster challenged that characterization by recalling Continental Illinois, a bank that failed in the 1980s.
But Continental Illinois was a bank, and the funds came from at least primarily from the FDIC. Bear Stearns is not what we think of as a bank: “The company’s business includes corporate finance, mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services.”
In the Long Term Capital Management bailout, the Fed acted as the matchmaker, but I don’t think taxpayer funds were placed at risk.
There’s an interesting historical aspect to this. While the term “National Socialism” has many meanings, one aspect of fascism is socializing risk allegedly in the national interest while profits remain private:
Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because “the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social.”
As it happens, they may also have broken the law in bailing out Bear:
- Fed Board: Direct Fed lending to individuals, partnerships, and non-bank corporations (IPC) such as BS much more stringent: only in 1)”unusual and exigent circumstances”; and 2) if IPC is not able to secure adequate credit accommodations from other banking institutions –>activation requires vote of min. 5 fed board members
- Inner City Press Community on the Move group files complaint on grounds that only 4 Fed board members voted for BS emergency lending.
6 Responses to “The unprecedented bailout and a parallel to fascism”
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Michael said
Fascism or kleptocracy, anyhow.
jo6pac said
Oh, Please how can we be moving toward Fasciam. Why just the other day we were free people on the internet, travel, and to do business with who we wanted. I’m sure all of those things will returned to Citizens as soon as the Demos win the big one.
Oh and does anyone have a bridge I could buy?
Best reading of 2007 books by the Naomis, one on what it looks like when it’s being done to you and the other on how it will be after it’s done.
jo6pac
Everything is on schedule, please move along.
PR said
Was he a liberal fascist?
Charles II said
Since I don’t know whether you’re joking or not, PR, I’ll assume you’re not.
The two words, “liberal” and “fascist” are opposite in meaning. Only an idiot like Jonah Goldberg would ignore most of known history and try to argue that there’s some point to his book besides trying to bash people he disagrees with.
“Liberal” means “generous” and “tolerant.” “Liberalism” is, through its tolerance inherently “libertarian.” “Fascism” means that one person makes the decision. No tolerance is required.
A fascist who is more liberal than most could be a reactionary. But a liberal who is a fascist is no liberal.
It ain’t a ‘theory’, it’s a damned conspiracy… « Homeless on the High Desert said
[...] to enslave the middle classes in a debt bubble. And Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because ‘the State pays for the blunders of private enterprise… [...]
hmmm said
actually, fascists exist on both extreme ends of the political spectrum.