04 March 2009

What the Hamiltonians forget

Poor David Brooks is shocked (shocked!) that Barack Obama is a big government, big spending, high tax, class warfare liberal tending towards the Left if not hard left. That via Instapundit who has a nice round-up of articles of those suffering 'buyer's remorse' in supporting Barack Obama and then finding out that the contents list on the packaging actually contradicted the glitzy front panel on the box. Apparently reading the contents label of a man's political career was too difficult to do for some of those 'moderate conservative' or 'moderate' or even 'conservative' punditistas that signed on to the Barack Obama bandwagon based on the packaging glitz.

It is telling what the basis for David Brooks' particular problem was in this land of self-delusion:

Those of us who consider ourselves moderates — moderate-conservative, in my case — are forced to confront the reality that Barack Obama is not who we thought he was. His words are responsible; his character is inspiring. But his actions betray a transformational liberalism that should put every centrist on notice. As Clive Crook, an Obama admirer, wrote in The Financial Times, the Obama budget “contains no trace of compromise. It makes no gesture, however small, however costless to its larger agenda, of a bipartisan approach to the great questions it addresses. It is a liberal’s dream of a new New Deal.”

Moderates now find themselves betwixt and between. On the left, there is a president who appears to be, as Crook says, “a conviction politician, a bold progressive liberal.” On the right, there are the Rush Limbaugh brigades. The only thing more scary than Obama’s experiment is the thought that it might fail and the political power will swing over to a Republican Party that is currently unfit to wield it.

Those of us in the moderate tradition — the Hamiltonian tradition that believes in limited but energetic government — thus find ourselves facing a void. We moderates are going to have to assert ourselves. We’re going to have to take a centrist tendency that has been politically feckless and intellectually vapid and turn it into an influential force.

Hamiltonianism is 'moderate'?

Alexander Hamilton was the guy who wanted a 'strong federalism' with the federal government taking on all sorts of things to guide the Nation. Foremost of which was to have federal input into the money and banking sector of the economy to help 'stabilize' it. Quite the contrary of 'limited' government, his first idea for a federal government was one that was aligned more to monarchy than republicanism. Although he would support the Constitution and compile the Federalist Papers, one suspects that the arguments of the Anti-Federalists, some few of which were arguing for a stronger set of checks and balances and more representation in the House, was something that Hamilton didn't care much for. That trend of not wanting to read and understand the full breath and scope of the founding era discussion (and some of the very personal venom that was going on) starts with Hamilton, Madison and the Federalist Papers.

Alexander Hamilton, in pushing for a type of Constitution that would see a permanent set of members in the Senate and President, was not looking towards a 'moderate' form of government but one that was, for his era, very conservative to the point of being hidebound and monarchist. His views of the elected elite having more wisdom than the common man would be moderated, and he would actively campaign for the ratification of the Constitution, but his view for a strong economic character of the National government to guide the economy is one that was fraught with problems from the very institution that he wanted: the National Bank.

I do write on this topic just a bit, and I don't mean to fetishize it, but this idea of a 'strong federal' presence in the economy, run by appointed officials in the Executive with rules drafted by the Legislative to meet petty, political goals is one that has caused problems both in the run-up and post-crash of 1927-1929 and the current housing inflation by Congressional rule changing that started in the mid-1990's but came to fruition after 2006 to present. I do so as the ills of such an institution are made when the Nation was founded and any institution trying to serve that role has the same ills that need to be addressed or it does the Nation little good to have it.

These problems were addressed long before our 'modern' era in the Bank Veto Message of 10 JUL 1832 and that message catalogs the ills of the institution drafted, then, as a monopoly concern by government. In kicking off that message the prime reason that every Hamiltonian gives for wanting a National Bank is given:

A bank of the United States is in many respects convenient for the Government and useful to the people. Entertaining this opinion, and deeply impressed with the belief that some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people, I felt it my duty at an early period of my Administration to call the attention of Congress to the practicability of organizing an institution combining all its advantages and obviating these objections. I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country.

And just where is the authorization for a National Bank or Federal Reserve in the US Constitution? Remember, after this Veto there would be NO National Bank or Federal Reserve that can intervene in the markets as we know it today, and that this would last for over seven decades. I see much on coinage, interstate trade, tariffs, taxation and so forth, but nothing on actually creating and controlling such an institution. In the Law of Nations that is something a National government can do, but our Constitution is a negative rights document that only gives to the federal government those things explicitly stated. If it isn't in there, it isn't there, and Hamilton who advocated for a National bank was neither being 'moderate' nor a believer in 'limited federal government' from the start, although his views would change during the Constitutional ratification process, his moves after that to still seek such an organ of government that is not explicitly given to Congress to do (or any other branch of government) is one that should be deeply troubling for 'moderates' today.

Ever hear of 'strict constuctionism'? Why is it only applied to the courts when the entire federal arrangement falls under a very strict constructional arrangement? You know, State's rights and that sort of thing... oh, right, we chucked that out with the 'Progressive' era with Teddy Roosevelt leading the way.... so sorry! I had forgotten how long the big government bug has been in the intestines of the two party system.

So, what was the first problem with the National Bank that caused it to get nixed? Well, it took far too much control of things:

The present corporate body, denominated the president, directors, and company of the Bank of the United States, will have existed at the time this act is intended to take effect twenty years. It enjoys an exclusive privilege of banking under the authority of the General Government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of many millions to the stockholders.

You mean they actually had a corporate body you could go to and address? Not just some high-up bureaucrat that trots before Congress once in awhile, but an actual board you could find and castigate? And it was a company, too? Any relation to Freddie and Fannie? I mean the Federal Reserve, Fannie and Freddie are all exclusive clubs... I mean 'organs of government'... that are put in place by Congress, right?

Now this foreign and domestic exchange problem, does that have anything to do with something like 'market intervention' to 'stabilize the currency' and 'buying other Nation's money' to help them out? How about intervention into the domestic market for, say, setting over-night bank loan rates and home mortgage rates? But we are, at least, lucky that the leaders of, say, Freddie and Fannie aren't mere political brown-nosers appointed to reward political support by giving the individuals a lucrative job in a controlled government organ to benefit partisan needs... oh, wait, they are that. Aren't we so lucky to have the latter and not a group we can easily point to as stock holders?

The problem, of course, is that politics then, as now, played a role in who got to do what in the National Bank, and so there was a ready scheme to utilize funds for political purposes and economic enrichment of those involved in it. And this would be yet another sticking point:

An apology may be found for the failure to guard against this result in the consideration that the effect of the original act of incorporation could not be certainly foreseen at the time of its passage. The act before me proposes another gratuity to the holders of the same stock, and in many cases to the same men, of at least seven millions more. This donation finds no apology in any uncertainty as to the effect of the act. On all hands it is conceded that its passage will increase at least so or 30 per cent more the market price of the stock, subject to the payment of the annuity of $200,000 per year secured by the act, thus adding in a moment one-fourth to its par value. It is not our own citizens only who are to receive the bounty of our Government. More than eight millions of the stock of this bank are held by foreigners. By this act the American Republic proposes virtually to make them a present of some millions of dollars. For these gratuities to foreigners and to some of our own opulent citizens the act secures no equivalent whatever. They are the certain gains of the present stockholders under the operation of this act, after making full allowance for the payment of the bonus.

Ah, a gracious President who says that those who passed the fool thing couldn't have foreseen the results that would come from it. But past problems do not require that they be promulgated: just the opposite, they are to be removed and if the basis of the institution is poorly founded then the institution must go. Giving a REWARD to those involved in the thing is just the opposite of doing that. Say, why are Fannie and Freddie get oodles of cash to hand out under the EXACT SAME regulations that CAUSED our current mess? What is up with that, anyways? Do our elected Representatives and Senators really think that these two institutions are worthy of the backing of the US government?

Still we don't have the stock prices of these institutions to worry about, we just pay and pay and pay into them with little to no accountability, as of late, and the Federal Reserve admitting that it doesn't know where up to half of the original TARP funds went. Not like we are handing out free money, or anything, heaven forefend. Mind you instead we are handing trillions more for government, the Federal Reserve and the two FMs to hand out. Can we at least get the entire boards of each of them tossed out and elect someone sane to run them? Oh, wait, those are 'political appointments' so we can't do that, we just have to trust our government... which got us into this mess in the first place.

On the foreign side, you do know that the largest debt holders in the Fannie and Freddie system are Russia and China, right? Its not like we are shoveling out hundreds of billions for a goodly portion of that to ensure that our debt holders don't get cold feet and pull out of our federal home mortgage system... yes, that's right, one of the reasons we are throwing out more cash than has ever been thrown out by any Nation in a few weeks is to make sure that our over-inflated housing market is pumped up to the benefit of these foreign debt holders. Because, you know, if they pulled their money out it might cause a 'crash'... scrambles to look at the Dow Jones hey an uptick at 6,840! Ah, well I do remember the days of the over-inflated 10,000+ Dow... you do know that percentage-wise we are pretty close to the same sort of drop as seen between 1928 and the crash of 1929, right? So given that we are already having one of the largest stock market crashes on record, just how much more painful would it be if Russia and China both left us? Russia isn't doing so hot what with the oil market in a tailspin and China laid off 2 million people and closed 70,000 factories. So we might be looking like a damned good investment right now.

So we are, basically, shoveling money out to keep the over-inflated system going and prop up Russia and China and reward them for investing in our bad economic behavior. Good job! We are now sure to get more of the same!

Now if you want to address the institutional problems of the two FMs and the Federal Reserve, we could take one of the solutions proposed for the old National Bank, and it is really something that is truly American:

It is not conceivable how the present stockholders can have any claim to the special favor of the Government. The present corporation has enjoyed its monopoly during the period stipulated in the original contract. If we must have such a corporation, why should not the Government sell out the whole stock and thus secure to the people the full market value of the privileges granted? Why should not Congress create and sell twenty-eight millions of stock, incorporating the purchasers with all the powers and privileges secured in this act and putting the premium upon the sales into the Treasury?

If you think the concept of 'privatization' is only something from the mid-20th century, you have thought wrong. Here is the concept: take the entire ball of federal wax that shouldn't be there and set a market value per share and offer as many shares as there are citizens and give each person the option to get a share in the resulting corporation either through direct payment to the government or as a check box on their tax returns with each member of the household getting a share (must be a US citizen). That way these institutions must get regular oversight, are accountable to the American People and must get a regular governing system set down that is separated from the political appointments of the government and elected by the share holders.

Instead of shoveling billions to all these companies for 'bail outs' why not tell them that they must give a share of their company to each and every American Citizen, distributed via the Treasury, and then be held accountable NOT to DC but to the American People directly? That then distributes the load of the system to all citizens and allows us to determine the value, if any, these companies have by TRADING the shares in an open market. Doing that would get rid of 'government oversight' and put it in the hands of the American People without exception: it is our government handing out our money and we deserve a direct say in these spendthrift companies government wants to prop up. Every additional 'bail out' is more shares due to each citizen.

Yes that will make any elitist 'moderate Hamiltonian' go watery at the knees at the concept that the American People can make a better decision on their own destiny than our government can in the financial arena. And if these companies ever start to make money, they can pay out dividends to EVERYONE. With that done the true market value of the companies and their assets will be found and adjusted for in a period of a year or less once average citizens start dissecting them like frogs in a science class. There aren't enough regulators in government to do that, but with the economic downturn we have lots of financial analysts that are unemployed and who could do a bit of hobby work on, say, AIG or Chrysler or Fannie Mae.

You see the Hamiltonians can't come up with this sort of deal as they don't trust the average American Citizen to make a good decision for themselves. Which is why they got co-opted by the Wilsonians prior to WWI when President Wilson re-created the National Bank in the form of the Federal Reserve. Ever since then Hamiltonians have let their elitist ideas of 'limited federal government' get overwhelmed with their 'moderate' views of what government should be doing FOR government in running the Nation. Why is David Brooks ticked off? Was it that Barack Obama went overboard? Or that he is a Hamiltonian with strong Wilsonian views that tend to be elitist, condescending and authoritarian? Hamiltonians were overjoyed that Ronald Reagan spent freely and never did get around to cutting government. Really, these are the 'moderates' who take the ratchet view of government that 'once it does something it cannot be undone' and forget the truth as stated in the Declaration that governments are instituted amongst men and can be changed or abolished by them.

We repealed Prohibition.

Perhaps it is time to undo the harm done by these grotesque federal organs that advocate policies of a faction of one party ONLY, and are elitist in their views and don't give a hot damn for anything but money. We will be impoverished to continue the wrongs that were created by ill-made institutions and ill-created regulations that guided banks and the American people away from sound banking, investments, and loans and to our current economic hardships. Remember those laws are still on the books.

A real President would trust the American People and not government.

Just like President Jackson proposed in 1832 and recognizes the proper place of government:

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society-the farmers, mechanics, and laborers-who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.

Nor is our Government to be maintained or our Union preserved by invasions of the rights and powers of the several States. In thus attempting to make our General Government strong we make it weak. Its true strength consists in leaving individuals and States as much as possible to themselves-in making itself felt, not in its power, but in its beneficence; not in its control, but in its protection; not in binding the States more closely to the center, but leaving each to move unobstructed in its proper orbit.

Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy.

Perhaps it is time we heed our experience as a Nation and learn the wisdom of past acts undone.

I have had it with the prostitute we call government and the Congresscritters who act as its pimp.

And when it is our interests as a Nation being pimped off for the gains of the few, and we get the shaft, that is when, indeed, we must heed the words of Jackson and Jefferson.

We can change, to do so is hard as we will step back to the path we have not trod on for decades now. The path of liberty, freedom and equality under the law with no bias in the law for any. And get these financial institutions into the hands of the American People and NOT their elected representatives who are not up to the task of running them for us, so we must take that burden from them.

It is not too late to do so.

But time grows short.


M. Simon said...

Government (for most of us) is like thermodynamics.

1. You can't win
2. You can't break even
3. You can't get out of the game

Our only consolation is that Europe has it worse.

A Jacksonian said...

To me it is a weed that grows in certain, well known ways and only has limited value in holding down topsoil. You make sure it is starved of water, kept to the lowest nutrients and it will serve the purpose of keeping the soil in place where nothing else will grow. Give it too much and it becomes this quite poisonous thing with its roots and stems festooned with toxins to poison any close to it.

Like thermodynamics it requires constant attention to keep in place.

It is, as Paine told us, a necessary evil.

Let it grow too large to take over the place of good crop plants and it becomes a pure evil.