Salsman on the Anti-Capitalist Troubled Asset Relief Program (TARP)

Nov 2, 2011 | Politics

Writes Richard Salsman on TARP After Three Years: It Made Things Worse, Not Better at Forbes:

The $700 billion “Troubled Asset Relief Program” (TARP) was enacted in Washington three years ago this week, and while most economists, policymakers and journalists still believe it made things better (“helping us avoid a second Great Depression,” they like to say), in fact it made things much worse – and today we’re still suffering from its bearish effects. As just one example, a similar scheme, modeled on TARP – the “European Financial Stability Facility” (EFSF) – is being adopted abroad, further undermining bank stocks.

Those who fail to grasp TARP’s true impact will find it difficult to comprehend the currently-bearish impact of the EFSF. The problem with most U.S. banks in 2008 was not that they were “under-capitalized” but that they held so many shaky (sub-prime) residential mortgage-backed securities (RMBS), assets which bank regulators insisted were some of the safest assets they could own, because they were “backed” by the taxpayer-backed mortgage GSEs (Fannie Mae and Freddie Mac) and thus required virtually no capital.

Instead of U.S. banks shedding bad assets, merging and raising private capital, TARP compelled them to take unwanted, high-cost capital injections with “strings attached” that became a noose around their necks.

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The critics of bank bailouts are right to oppose bailouts per se, but most of them ignore the irrefutable fact that in 2008-2009 most U.S. banks were forced to take TARP funds, coerced into paying above-market rates on preferred dividends, and compelled to run their operations as Washington prefers (the source of the financial crisis in the first place). Yes, most banks by now have repaid TARP funds, but the Dodd-Frank “reform” bill (enacted July 2010) continues or intensifies its evils while further institutionalizing government interference in banking. Even though U.S. bank profits have rebounded in recent years, bank stocks today remain 47% below where they traded when TARP was enacted in October 2008, and 23% below where they traded when the Dodd-Frank bill was enacted in July 2010. It is politically unsafe to invest in the banks.

The majority of U.S. banks were perfectly healthy in 2008-2009 and should have been left free of TARP. Instead they were exploited by Washington – and unwittingly by U.S. taxpayers – not the other way around.

Steve Jobs: One of the 1%

Nov 2, 2011 | Politics

Are you a money-making personality? Apple co-founder Steve Jobs (1955-2011) certainly was, but so also are the lesser-known creators of abundant value in the business sector who sustain the world economy like the Atlas who holds up the globe.

These are the 1% of us, the rare giants of industry, commerce and finance who occupy Wall Street suites, Silicon Valley campuses, and all great cities in between. These are the best and the brightest, not the worst and the dimmest, those who don’t whine that others owe them jobs or handouts but practice the virtues of rationality, honesty, integrity, independence, productiveness, and pride.

Jobs’ recent death elicited the requisite commendations and eulogies, the most worthy of which came from those who knew best his character, life, work, and achievements. Interviewed last August, Apple co-founder (in 1976) Steve Wozniak said “He’s always going to be remembered, maybe for the next hundred years, as probably the greatest business leader – or at least technology business leader – of our time, or ever.” Like Bill Gates, Jobs and Wozniak were college drop-outs (from Harvard, Reed College, and U.C. Berkeley, respectively) – proof to young aspirants that great success can come without over-priced college degrees.

Are The Real Uncle Tom’s Left-Wing?

Nov 1, 2011 | Politics

There’s already plenty of groupthink among American blacks. Over 90% of us vote Democrat with religious regularity, and we have been doing so for over fifty years. For a short time, I was one of them. I realized a few years ago that the Democrats’ promises of equality bestowed by government wasn’t working and will never work. I came to believe that redistributionist policies with the goal of social justice was essentially creating a new plantation within the federal government. Scraps might be thrown our way, but dependence on the plantation would be the inevitable result.

Over half a century since we started voting for Democrat policies, blacks in America are worse off than before. Black Americans are more likely to get involved with drugs, go to prison, and die younger than our white counterparts. Over 70% of our children are born out of wedlock. Our abortion rate has never been higher. There are two explanations for these results. 1) Blacks are an inferior race and can’t take care of themselves. 2) Despite the best of intentions, the government has created and implemented “social justice” policies that promote perpetual dependence. I choose to believe the latter.

Lecture: Capitalism Without Guilt — The Moral Case For Freedom

Oct 29, 2011 | Politics