Will the innocent be hanged?

After Comrade George W. Bush nationalised the two giants of the US mortgage market, Freddie Mac and Fannie Mae, earlier this month, Anatole Kaletsky wrote in The Times of London that ''the most capitalist administration ever, in the world's most capitalist country, [has] decided to wipe out the private owners of its biggest and most important financial companies and replace them with state-appointed bureaucrats''.

Wikipedia defines ''nationalisation'' as ''the act of taking an industry or assets into the public ownership of a national government. It is a central theme of certain brands of state socialist policy that the means of production, distribution and exchange should be owned by the state ... Nationalization may occur with or without compensation to the former owners. If it takes place without compensation it is a case of expropriation.''

Well, this was expropriation. When the US investment bank Bear Stearns went belly-up in March, the shareholders used their political influence to get the price of the buy-out raised from the originally agreed $2 per share to $10 per share.

By April, however, it was known that the US Federal Reserve Bank was talking to the Scandinavian authorities, who had survived a rather similar crisis in 1991-93 by nationalising their banks without compensation for shareholders.

And that is essentially what happened with Freddie Mac and Fannie Mae, whose combined liabilities of $5.5 trillion were equivalent to about two-thirds of the existing US national debt.

Those liabilities of those two institutions, which hold around half of all US mortgages, have now been added to the Federal Government's debt, bringing it to about $14.8 trillion approximately three times what it was when Comrade Bush first took office. But the shareholders got nothing.

In its desperate attempt to keep Freddie Mac and Fannie Mae afloat over the previous six months, the US Treasury had encouraged investors to pump an extra $20 billion into them.

As the situation worsened and the likelihood of a federal nationalisation without compensation loomed, Yu Yongding, former adviser to China's central bank, warned: ''If the US Government allows Fannie and Freddie to fail and international investors are not compensated adequately ... it is the end of the current international financial system.''

That is what actually came to pass this month, although the consequences will take years to play out fully. Then came last week's effective nationalisation of American International Group, which made the US Government the world's largest insurance company.

''The move represents the largest lurch toward socialism that this country has ever seen, and signals the end of the vibrancy of America's once-vaunted free-market economy,'' said Peter Schiff, president of Euro Pacific Capital.

The current proposal by the US Treasury to spend $600 billion of taxpayers' money buying up the worst of the sub-prime mortgages only emphasises how far we have travelled from the triumphalism of the free-marketeers in just a few months.

Just as China has developed a ''socialist economy with Chinese characteristics'', so the US is getting a socialist economy with American characteristics. (Indeed, the two countries even share some of the same characteristics, like the lack of a comprehensive national health service.)

The most extraordinary part of this upheaval is that there has been virtually no public outcry in the US itself, the bastion of free-market capitalism, about these nationalisations. The word ''nationalisation'' is never used, and the irony of such a socialist measure being implemented by this most doctrinaire of Republican administrations is scarcely commented on.

Republican presidential candidate John McCain let a bit of the old free-market ideology show through when he told reporters that ''the Federal Reserve should get back to its core business of responsibly managing our money supply and inflation'', but he is not really fighting nationalisations and government subsidies.

Indeed, he agrees with Democratic candidate Barack Obama that the subsidised loans to General Motors and Ford now pending approval in the US Congress should be raised from the proposed $25 billion to $50 billion.

The panicky flight from free-market orthodoxy in the US is bound to fuel a revival of government intervention and welfare-state policies in the rest of the world. In the US itself, however, they are likely to hang the wrong culprit in the end.

It was the ideologically driven deregulation of banks and markets by the Bush Administration, encouraging wild speculation and the proliferation of murky financial instruments, that made this crisis possible.

When one set of Bush-appointed regulators brought garden shears to a press conference to show their dedication to cutting the ''red tape'' that allegedly kept banks from realising the full potential of unregulated financial markets, a rival Bush appointee, James Gilleran, head of the Office of Thrift Supervision, brought a chainsaw to his photo-op. So will the Republicans be punished for their wilful fiscal irresponsibility?

Not if Barack Obama wins the presidency, which seems the likely outcome of the November election.

American voters won't remember who actually caused the financial crisis that impoverished them. They will end up blaming the party in power, the one that actually has to try to lessen the misery and clear up the mess. The Democrats, in other words.

We are entering an age of mistrust. Where can you put your savings? Show money, and the hucksters offer you sweet deal. Then you can watch it dissolve into nowhere. Put you wealth into real estate and the bureaucrats come along and tax it. This will encourage more ordinary men to join the shadow economy becoming criminals. They will join the small ranks of the thieving CEO's and directors who run public corporations and the politicians who take kickbacks and levy taxes. The problem for the the bureaucrat is as they crush the former, they reduce the flow of cash resulting in less for them to steal. Look at Europe and the former Soviet Union. Both have had large shadow economies because of state greed.

Go shadow young man, otherwise the elite will steal your wealth. know this, in order to keep your money, you need power. The two go hand in hand. Want proof? Try to call for the arrest of any involved in the latest debacle.

Hardly. For example this part is dead wrong: “It was the ideologically driven deregulation of banks and markets by the Bush Administration, encouraging wild speculation and the proliferation of murky financial instruments, that made this crisis possible.”

No, this mess was made inevitable under Clinton with the “anti-redlining” regs. Those forced banks to issue loans on criteria other than the numbers. Some banks were stupid, held on to the worthless paper, and got killed. The smart banks bundled it all up and sold it to Fannie/Freddy, which lead directly to their crash.

This is classic statist expansionism: create a problem under false pretense, let it fester out of control, then use it as an excuse for a govt power grab.

GW repeatedly tried to get bills passed to change this path, but the Donks blocked him BECAUSE THIS IS WHAT THEY WANTED ALL ALONG. Of course, they also have to deflect the blame, so we get articles like the Blaming Bush and advocating for even MORE govt reglation. In other words, lather, rinse, repeat...

But the Messiah has the answer.

Just ask his friends:

Goldman Sachs $748,880

University of California $625,911

JPMorgan Chase & Co $491,469

Harvard University $473,669

Citigroup Inc $467,849

Obama's Top 5 contributors...

Will the innocent be hanged?

If we just put the responsible parties that PERPETRATED this crisis
into jail in the manner of what Ken Lay had coming (but escaped)
no innocents will be hanged.
Even if they get effective life sentences.

Execution for corruption/fraud/theft?
That's for a country that's actually expanding, not shrinking.

Like Mainland China.

I believe the proper role of government in a healthy nation is analogous to the role of umpire in a sports event. When the umpire walks off the field, the game descends into chaos. Ditto when the umpire insists on joining in.

I quit paying any attention to Gwynne Dyer years ago. Don't remember details - so many leftist bloviators to forget, so little time- but here's his wiki entry.

Seems to be having trouble getting published in Canada (which used to be his home base) except in leftist and very small publications. Looks like he's blaming it on the Jooz. Here and here are two posts from Canadian blogger Kate at smalldeadanimals from 2004. The page linked to at Toronto [red] Star is no longer available.

Most capitalist administration ever? I guess this writer missed out on Dubya's, along with the "republican" Congress', massive pork spending, Medicare D massive increase in unfunded liabilities, the Socialist housing bubble...

I thought Leftists loved these kinds of things...oh, I forgot Dubya is against abortion. Plus, he loves war, unlike Kosovo Klinton. So never mind all that, he's the most right-wing, nut-job, capitalist administration in history.

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