Vladimir Putin forces an aluminum plant owner into humiliating public submission:
When you think about the cram down the Obama people forced on the Chrysler bondholders in violation of U.S. bankruptcy law, or you recall the humiliation of the automakers driving economy cars cross country to testify before Congress, or if you recently watched a quavering and submissive Vikram Pandit — CEO of U.S. government owned Citi — on CNBC talking about the justified “retribution” of President Obama and his public supporters against freedom of contract on Wall Street, you have to think we really are not that far from a behind-closed doors version of the world which Putin now commands in Russia. Here’s a clip of Pandi on recent “Meeting of the Minds: The Future of Capitalism” on CNBC talking about the “retribution” limiting freedom of contract which Pandit says Wall Street justly deserves:
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I love how they never mention that “get bailed out” was these corporations’ risk-management strategy. Somebody with a little backbone and intelligence would’ve seen that and refused.
Don’t forget the original GM stockholders who had their assets stolen by the government. That was easily one of the most flagrant examples of government denying private property rights since FDR confiscated people’s gold.
I notice that Greg Ransom skips right over the fact that the owners of the aluminum plant are accused of failing to pay workers. Isn’t that a contract as well. Or are only contracts which pay management or Wall Street bankers bonuses worth enforcing? Its just as much a breach of contract when an Aluminum company fails to pay its workers as it is when a bankers does not get his bonus
So when we cry over contracts not being honored, lets cry over all the contracts, not just some of them. And when we condemn someone for breaking a contract lets condemn all of them including Vikram Pandit whose Citi bank was about to break a huge number of contracts since it had run out of money and has only been able to pay them off with taxpayer money
DJF: remember that the workers weren’t working. I don’t know the specific contracts involved, but I also don’t think that the oligarch in question was as stupid as many American businessmen in agreeing to pay workers even when they weren’t working. The contract that Putin forced the man to sign required him to ramp up production so that he would have to pay his workers. That is ridiculous.
As to Citi, it is normally the responsibility of a company to meet its own obligations. The knowledge that the government (that is, everyone else) would bail them out of their obligations encouraged Citi to overstretch itself. If you agree to meet two people at different places at the exact same time of day, you will fail to do so and the fault lies with you. Should you break those agreements? No, but more to the point, you shouldn’t have made both of them in the first place. Government agrees to enforce contracts, but no one can enforce a contract that cannot be fulfilled at all.
And I think we all agree that contracts ought to be sacrosanct, but people do stupid things and there is no way to enforce all contracts without violating the Rule of Law, the ideal that keeps governments from being arbitrary.
DJF — I’m not crying over anything or skipping over anything.
Are you a Soros paid professional troll?
Is this the same Putin who was lecturing the US about the dangers of turning to socialism just a few days ago?
But David Bratton Putin didn’t say anything about fascism!
When will Obama and his cronies face retributive justice? A little crucifixion would be in order for our would-be “Messiah”… Except this time it would be of a Barabas…
“â€â€â€Thinker writes
remember that the workers weren’t working.â€â€’
If getting paid for not working is so wrong then why do so many corporations pay out for no work. They give out “Golden Parachutes†to failed executives, they give out “retention bonuses†to traders who have already been fired, and I have no problem with that, but I do have a problem when the money for that is taken from the taxpayer.
“â€â€â€As to Citi, it is normally the responsibility of a company to meet its own obligations. The knowledge that the government (that is, everyone else) would bail them out of their obligations encouraged Citi to overstretch itself.â€â€â€â€
And how did Citi and the rest of the bankers know this? Because they have their people in the Treasury and the FED. The FED is owned by the bankers, it’s a bankers cartel. I find it strange that mises org can be so right about the evils of the FED but ignore who owns and controls the FED
Below is part of the Federal Reserve Act concerning the directors of individual FED banks. There are 9 directors, 3 each of Class A, B, C. Six of those directors however are nominated by the banks themselves, Class A and B. So those banks control the FED, they are the FED. Yet we have here at Mises a constant attack on the FED (rightly in my opinion) but also a constant defense of the banks that make up and control the FED. This makes no sense, to claim that the banks who control the FED are victims of the FED.
The same with the Treasury, Paulson was the bankers guy, he was CEO of Goldmans Sachs. Geithner was the President of the New York Federal Reserve bank, a position he could not get without the banks supporting him, six of the nine votes are directly controlled by the banks. So the idea that the evil FED and evil Treasury are picking on the poor banks is ridiculous, nothing happens at the FED or Treasury without the banks signing off on it.
“â€â€16. Nomination and Election of Class A and B Directors
Directors of class A and class B shall be chosen in the following manner:
The Board of Governors of the Federal Reserve System shall classify the member banks of the district into three general groups or divisions, designating each group by number. Each group shall consist as nearly as may be of banks of similar capitalization. Each member bank shall be permitted to nominate to the chairman of the board of directors of the Federal reserve bank of the district one candidate for director of class A and one candidate for director of class B. The candidates so nominated shall be listed by the chairman, indicating by whom nominated, and a copy of said list shall, within fifteen days after its completion, be furnished by the chairman to each member bank. Each member bank by a resolution of the board or by an amendment to its by-laws shall authorize its president, cashier, or some other officer to cast the vote of the member bank in the elections of class A and class B directors: Provided, That whenever any member banks within the same Federal Reserve district are subsidiaries of the same bank holding company within the meaning of the Bank Holding Company Act of 1956, participation in any such nomination or election by such member banks, including such bank holding company if it is also a member bank, shall be confined to one of such banks, which may be designated for the purpose by such holding company.â€â€â€
“â€â€â€And I think we all agree that contracts ought to be sacrosanct, but people do stupid things and there is no way to enforce all contracts without violating the Rule of Law, the ideal that keeps governments from being arbitrary.â€â€â€â€’
I agree, but a big part of the arbitrariness has been in favor of banks like Citi. They are the ones who signed off on contracts which they had no possibility of paying off. That is fraud, both civil and criminal. But because of their control of the FED and the Treasury they get a pass on this and then get bailed out and with that bailout they get to fullfill certain of their contracts, the highest priority seems to be in giving bonuses to executives and traders. While the attitude here at Mises seems to be that these are sacred contracts while the pension fund contract to a auto workers is nothing and in fact is illegitimate. Either they are all sacred or none of them are. And the only way to break them is by either mutual agreement or by the fact there is no way to fullfil them which might be fraud.
“How far are we from this?”
From the situation in Russia? Not too far. I do have to say that Putin forcing the man to meet his contractual obligations that he didn’t meet and humiliating him in the process is fair.
Forcing the plant to stay open is unfair.
Finally, a smart cookie ! mises.org is starting to be polulated with absolute idiots David Bratton, Thinker (thinker !? more like donkey, you fool !)
DJF,
Your points seem to address an issue of “fairness”. This isn’t something our system is well designed to dispense. But at first I thought, well, both investors and union workers are taking a pounding here.
But there’s a difference: investors are owners. Workers aren’t. And if we were an equal-ownership society, there wouldn’t have been any investors and thence no car company to begin with. The union contract was dependent upon a solvent company, at least in theory. This company has ceased to exist. All bets are off.
But his sounds a little academic even to me.
I don’t agree with this government takeover but as I look at GM and it’s cohorts, it’s dependents and beneficiaries, I say BIG DEAL. These behemoths went broke despite DECADES of hand-outs and favoritism. And I guess this is my point: anybody who didn’t see this coming, from the man on the shop floor to the most heavily vested investor, they either made a very poor decision or they got too used to the gravy train.
So I’m with the crowd that says fairness, if there is any here, is to shutter the place, sell it’s assets to it’s competitors and send everybody home disappointed. As it stands, investors and union workers should be glad to get ANYTHING out of this because the rest of us, all we get is to pay for it.
I think that another critical point is that the banking industry around the world should really be considered more a defacto part of the government than it is. Their entire business model is constructed around a violation of property rights (fractional reserve banking) and fraud (issue of credit from thin air, FED clicking the button and increasing bank reserves), throwing in free, underfunded insurance for gravy (FDIC). It is foolish to believe that a private market alternative to this industry is viable, if the state-sponsored entities have such large advantages over private market firms that respect property rights. I believe that it is fundamentally improper to treat a “private” business as private it operates only with such largesse from the government. The banks and the government are symbiotic parasites on the productive part of society, and one superior in the parasitical organization (Obama) stringing up an inferior in the parasitical organization (Pandit) makes total sense. They are trying to preserve the BIG lie.
The property rights at issues are not those of the owners of Citi and the other banks. They engage in an enterprise that exists by violating the property rights of others. The property rights at issue are those of all holders of US money, holders of bank deposits, or those who have taxes stolen from them.
That Putin clip is terrifying. What would you do, as the plant owner, knowing that a large number of journalists and political opponents of Putin have had deaths under mysterious circumstances? I could see the look of nervousness and apprehension in his eyes.
Here you have some obviously incompetent plant owner that should go out of business and yet, he’s forced to sign an idiotic, sure to fail “business” contract. According to the clip, he already has massive debt and you can see that his plant was in total disarray. I don’t see how keeping that guy in business can do anything except make things worse.
The US is already there, the tone is just different. Putin’s cult of personality is based on a macho image, which this publicity stunt well exemplifies. But the action isn’t really that different. It wasn’t that long ago when US politicians were publicly demanding that GM/Chrysler CEOs sell their jets. It’s all a part of the same three-ring circus that the public appears to buy into so willingly.
The way I hear it, the list of entities that have received federal money, including Penn. RR, Martin Aircraft, Chrysler auto of years back, NYC, etc. all had directors on their board that represented at least one of the six largest banks in the US. They drove the business into a highly leveraged debt ratio which bankrupt the firm. It was the banks involved that were rescued by the government bailouts.
Is this the same situation in current Detroit ??
DJF: Paying workers for not working isn’t “wrong”, it’s just not a particularly sensible thing to do. Pension plans may attract workers in the present, but they potentially overstress the company to the point that it cannot continue, see GM.
The Fed, as Murray Rothbard detailed, was created by the large banks to allow them to do stupid things without paying the consequences or lose business to smaller banks. Thus the problem is with the bankers, but it is exacerbated enormously by the Fed, whoever runs it; and the Treasury is not actually controlled by the bankers, but by the White House, so the Treasury inflicting arbitrary punishments on the banks is not so ridiculous.
I can’t speak for the whole of Mises, but payment tends to flow out in the same order that investment (of capital or labor) flowed it: stockholder and bondholders first, then workers, managers, and executives, with the exact order being determined by the specific contracts and the ease with which they are fulfilled. This order makes sense and is “fair” on the basis of mutual agreement.
We have a contract that is being cancelled, it was called The Constitution, and the Bill of Rights, are you willing to fight to retain those rights, or is that just too much trouble?
Obama is leading us to One World Government, and he hopes he will be the Grand Leader.
He uses Teleprompters to make sure he voices the parties instructions, but he does not know he is the dupe, just following the plans to destroy our sovereignty, and deliver us to evil.
What is painful is to see this happening, and the sheep following to slaughter.
Wake up Americans, fight to retain our Rights, turn off the Ball Game and get involved. Don Cordell can lead this nation to Restore, not Change.
Wasn’t Putin demonstrating and utilizing the techniques he has learned from the U.S. political structure ?? Hasn’t D.C. manifest similar control over U.S. industry, especially over Detroit, for the past 60 years ??
The workers in the U.S. can be employed and earn a living only if they submit a tribute, arbitrarily determined by Congress, for their physical labor. The workers are leased from government. Payments for income taxes, Social Security, workmen’s compensation, and other fees imposed by government must be paid or the employer is destroyed. Employers are controlled by government.
If GM and Chrysler had been permitted to cease making payments of tribute to government, they would never have had financial problems.
Heavily unionized industries (most of which have already fled the country to avoid excess labor costs) exist only because unions are protected by legislation. Union leadership bribe legislators for increased protection and the inflated wages, whether at Detroit or government contracted projects such as road building, are all paid by the taxpayers. Increased membership of unions is currently most prevalent in government employment. Unfortunately, those occupations cannot be off-shored. Employers are controlled by government.
If GM and Chrysler had been permitted to pay competitive non-union wages, they would not have been forced into bankruptcy.
Punishments fines for OSHA infractions, environmental offenses, product malfunctions which are often over-hyped, are all expenses for businesses that are paid by consumers and fill government coffers. Businesses are the revenue source for government.
Putin, in compelling the employer to restart his business, was protecting the economic welfare of the Soviet political forces. He learned well from the U.S.
DJF makes some interesting observations on the FED but I believe he inadvertently puts the Fed spin on some of the Fed misconceptions he transmits.
He says: “The FED is owned by the bankers, it’s a bankers cartel.†The evidence appears to confirm that conclusion, but his following paragraph attempts to identify the bankers cartel as the Board of Directors of the federal reserve banks. Whoops! I disagree.
The Federal Reserve System is created by Title 12, Sections 221 through 530. The twelve FR banks DJF identifies with the nine member board of directors are the subject of Sections 281 through 290. Local banks gain access to services of the FR system by fees and participate in the election of the directors of the regional FR Bank as detailed by DJF. As DJF relates, the FR banks have been adjudicated to be privately owned banks. Scott v FRB of Kansas City, 406 F3d 532.
DJF overlooks the role of the FR Board of Governors as established by 12 USC 241 to 252. Section 248j establishes supervisory control over the FR Banks. Status of regulatory control has been adjudicated. The BOG has assessment authority for “expenses†per section 243.
It is the BOG that is the banking cartel that controls the FR System. That cartel is centered in NYC. The FR Banks are mere franchises of the FR System. The BOG asserts it is a government agency but it fails many of the parameters of such an agency.
Paying workers to not work sometimes makes sense. If they have any skill at all, and you plan to reopen, then you had better pay them, otherwise they will find a new job, and be unable to work for you when you reopen. In this case the shutdown saves you the cost of raw materials, and reduces supply of your product – both working supply and demand into your favor.
Of course this is a business decision. It is not always the correct one.
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