Barak Obama and the Democratic Congress are talking a lot about more regulations over and tax burdens on financial institutions.
But as I point out in a new piece that I’ve written on, “Bank Bailouts are Payback for Bankrolling Politcians,” those same bankers and financial “masters of the universe” were major contributors to the election of the president and those Congressmen.
About 160 of the banks and financial institutions who have received, so far, about $305 billion in TARP money shelled out $37.5 million in campaign contributions in the 2007-2008 election cycle. President Obama received $4.3 million of those contributions. The Senators on the Senate Banking, Housing and Urban Committee and the Senate Financial Committee received $5.2 million on campaign contributions.
In addition, those same banks and financial institutions expended $76.7 milliion in lobbying costs to win friends and influence those in political power who determine how much and for whom the bailout money will be redistributed from the taxpaying public.
Thus, for a total of $114.2 million in political campaign contributions and lobbying expenditures, those banks and financial institutions have received a more than 2,500 percent return on their political “investment” in the form of TARP money.
Nothing talks like money in politics. While there may be caps on some executive salaries, and expanded regulations on how financial institutions operate, and on what they are to spend all that government money, the fact is those closest to the government will always use their connections in the halls of political power to see the interventions can be used and manipulated by them.
That is the nature of “the political marketplace” in which the primary commodity traded are favors and privileges for some at the expense of the general citizenry and the taxpaying public.
Again, Ludwig von Mises understood and explain all of this many decades ago, in an essay on “The Myth of the Failure of Capitalism” (1932):
“In the Interventionist State it is no longer of crucial importance for the success of an enterprise that the business should be managed in a way that it satisfies the demands of consumers in the best and least costly manner. It is far more important that one has ‘good relationships’ with the political authorities so that the interventions work to the advantage and not the disadvantage of the enterprise.
“A few marks more tariff protection for the products of the enterprise and a few marks less tariff for the raw materials used in the manufacturing process can be of far more benefit to the enterprise than the greatest care in managing the business. No matter how well an enterprise may be managed, it will fail if it does not know how to protect its interests in the drawing up of the customs rates, in the negotiations before the arbitration boards, and with the cartel authorities. To have ‘connections’ becomes more important than to produce well and cheaply.
“So the leadership positions within enterprises are no longer achieved by men who understand how to organize companies and to direct production in the way the market situation demands, but by men who are well thought of ‘above’ and ‘below,’ men who understand how to get along well with the press and all the political parties, especially with the radicals, so that they and their company give no offense. It is that class of general directors that negotiate far more often with state functionaries and party leaders than with those from whom they buy or to whom they sell.
Since it is a question of obtaining political favors for these enterprises, their directors must repay the politicians with favors. In recent years, there have been relatively few large enterprises that have not had to spend very considerable sums for various undertakings in spite of it being clear from the start that they would yield no profit. But in spite of the expected loss it had to be done for political reasons. Let us not even mention contriÂ¬butions for purposes unrelated to business – for campaign funds, public welfare organizations, and the like.”
Mises wrote these words about the nature and workings of the interventionist state in the twilight of the German Weimar Republic — just before the arrival in power of those who imposed the “national socialist” form of central planning and control as a “cure” for the Great Depression that the earlier interventionist state had created.