Right Wing Nut House

It is an article of faith for many on the right that government regulation of anything is inherently wasteful and inefficient; that government’s role as a watchdog or arbiter can only lead to less freedom, more restriction of the free market, and a less vibrant economy.

More learned people than I make that argument so I will not dispute it. The question then; is there a case to be made for government regulation anyway?

We’re getting into slippery territory by weighing the bad against the good; a loss of freedom in the market in exchange for some semblance of order. The notion that this is a bad trade off in every case is mistaken, in my opinion. Certainly there are compelling reasons why the only entity large enough to ride herd on the gigantic corporations who run our financial industry upon which we all ultimately depend is the federal government. Trusting these mega-banks to do the right thing without careful, and calibrated adult supervision contradicts the conservative principle that you can’t change human nature (Russell Kirk’s principle of the “imperfectability”) - that given the means and opportunity, the financial giants will act in ways that would be detrimental to the promotion of necessary fairness and transparency, thus damaging the free market anyway.

Kirk’s “well ordered society” and “prudent restraints upon power” should inform any regulatory scheme that seeks to balance the needs of society to protect itself and the necessity of the free market to operate. In this way, there is a conservative case for financial regulatory reform to be made. It’s just too bad that GOP lawmakers are so terrified of their right wing base that they didn’t dare work with Democrats to come up with a bi-partisan FinReg bill that would have been a more prudent, less intrusive, and more effective than the one that passed the senate yesterday. Working with the enemy is verboten and that goes double for anything that smacks of using the government to regulate Wall Street.

It is a legitimate question to ask whether Democrats would have listened to Republicans - any Republican - on a FinReg bill in the first place. Not even trying to work with the opposition on such significant legislation is irresponsible governance. Those few Republicans who exposed themselves to the fury of the base by trying to work with Democrats will get precious little thanks for their efforts. What meager concessions that senators like Scott Brown, Susan Collins, and Olympia Snowe were able to wangle from the majority will do little to alleviate the impression that this is a Democratic bill through and through, passed once again in the dead of night, with little understanding of what the senate has wrought, and will place an inordinate amount of power in the hands of regulators to make sense of the bill’s 2000+ pages.

Prudence is a lost civic virtue.

The tragedy is that there are indeed, some aspects of this bill that any conservative could have gotten behind. For the first time, a light will shine on the shadowy world of derivatives and credit default swaps - the abuse of which became a primary cause of the downfall of Bear Stearns and AIG. The NY Times Steven Davidoff:

Shadow Banking. The bill establishes record-keeping and reporting requirements for most derivatives (Section 727 and 729). It also establishes a registered derivatives exchange and requires all of these derivatives to be submitted for clearance on an exchange (Section 723). The Securities and Exchange Commission and the Commodity Futures Trading Commission can regulate and ban abusive derivatives as well as decide which derivatives are required to be cleared (Section 714). Nonfinancial companies do not need to clear derivatives if there is a commercial reason for the transaction and they notify the S.E.C. of their ability to financially meet the obligation (Section 723). These provisions as a whole ensure that there is a more open process for derivatives and the ability of regulators to assess their systemic risk.

Treating the derivatives market in a similar fashion that we regulate the stock exchange is a reform long overdue. Previously, we were treated to the spectacle of derivative traders actually betting against the plays of their clients - a grossly unethical practice. At least regulators will get a heads up if there are the kinds of abuses in the system that led to the meltdown.

What about bailouts?

The bill establishes an intricate series of provisions to place ailing financial institutions and systemically significant nonbank financial companies into receivership (Title II). The bill also has provisions allowing the government to deal with systemically significant foreign firms and foreign financial subsidiaries of American companies (Sections 113 and 210). Had these provisions existed, the government could have dealt effectively with the disastrous problems at the American International Group, Bear Stearns and Lehman Brothers.

The bill requires that in any resolution, senior management is placed farther down the line of creditors of the firm than they would in a normal bankruptcy (they are placed after the unsecured creditors and just before shareholders) (Section 210). The bill also allows the government to break financial contracts, like credit default swaps, in the resolution process (Section 210). These two provisions allow the government to avoid an A.I.G.-type situation where it is forced to hand over collateral under these derivatives contracts or otherwise pay out money to undeserving management.

There is no guarantee that a company will be “too big to fail” but it makes a taxpayer bailout a matter of last resort rather than panicked action by government. The point being, even if we allow a failing giant to go out of business, it must be managed very carefully so as not to spook the rest of the market and guarantee an orderly exit for the business.

Not perfect but probably the best that could be achieved under the circumstances.

The bank capital requirements are mostly sensible to me, although there is the risk that too stringent requirements will lessen the competitiveness of our financial institutions. As a prime example of unintended consequences, a regulatory regime that is too restrictive in how much cash and assets a bank should have on hand is a probable outcome. Regulators, by nature, are overly cautious and this area of the bill would seem to lend itself to overregulation.

There’s plenty not to like in the bill. A fairly thorough and intelligent take on this comes from Conn Carroll over at Heritage blog. No doubt there are other unknown consequences that will emerge over the next few years. All we can do is hope that Congress will ride herd on the bureaucrats and mitigate the worst of what they can do.

Could the GOP have done any better - that is, if they were of a mind to regulate Wall Street to begin with? I really don’t know. Would a GOP bill have incorporated more suggestions from the industry? Would it have been as tough on derivatives as the current bill appears to be?

What is certain is that we have another imprudent example of how not to govern an industrialized democracy in the 21st century. These gigantic “comprehensive” reform measures hand too much power to unelected bureaucrats by Congress abdicating its responsibilities to carefully weigh the consequences of their proposals before greenlighting them. The most disheartening aspect of Obama’s agenda is not that little thought is given in this area, but that no thought at all is invested in figuring out the downside to these legislative initiatives. It is beyond irresponsiblity that the Democratic Congress has placed us in thrall to government apparatchiks who care more about aggrandizing power and elevating their position than in promulgating intelligent regulation. That is the nature of bureaucracy - something that the Democrats have forgotten, or simply about which the Democrats don’t care.

Reason enough to boot them from power in November.

The earthquake that shook the world’s financial system in September of 2008 opened many eyes to the fact that the largest companies on Wall Street had become heavily engaged in the extremely profitable but wholly unregulated derivatives market without a clue as to understanding the extraordinary damage their gambling could do to the economies of the industrialized countries if a financial shock came along.

There were some - in government and out - who sensed the trouble we were in but whose voices were drowned out in the speculative frenzy, the drive for ever larger profits, and the mania for secrecy upon which these firms traded. And the enablers in the Clinton Administration - including Larry Summers, Tim Geithner, and Robert Rubin - along with the anti-regulatory Fed Chief Alan Greenspan, worked hard during the 1990’s (as did their successors in the Bush administration) to keep the regulators at bay, discrediting them with Congress, and trying to bully them to toe the party line on keeping the derivatives market free of scrutiny by the government.

We paid for this shortsightedness with a meltdown of the financial industry that we are still feeling today and are likely to feel for years to come.

Those who continue to believe that the collapse of Lehman Brothers and subsequent tsunami that led to our current economic problems was the result of a few hundred thousand poor people who got loans they shouldn’t have received through the Community Reinvestment Act need to wake up and smell the coffee. The still unregulated derivatives market is worth $600 trillion today. That is not a misspelling. An unknown tens of trillions of that market - nobody can possibly know exactly - are in “toxic assets” still being carried on the books of big banks just waiting for the next shock to hit Wall Street to bring these great houses of finance to their knees again.

Yes, mismanagement of risk by Fannie and Freddie had something to do with the crisis, and the CRA had its own small role to play. But this crisis virtually begins and ends with the mind boggling way in which the largest financial service companies in the world fought tooth and nail to keep the government from finding out just what they were up to with these credit swaps.

I suppose I should mention that my understanding of all this is a mile wide and an inch deep. But the political explanations offered by both sides never satisfied my curiosity. The crisis was more than 2 decades in the making, and the idea that one side is more or less to blame for it is nonsense. Both Clinton and Bush, Democrats and Republicans in Congress have a lot to answer for and trying to place relative blame on a scale and weigh out who should be designated as the winner of the blame game is an exercise in futility.

No transparency, no record keeping, and little understanding by either the companies or the government of the systemic risk of these derivatives and credit swaps led directly to the collapse. But we can’t get rid of derivatives even if we wanted to, as business writer for the NY Times Timothy O’Brien points out:

But it’s really important to remember that there are a lot of good, practical uses for derivatives. In fact, the average person who’s a homeowner owns a derivative. It’s the insurance policy on their house, and it’s essentially a contract that you enter into with an insurer that pays you a certain amount of money if some kind of damage or calamity happens to your home. And you pay a little bit of money, or a lot of money depending on the size of your home, each year for that policy.

Wall Street has all sorts of contracts like this. Derivatives, in essence, are insurance policies that various players on Wall Street and in the business world enter into to protect themselves from unforeseen calamities, whether it’s wild interest-rate swings, changes in the values of currencies, someone’s debt going bad. …

And that’s a good thing. When people have protection from things they can’t control, it enables them to take sensible risks, which allows them to grow their business and allows more money to get created and creates jobs. These are all good things, as long as that’s what these things are being used for.

As you might have guessed, it was the other things derivatives were used for that sealed our fate:

The problem is, no one really knows exactly what derivatives are being used for because it all exists in a black box. They’re unregulated; the contracts aren’t traded on exchanges; they’re entered into between private parties. No one knows whether or not one company, let’s, for example, call them AIG, a big insurance company, has entered into so many of these contracts that if an unforeseen financial hurricane comes and hits the house known as Wall Street and suddenly AIG is required to make good on … so many of these policies that they don’t have enough money to do this, and they run into danger of going belly up. Which is exactly what happened at AIG.

And the lingering question is, if these transactions - if the derivatives market - had been regulated adequately, could we have avoided the worst of the meltdown? Joe Nocera, also of the Times:

The technical term for the kind of derivatives that really got us into trouble is bespoke derivatives. Bespoke means one of a kind. And these were complicated contracts that covered a particular, you know, one deal only. It couldn’t be replicated. It wasn’t like buying a share of IBM that is exactly the same as every other share of IBM. You bought a credit default swap; it would be built around a particular series of deals. It would have a particular set of terms. It would be one of a kind.

This is, by the way, why this stuff became so untradable. How do you trade a one-of-a-kind? There is no real market for them. It has a utility as a contract on a one-on-one basis. But there is no trading function. And that has been part of the whole problem. They don’t mark to market, i.e., because there is nothing to compare it to. What’s out there that you can compare this one thing to? So they mark to model. They come up with fancy, financial models every quarter. And they mark this thing to the model.

And for many years the model said they were worth more, worth more, worth more, so you mark them up. And then finally the model said: “Uh, you know what? Foreclosures are up. Subprime is down. We have got to start marking them down.” You start to blow up. But even though they are blowing up, you are still stuck with them. There is nothing you can do with them. You can’t trade them.

Bottom line:

So one of the big problems with the rise of credit derivatives is that Wall Street was terribly resistant to the idea of standardizing contracts and allowing them to be traded on an exchange, because it would hurt their profits.

The question now before us is what should be done about it? And for me and for many conservatives, the question becomes is there any regulatory regime that would be consistent with conservative principles?

It is a false assumption that regulation of markets is inherently un-conservative. Libertarians might take that position but since conservatives should value order above almost all else, sensible regulation of markets is a requirement for promoting a just and orderly society.

The size of companies like JP Morgan and Citigroup gives them an enormous advantage in the market already. And as I demonstrated above, these credit swaps take place in a totally unregulated, secret environment. Add the potential for harm to the community - harm that could be avoided or mitigated with a regulatory regime - and I think a solid, general case can be made for conservatives to support some kind of minimal regulation.

The problem as I see it, is that as with everything else President Obama wishes to do, he takes a good idea and ruins it by overkill. The president wants to transform the financial services industry. Conservatives want to rein it in. Obama wants to drastically reduce risk. Conservatives recognize the value of risk (as explained above) and want to minimize it without destroying its many advantages. The president wants to create a federal agency - the Consumer Financial Protection Agency - that some analysts believe would make credit extremely difficult to get for ordinary Americans. Conservatives believe that laws already on the books to protect consumers in this regard could be strengthened, but that a whole new agency is dangerous and unnecessary.

The differences then, are a matter of degree. Clearly, where there is no regulation or transparency, government must be there to create it so that not only is the economy protected, but that the derivatives market itself becomes less prone to the kind of exploitation that secrecy encourages.

Being supportive of a free market most decidedly does not mean that conservatives should oppose all regulation, or support less than adequate regulation, due to an ideological belief that such “interference” is an anathema to the functioning of the market. If the derivatives crisis showed anything, it is that our modern financial system is so complex that ordinary market forces that are supposed to correct imbalances are actually a danger to the economy as a whole. There may have been steps short of trillions in bail outs for firms “too big to fail.” We will never know because they weren’t tried. But even solutions like forced mergers of teetering banks, managed liquidations, guided bankruptcies, and the like would have required massive government intervention in the markets to achieve. And since the problem was worldwide, such measures may still have not been enough to keep the crisis from imperiling the world’s banking system.

A free market is only free if all benefit from its workings. When big companies can skew the market to gain advantages not available to others, or when they can game the system - backed by taxpayers - to take wild risks and place our economy in peril, it behooves conservatives to support reasonable steps by the government to rectify the situation.

Some of what the president proposes makes sense. Preventing big banks from both taking deposits and trading securities that benefit their own house - a small move back toward Glass-Steagell - is a good idea. Other ideas, like making the Fed the overseer of “systemic risk” and the creation of the CFPA smack of overreach. What eventually emerges from negotiations with Congress, with Wall Street, and the White House we can only hope will be adequate to address the problems without being so burdensome that they stifle economic activity.

It should be clear to all of us by now that the single driving factor in this economic downturn was the meltdown in home values. All the talk about how the big banks screwed us over is relevant only as it relates to the massive devaluation of our largest personal asset; our homes. If home values had stayed relatively stable, or come down at a reasonable rate, the bank crisis may have been manageable. It may have been seen as a bad couple of quarters rather than the catastrophe it became.

But that didn’t happen so here we are. And where we are may very well precipitate another huge devaluation of homes which would then lead to another round of bailouts and takeovers. This is because according to most experts, there is still slack in home values that has yet to be taken in; that our homes are still overvalued despite dropping 30-35-40%.

This has created a situation that is evidently not unprecedented except in scale; people with “underwater” mortgages - where they owe more than their house is worth - simply mailing the keys to their domicile to the bank and walking away from their mortgage obligations. Many simply stop payments and dare the bank to foreclose and evict them. Others find cheaper quarters by either renting, or taking advantage of cheaper mortgages.

There were a few of these walkaways during the housing bust of the early 1990’s. But today, nearly 5 million mortgages - about 10% of all residential mortgages in the country - are underwater (defined as a mortgage where the value of the house is 75% or less than the principle). And while no one is keeping track, one outfit has estimated that a half million people took the walkaway route last year.

Financial advisors are at the point of actually urging their clients to walkaway. Sure, their credit rating will take a hit. Better that than pouring money down a black hole where you will never realize any return on your investment.

There are a couple of ethical questions associated with walkaways that need to be addressed; one is personal, the other is an apparent double standard in the application of society’s disapproval.

Case in point; a New York developer walked away from paying the loan on 11,000 apartments in Manhattan:

The rules are different, though, for the walkaway of all walkaways.

That title is reserved for what happened to one of New York’s trophy properties, the 56-building Stuyvesant Town and Peter Cooper Village complex. Spanning 80 acres on Manhattan’s east side, it’s the largest single-owned residential area in the city. Its red brick buildings, built by Metropolitan Life in the 1940s for World War II veterans, are still a haven for the city’s middle class.

Commercial real-estate firm Tishman and its partner, investment firm BlackRock, paid $5.4 billion to buy the property from MetLife in late 2006 — right at the market’s peak. They hoped to make money by converting rent-regulated apartments into luxury condos and raising rents.

Then the housing crash hit. The value now: $1.8 billion.

And you thought you overpaid for your house.

“They made assumptions that things would grow to the moon, and things certainly did not,” said Len Blum, a managing partner at investment bank Westwood Capital.

Tishman said last week that it was turning the property back over to creditors to avoid filing for bankruptcy protection. In recent weeks, Tishman failed to restructure $4.4 billion in debt, and couldn’t find another buyer, according to a statement from the company.

Will Tishman come in for less disapprobation than a homeowner who walks away from a mortgage where he is paying 40% more than the house is worth? It’s a certainty that banks are treating Tishman differently than the ordinary homeowner:

Walking away isn’t risk-free. A foreclosure stays on a consumer’s credit record for seven years and can send a credit score (based on a scale of 300 to 850) plunging by as much as 160 points, according to Fair Isaac Corp., which provides tools for analyzing credit records. A lower credit score means auto and other loans are likely to come with much higher interest rates, and credit card issuers may charge more interest or refuse to issue a card.

In addition, many states give lenders varying degrees of scope to seize bank deposits, cars or other assets of people who default on mortgages.

Even so, in neighborhoods with high concentrations of foreclosures, “it’s going to be really difficult to prevent a cascade effect” as one strategic default emboldens others to take that drastic step, says Paola Sapienza, a professor of finance at Northwestern University. A study by researchers at Northwestern and the University of Chicago found that as many as one in four defaults may be strategic.

The double standard is easy to understand, less easy to justify. The fact is, a bank is less apt to severely penalize someone who owes them billions as opposed to someone who is into them for a few hundred thousand. The “sin” may be similar, but repentance is more complicated. It’s as if a rich man and a poor man both stole a loaf of bread; the poor man was forced to knee walk up a rocky mountain and say the rosary while the rich man got away with saying one our father, one hail mary, and a glory be (old line catholics will recognize that penance immediately).

Ideally, the same sin should engender the same penance or punishment regardless of wealth or social station. But in this case, we hold people and corporations to different standards of behavior and hence, different attitudes toward walkaways.

But it is the personal ethics of abandoning a promise to repay monies loaned in good faith by a lending institution based on your past history of good credit and timely repayment that is of most relevance for us. What happens when so many walk away from their obligations not because they can’t pay but because paying what they owe is a bad personal financial decision?

We can all sympathize with the walkaway and wonder if we’d do the same in their situation. But from an ethical standpoint, this is really rotten. By walking away, these homeowners are making it more difficult for the rest of us to get a homeloan or refinance our existing home. This is an inherently selfish act in that the walkaway fails to take into account the effect on the community and society.

And then there’s the prospect if there are enough walkaways, a tipping point will be reached and all that bad paper that is still on the balance books of major banks will cause another meltdown necessitating still more bailouts and takeovers when home values go into another death spiral.

What happens if five million Americans decide to stop overpaying their mortgages and mail the keys back to the bank? There would be a sharp decline in housing values. There would be another downward leg to the financial crisis, with a big hit to the capital of banks and other institutions holding large mortgage portfolios.

I think the housing decline would be a healthy thing, as this market is still overvalued. I don’t believe we would see a deflationary spiral, a widespread collapse of debt values, and a descent into a full-fledged Great Depression II. This was the great fear when the bubble first started popping in late 2006.

But since late 2008, the Bernanke Doctrine has showed that the modern Fed has the tools to keep this from happening. Administration officials can say whatever they want, but Too-Big-To-Fail is still reality.

What of the decline in individual purchasing power, the so-called adverse wealth effect, that would come with lower housing values? It would be muted because making mortgage payments on an overvalued house diminishes purchasing power just as badly.

But the net effect of the Great Walkaway would still be a strong downdraft in the overall economy.

I don’t for a moment believe that 5 million people will strategically default on their mortgages. But who can guess where the tipping point might be? Who can be sure that 1 million or 2 million such defaults wouldn’t crash the economy again?

All because people selfishly took stock of their personal financial situation and decided it was OK to saddle the rest of us with what is, after all, their problem. I say they have no ethical right to do it and that Congress should make it easier for banks to collect from these voluntary deadbeats.

Not surprisingly, Congress will treat these people as victims and no doubt either bail them out (one estimate is it would take about $750 billion to pay off the difference between what underwater borrowers owe and what their houses are worth), or make some accommodation with credit reporting services to give these strategic deadbeats a pass. Encouraging irresponsibility has been the hallmark of the Obama administration housing policies so why should we expect anything to be different here?

For the vast majority of us who have suffered a big hit on the value of our homes but continue to remain faithful to our obligations, this whole walkaway phenomenon is a slap in the face. We are being played for suckers. And it’s depressing to think that rewards will accrue to those ethically challenged scofflaws who don’t play by the rules but come out smelling like roses anyway.

In the midst of doing a lot of things wrong, the Obama administration appears to be about ready to take some steps in regulating the big banks on Wall Street that, if the details are carefully drawn, will make our financial system more secure while reining in institutions that were determined to be “too big to fail.”

The Wall Street Journal:

On Thursday, Mr. Obama proposed a plan that would prevent banks that receive a federal backstop from investing their own money in financial markets—what is known as proprietary trading. He also pushed for new limits on the size and concentration of financial institutions. Both moves echo the Glass-Steagall Act, the Depression-era banking curbs that was repealed in 1999.

The proposal marked the return of Mr. Volcker to center stage in the Obama White House. The 82-year-old chairman of the president’s Economic Recovery Advisory Board consulted closely with Democrats in the House and Senate as they drafted their proposals to address “too big to fail” entities, referring to financial behemoths whose collapse might bring down the economy. Mr. Volcker spoke frequently with Mr. Obama as well.

But he faced a philosophical divide with others on the economic team.

The Geithner-Summers axis in the White House has been opposing the virtual re-imposition of Glass-Steagall for months. This decision by the president makes me think that one or both of them is on their way out - and soon. Geithner is the logical choice to take a long walk off a short pier, having angered just about everybody but executives who benefited from his bank bonus policies.

My guess is the ax will fall right before the State of the Union speech, perhaps as soon as this weekend. Obama will use SOTU to probably ask for a fresh start from the American people and he’s not going to be able to do that without some heads rolling - especially among those who have been responsible for implementing his economic policies.

The experiment of having a financial system free of Glass Steagall constraints has failed. Jim Manzi at American Scene, in an excellent summary of the new regs, explains why:

Finance professionals, like members of all occupational categories, attempt to build barriers that maintain their own income. One of the techniques used is to shroud what are often pretty basic ideas in pseudo-technical jargon. The reason that it is dysfunctional to have an insured banking system that is free to engage in speculative investing is simple and fundamental. We (i.e., the government, which is to say, ultimately, the taxpayers) provide a guarantee to depositors that when they put their savings in a regulated bank, then the money will be there even if the bank fails, because we believe that the chaos and uncertainty of a banking system operating without this guarantee is too unstable to maintain political viability. But if you let the operators of these banks take the deposits and, in effect, put them on a long-shot bet at the horse track, and then pay themselves a billion dollars in bonuses if the horse comes in, but turn to taxpayers to pay off depositors if the horse doesn’t, guess what is going to happen? Exactly what we saw in 2008 happens.

If you want to have a safe, secure banking system for small depositors, but don’t want to make risky investing illegal (which would be very damaging to the economy), the obvious solution is to not allow any one company to both take guaranteed deposits and also make speculative investments. This was the solution developed and implemented in the New Deal. We need a modernized version of this basic construct, and as far as I can see, this is what President Obama has proposed.

Glass-Steagall put up a wall between commercial banks and those banking institutions that make their living on Main Street. What was seen as an antiquated, outdated notion in 1999 when it was repealed, makes a lot more sense in retrospect. The deregulators forgot one gigantic truth about human nature; we are a fallen species, and if an opportunity presents itself to aggrandize one’s own wealth and power at the expense of another, few will resist such temptation.

Manzi’s point about risk is also well taken. We cannot overregulate to the point that risk is discouraged - especially in the competitive global business environment we find ourselves today. Intelligent risk taking is the essence of entrepreneurship and the government will have to walk a fine line between mandating responsible behavior by big investors while still allowing the magic of the market to bring new products and new ideas to the fore.

While some of the administration’s rhetoric on this issue has bordered on anti-business, the political ramifications of slapping Wall Street with new regs that will force them to act more responsibly to the economy as a whole are profound. Manzi again:

The political aspects of such reform are compelling. People are disgusted at recent bank bonuses. I’m a right-of-center libertarian businessman, and I’m disgusted by them. Make no mistake, many banking executives right now are benefiting from taxpayer subsidies. Even if they pay back the TARP money, the government has demonstrated that it will intervene to protect large banks. This can’t be paid back. And this implicit, but very real, guarantee represents an enormous transfer of economic value from taxpayers to any bank executives and investors who are willing to take advantage of it. Unsurprisingly, pretty much all of them are.

The “populist” observation that the fact of a bunch of well-connected guys each pulling down $10 million per year while suckling on the government teat constitutes almost certain evidence of self-dealing is accurate, and all the fancy finance talk in the world can’t get around it. President Obama has a clear political incentive to pursue this proposal. I assume Republicans will see that they have a clear political incentive to go along, rather than standing up for such a situation. Hopefully, this will create the political dynamic that will allow real, positive reform.

If the result of these regs is that we never hear the words “too big to fail” again, that will be fine by me. I am a little more convinced a year later that the intervention by government at the time was at least partly necessary, although I ask would it have been possible for the government to have tried a little harder to effect mergers and controlled bankruptcies rather than shelling out such huge amounts of taxpayer dollars. We’ll never know, which is why creating a regulatory regime to make sure that we never - ever - put the taxpayer in that position again is of paramount importance.

You may have missed this blog post at American Thinker a couple of days ago. Rush read it on the air and it got a little play - not nearly enough as it should, however. This “Letter from a Dodge Dealer” brings home in stark, human terms the cost of Obama’s power grabs and points up a fact that many may have dismissed or simply not recognized; when you’ve got a gun to your head, you’re even willing to destroy your family to save your own life.

That gun is being held by Obama’s auto team as it struggles to keep as many UAW jobs at Chrysler as possible regardless of whether the businesses involved get hurt. Case in point; George C. Joseph, sole owner of Sunshine Dodge-Isuzu in Melbourne Florida, a business that had been in his family for 35 years, who received the bad news that Chrysler was yanking his dealership agreement as part of their restructuring under the forced bankruptcy of the company ordered by the Obama auto team.

Mr. Joseph says that his dealership was “financially strong” and was seen as having “great respect in the market place and community.” He added, “We have strong local presence and stability.”

This was not enough to save Mr. Joseph or any of the other 788 dealers who are being dropped by the automaker. Beyond that, the “terms” of the break with Chrysler would no doubt have made Al Capone proud:

On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them. My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as “new,” nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory.

Our facility was recently totally renovated at Chrysler’s insistence, incurring a multi-million dollar debt in the form of a mortgage at Sun Trust Bank.

This is happening all over the country as this Chicago Trib article from May 17th explains:

But inside the 789 Chrysler showrooms to be cast aside, fear is starting to set in as dealers try to figure out what to do with expensive inventories that weren’t selling well even before the Auburn Hills, Mich., automaker entered bankruptcy protection last month.

“They’ve told us that the inventory is our problem,” said Keith Hollern, one of the owners of a Dodge dealer in Windber, Pa. “Want to buy one? We’re having a fire sale.”

Dealers borrow money to buy their inventories, then repay the loans and make a profit when the vehicles are sold. But Chrysler sales were down 46 percent the first four months of the year, so many dealers have been paying interest for months. Even if the vehicles are sold at cost, dealers still lose thousands in interest payments.

Chrysler doesn’t have the money to buy back the vehicles, said company spokeswoman Kathy Graham, but it also doesn’t want to leave dealers in a bind or see the inventory flood the market at bargain prices.

So it has signed a deal with GMAC Financial Services, Chrysler’s new finance company, to float loans to dealers that Chrysler plans to keep can take on the 789 dealers’ unsold inventory. The deal, though, doesn’t include about 4,000 2008 models still on the lots.

We are talking about around 44,000 cars that would need to be bought back. Are you trying to tell me that Obama can find the tens of billions of dollars to bail out his union buddies but can’t find one red cent to help the small businessman? Where is the logic that you must bail out the auto maker but allow the company that sells those cars to perish ignomiously?

Obama’s corporatism does not mean he is friendly to business but rather only to those businesses that can do him political good. Mr, Joseph asks the $64,000 question:

HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?

THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY

This is beyond imagination! My business is being stolen from me through NO FAULT OF OUR OWN. We did NOTHING wrong.

This atrocity will most likely force my family into bankruptcy. This will also cause our 50+ employees to be unemployed. How will they provide for their families? This is a total economic disaster.

HOW CAN THIS HAPPEN IN A FREE MARKET ECONOMY IN THE UNITED STATES OF AMERICA?

It can happen because at the moment, the opposition forces are scattered, dispirited, and engaged in a fruitless quest to determine who is a “real” conservative and who is an Obama loving, free market hating, wimpy, squishy RINO.

It can happen because we are barking up the wrong tree when we accuse the Democrats of practicing socialism. Any Chicagoan recognizes what’s going on as pure gangsterism - the application of power through the use blackmail, threats, and pure muscle and the devil take the Constitution, the rule of law, and simple fairness.

It can happen because we’ve elected a president who aggrandizes power unto himself while running roughshod over individual rights.

It can happen because we are allowing it to happen. We are too busy, too worried about the economy, too frightened of the future, and too complacent about the idea that “It could never happen here.” It’s happening now and not enough of us are raising our voices in protest. Not enough of us are demanding that our politicians be held to account for meekly accepting Obama’s fait accomplis.

What can we do about it? Hope that most of Obama’s ruinous interventions can be reversed once people wake up to the fact that this is not about saving the free market, or curing the economy, or stimulating production, or anything else save the naked application of power by presidential fiat to further the ambitions of one man and his party. The automatic complaint that the right never protested Bush power grabs will ignore the fact that, while overreaching in many cases I believe, the Bush administration was seeking to restore a balance lost in Congressional power grabs of the 1970’s and early 80’s. Bush was not seeking new powers (in most cases) but rather to restore power to the executive lost when Congress usurped several presidential perogatives, especially relating to national security. Not a “unitary executive” but rather the restoration of the same powers exercised by presidents in war time from Washington through Nixon.

What Obama is doing is much, much different and on a scale that makes Bush look like a presidential power grabbing piker. The incredible amount of debt he is piling up has a purpose; to ensure federal intervention in the economy for the foreseeable future. It will also, no doubt, make more people dependent on government for their livelihood - a good reason to vote for the party that will promise to keep the spigot open and the dollars flowing.

The tea parties are a good start but obviously not enough. Obama is moving too fast, his reach will soon engulf bankrupt states like California and probably New York eventually. Only voters can stop him and the Democrats from turning this country into something that is unrecognizable to those of us who still believe that the Founders intended America to be different and not a pale imitation of some moribund European social demcracy.

We feel for Mr. Joseph. But Obama’s got the muscle to do pretty much anything he pleases. And that includes holding a gun to the head of Chrysler and making them an offer they can’t refuse.

Is it smart politics to vote against what will be a wildly popular economic bailout package that may approach a trillion dollars? Further, is it really necessary in order to “save” the economy?

Politicians are always torn between doing what they know is right and what they know is politically safe. Many times, there is a happy convergence between the two schools of thought and the politician comes out a winner. For Republicans, this happens whenever tax cuts are up for a vote or votes on issues like welfare reform or military spending.

But what happens when an issue like the bailout package comes before you - a bill that most GOP conservatives worth their salt know deep down in their gut is the wrong approach to getting the economy out of a recession and will push the federal deficit toward the magic number of a trillion dollars?

To liberals like Paul Krugman (and probably some Republicans), the deficit doesn’t matter:

It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.

Krugman may be half right. Government spending increases during a recession are inevitable and the fall off in revenue due to reduced business activity as well as the increase in the numbers of citizens forced on to the public dole as a result of job loss means a rise in the federal deficit. This much is unavoidable and repeating Herbert Hoover’s mistake in trying to hold the line on spending by increasing taxes is a non-starter. Even Obama knows that much in that he has put his tax increase plans on hold for a couple of years - much to the chagrin of his class warrior base.

But a trillion dollars? And beyond that incomprehensible number is the political fallout that would occur if the GOP were to fight against the stimulus package in the first place.

Such a move might please the Republican base which makes up about 30% of the electorate. But the last I checked it takes more than 50% to be successful in elections. And if the GOP wants to make inroads against the Democrats in the House and Senate, they are going to need considerably more than 50% of the electorate to vote for them in order to climb out of the huge hole they have dug for themselves.

So the smart political move would be to go with the flow and vote for Obama’s giveaway, right? Not so fast, says Nate Silver who lays out the political choices for GOP lawmakers quite nicely:

1) Try to pressure Obama into some kind of compromise, and vote for that compromise;
2) Let the stimulus pass as the Democrats choose to construct it, over your strong objection;
3) Yield to Obama, and vote for the stimulus in the name of national unity.

The third choice probably isn’t very appealing to you. It might be appealing to Newt Gingrich, who is telling you that you don’t have the credibility right now to pick a fight. Better off rebuidling and rebranding the party for the long term. But rebuilding and rebranding means someone other than you is in charge — someone, for example, like Newt Gingirch. So that option is out.

So let’s think through the other couple of choices. First thing first: if the economy improves substantially by the midterm elections, you’re screwed. It won’t matter whether you voted for the stimulus or voted against it, and it won’t matter whether you achieved some kind of compromise or you didn’t. If, by the summer of 2010, GDP growth has miraculously recovered to 4% per year, that’s all the public is going to think about. Obama Save Economy!! Me Vote Democrat!! They aren’t going to care about whether you snuck some sort of capital gains tax cut in there.

But let’s say that the economy still sucks in 2010 — which, frankly, is a pretty good bet. That’s going to work much, much better for you if you’ve voted against the stimulus. Not only can you pin the blame on the donkeys, but you can campaign on tax cutting and fiscal responsibility — the stimulus will “prove”, once and for all, the wisdom of conservative economic principles. And then think about this: the Democrats are going to be trying to spend $800 billion in taxpayer dollars as quickly as they can possibly get away with it. Somewhere along the way, they’re going to wind up funding a Woodstock Museum or a Bridge to Nowhere. Somewhere along the way, an enterprising contractor is going to embezzle a bunch of stimulus money, or cook up some kind of pay-to-play scheme. Maybe if you’re really lucky, this will happen in your Distrct. Better to keep the whole thing at arm’s-length and make sure that Democrats get the blame for that.

The Hobson’s Choice facing Republicans is fighting against a popular president and his very popular giveaway plan in which case if the economy improves by 2010 (more on this later), the GOP is toast or accepting the rationale of the Obama White House and voting in favor of the package in the name of national unity as a result of an “emergency” in which case you will get absolutely no credit from the American people and your base will desert you. The third choice is equally unpalatable; try to inject some sanity in the giveaway by dint of minor amendments, warn of catastrophe, and then vote for it anyway.

In other words, if you stand up for your beliefs and fight the bailout (a certain losing proposition at this point given the Democratic majorities in the House and Senate), your only hope is if the plan doesn’t work and the economy is still in the tank by 2010-12. But if you follow your political instincts and vote in favor of the plan - even if you are able to get Obama to modify some of the parameters - the American people will still see the package as a Democratic triumph. You only consolation by taking door #3 is that the GOP base won’t desert you entirely - probably.

More to the point, can an honorable politician of any ideology or party deny the president what he deems necessary to help people in what his advisors and many experts are telling him is an extremely serious economic crisis? And what does it say about the GOP as a party whose only real hope for gains in 2010 is if the president’s plan doesn’t work and millions suffer the consequences?

Or will they? We are in a serious recession, the depth of which is unknowable at the moment. A Republican Administration has already pumped trillions into the financial sector (without much effect on credit markets and all to the detriment of a free market economy). Few are asking would we have been better off - or just as badly off - if Bush and his gorgon Paulson (and bailout enabler Fed Chair Bernanke) had simply tweaked the system rather than drowning it in money. If the Bushies had allowed several larger Wall Street banks to go under or facilitated some mergers while letting others go down the drain, how much worse off would we be?

Stock market lower? Perhaps. Credit tighter? Hard to see how that would be possible. More job losses? Again, we’re bleeding half a million jobs a month so it would be difficult to imagine that pace getting much worse.

Then there’s all that worthless paper - mortgage backed securities, credit derivatives, and loans that have been foreclosed. There are trillions of dollars of this worthless toilet paper sitting in banks around the world - had been sitting there for months as the housing bubble burst and began to drag the economy toward recession. What changed that caused this bailout mania?

Panic took hold. The Panic of 2008 will be remembered for the scramble to inject “liquidity” into the financial sector so that the business of American business could continue. Gigantic corporations asked the government to sheild them from the results of their poor business decisions and the ebb and flow of the free market by claiming to be “too big to fail” and the government obliged them by throwing trillions of dollars in their direction. No one knows where this money went. No one knows how it was spent. We are told that by saving these companies, we avoided a “meltdown.” If it not be heresy, might I inquire as to just what proponents of these bailouts think we are experiencing now if not a “meltdown?”

In effect, we just spent $7 trillion or so (most of that printed up by the Fed and pumped into the “system” in ways that are so arcane, not even the deacons of high finance can explain it adequately) just to avoid what we are, in fact, going through right now. We don’t know how much worse it would have been without this massive bailout. Such prognostication is impossible. Indeed, even asking the question “How much bang did we get for those $7 trillion bucks?” will bring down criticism for even daring to think that perhaps - just perhaps - much of this massive giveaway was - dare I say it - unnecessary?

But with the GOP’s credibility at close to absolute zero, no one in the Republican party seems willing to make the case that before we pump another trillion dollars into the economy in free money, it might be a good idea to pause and reflect on exactly what we are doing. Forget the deficit for the moment. How is this bailout mania - the result of a feeding frenzy due to the smell of unearned cash available to those who whine the loudest and have the best lobbyists - affecting the ability of the free market to function?

For all the ignorant words written in opposition to the free market in recent months, no one has yet figured out a better way to deliver goods and services to the consumer so cheaply and efficiently, create wealth and jobs, innovate in cutting edge industries like energy, pharma, and bio-tech, while proving itself over time as the most spectacular engine for liberty and the fairest system in the history of industrialized civilization for distributing the economy’s bounty.

No, it is not perfect. Far from it. But this hybrid beast that is emerging as a result of such massive government intervention in the economy is an unknown animal. And if this is to be the end of the “American System” don’t you think we should like, you know, have a debate about it or something? Right now, the new Obama Administration is riding the crest of a wave of panic that gripped this country in late summer and early autumn. And the idea of making nation-changing decisions because Wall Street has been spooked or people are anxious about the future without the benefit of a full fledged debate is even scarier than anything the economy could ever elicit from me.

And now, at the exact moment that this country needs a strong, united Republican party who could come up with free market alternatives to this giveaway society being created by the Democrats and stand up for what they know is right, the GOP is busted, broken, toothless, and out of ideas.

It is not simply going to be good enough to scream “NO” into this hurricane wind of “hope and change.” The GOP must vigorously make the case that the need for this bailout has not been thoroughly examined or thought through adequately. They have a responsibility to try and apply the brakes to this juggernaut that has swept the country over the last few months as politicians have responded to panic by panicking themselves. Most importantly, they must do what minority parties are supposed to do; offer sound, reasonable, achievable ideas to counter what is coming from the majority.

This will not happen to the leaderless, dispirited crew of Republicans on Capitol Hill. In this respect, it won’t matter politically whether they vote for the bailout or not. They have already proven themselves to be emasculated by the voter and their own timidity and cowardice when it comes to standing up for their core principles.

I am not a leveller. I am not a class warrior. I believe that the free market should set pay scales for everyone from janitors and secretaries to the CEO’s of large corporations. I believe the government has no business telling corporations how much to pay their CEO’s or top management. Nor should government be in the racket of giving an advantage to labor unions in negotiations by doing away with the secret ballot and forcing unions down the throat of unwilling business owners.

But what happens when the rich corrupt the market and make their own rules? What happens when powerful interests interfere with the workings of the market and make a mockery of fairness, accountability, and common sense? This is where the libertarian, laissez faire capitalism model falls on its keister and fails to do its job. When companies are so big that their movements can overwhelm the natural balance that the free market seeks to impose on all, some other entity must step in to restore that balance.

We conservatives have been loathe to see government interference in the free market of any kind, deeming such nosiness as anti-business and anti-capitalist. Indeed, many regulatory efforts by the government are counterproductive to competitiveness and inimicable to simple liberty. But there is also something to be said for a government that works to keep that balance offered by the free market by not allowing things to get too far out of whack.

The problem is that much government regulation is written by the very people it seeks to regulate. One of the dirty little secrets in Washington is that of the thousands and thousands of proposed regulations published in the Federal Register every year, very few are enacted without “input” from lobbyists representing the interests being affected. This input goes far beyond the comments requested when proposed regulations are published. In fact, the regulator and the regulatee often have an incestuous relationship where much of the language upon which a regulation is based - regulations that have the force of law - is inserted by well heeled industry lobbyists who are allowed into the process due to their expertise.

There is nothing inherently wrong in this. In fact, such a right is guaranteed in the First Amendment’s “right to redress grievances.” The problem is that many of these regulations are written to choke off competition, not protect or expand it.

But that’s only half the problem. Government has become complicit with these anti-competitive forces in Congress as well. The insertion into an innocuous piece of legislation of a tax rider that grants a specific corporation a break on some arcane IRS rule. Business cronies of members who are steered to the right people in the bureacracy who can throw a federal contract their way, thus making a mockery of the competitive bidding process.

The point is simple; when government (and I include government headed by Democrats as well as Republicans) puts itself on the side of the rich and powerful instead of on everyone’s side - rich, poor, business, labor, the middle class - the market becomes skewed and we end up with the kind of crisis and bailout mania that we have now. To those who say on both sides that the government must “choose” whose side to take, you are missing the point. If the government took the side of the market and generated regulations and legislation that increased competition, fairness, and accountability, we would not be in the situation we are today. All would benefit from that kind of government and prosperity for most would be the norm.

George Bush didn’t want that kind of government. Neither does Barack Obama who thinks he can skew things toward the poor and Middle Class rather than the perceived favoritism shown toward the rich and large corporations. The problem with Obama’s good intentions is that without massive reform in the bureaucracy and on Capitol Hill, the rich will simply go on making their own rules that either exempt themselves from market forces or make it harder for their competition to do business.

Is it a pipe dream to envision this kind of reform? Given the cynicism and venality we find in official Washington today, such reform is probably impossible. We have allowed corporations to grow beyond all reasonable bounds and it is impossible to reign them in given their international reach and massive influence on the government. Then there are the titans of finance like Maddoff who are so rich, they can make water flow uphill by getting regulators to look the other way while he steals tens of billions of dollars.

I am not complaining that Maddoff is rich. More power to him if he gambles successfully in the stock and commodities market. But his lawbreaking highlights the unfair advantage that accrues to the rich when they can bend government to their will and warp the competitive marketplace to their wn advantage.

These rather disjointed thoughts are largely the result of the $8 trillion in bailout money that has been handed to these corporations with little more than a hope and a prayer that they will use the funds in a responsible manner. The fact that most of the managers and CEO’s whose unconscionably reckless and - dare I say - greedy actions got us in this mess in the first place still have jobs at these companies does not give me confidence that anything will change. In fact, many of these top managers gave themselves large bonuses on top of their huge salaries.

In a true market economy, those guys would have trouble getting a job picking fruit. But today, they are rewarded for hastening the end of the free market in America and the arrival of the Plutocracy.

With all this free money floating around and every CEO worth his salt lining up at the government trough ready to bury their faces and feed heartily on the taxpayer’s generosity, I think it’s time we began to look around and see what other companies - past and present - we should also claim to be “Too Big To Fail!”

For instance, a prime candidate for a government bailout would have to be John Jacob Astor’s American Fur Company. Sure it’s been bankrupt for 160 years but I didn’t see any limitation attached to that bailout bill, did you? Hell, if the Medici’s had an American subsidiary we could probably bail out that Renaissance era company too.

The fact is, the American Fur Company failed and it’s your fault. Tell the truth now, when was the last time you bought a beaver hat? Don’t you realize that thousands of fur trappers have been thrown out of work because you selfishly decided to be a slave to fashion rather than thinking of those trappers, trading post managers, export facilitators, dock workers, and ship captains who lost their jobs as a result of the switch from beaver pelts to silk in hat making?

And, of course, you know where that silk is coming from, right? This may have been the first instance of a Chinese attack on our economy. Haberdashers, seduced by cheap imports of silk, ought to be ashamed of themselves. The American Fur Company must be saved else we will lose our competitive edge in the world’s fur trade. Then there are the national security implications which are just too horrible to contemplate.

So we should give some of that $700 billion in bailout money to the descendants of John Jacob Astor and power up the fur trading business again so we can all buy a stinky, misshapen, butt-ugly hat made from the skin of cute little beavers who are trapped in steel jaws that, when sprung, clamp down on their leg, forcing the helpless creatures to either gnaw off their own limb or die a slow death by starvation. But if it will save American jobs, it will be worth it, right?

Similarly, we could save the “Big Three” American automobile manufacturers who have run into a skein of bad luck recently. Of course, that streak of bad luck has lasted 35 years and for all practical (and aesthetic) purposes, the US auto industry has been dead since then. But if we’re going to save The American Fur Company, we might as well try and pump some life into the moribund car manufacturing sector, right?

Actually, this might prove to be a bigger trick than trying to make beaver hats all the rage again. This is because there is a reason that Detroit has lost its positions as the Mecca of car manufacturing; they make sucky cars that no one wants to buy.

The Big Three can complain all they want to about the high cost of union benefits, unfair competition (Translation: It is unfair the Japanese are smarter, more innovative, and more quality conscious than we are.), and “green” regulations that add cost to their products. They are basically calling the American consumer stupid for actually wanting nice looking, trouble free, fully functional, safe, and adequately serviced autos. The gargantuan salaries paid to auto execs have not produced one single model that can outsell the Toyota Corolla.

For all their redesign, retooling, rethinking, and re-inventing the “corporate cultures” in Detroit, they have accomplished nothing in their efforts to compete with Japanese manufacturers. The excuse used to be that their plants were so much newer than ours. That is no longer the case as the average American auto assembly plant is almost just as recently built as the average Japanese plant. It’s not the age of the plant that matters anyway. It’s how the cars are built. And the Japanese have embraced new techniques, new technologies that give them a leg up in the competition.

Then it was the excuse that Japanese workers make much less than American unionized workers. That may have been true at one time but today, it is very close and getting closer all the time. The difference today is almost entirely due to health and pension benefits. But instead of losing market share because of this, the Japanese have been steadily increasing their sales numbers.

Face it. Detroit is in a fix of its own making. Shortsighted managers, unions who still believe that benefit packages should reflect 1970’s realities, a stubborn resistance to higher CAFE standards that would allow them to compete with the fuel efficient Japanese cars, and an inability to figure out how to make a decent profit on smaller cars. The fact that the enormous falloff in sales of SUV’s and other big car, high profit models was entirely predictable, the Big Three got caught with their pants down when gas prices got so high, people were paying a third of their weekly paycheck to fill up.

Despite all - failure at every level including executive, manufacturing, marketing, and labor - we are now supposed to rally around the cry “Too Big to Fail!” and hand these incompetents $25 billion (for now - more later, I promise you).

I say no way.

President-elect Obama wants to nationalize the auto industry:

Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an auto czar who could ensure the money was being used wisely.

Aides said Obama is also open to an oversight board that would perform the same function as one individual. The proposals come as the estimates of the cost to fix Detroit’s three largest automakers continue to mount.

“Certainly he wouldn’t believe in it being a blank check,” said an Obama adviser, who spoke on condition of anonymity due to not being authorized to speak publicly on the topic. “He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns.”

Let’s be clear here. This would not be a “temporary” solution. Government “ensuring the money is spent wisely” sounds an awful lot like being able to approve or veto business decisions. If that’s the case, why shouldn’t the government be able to fire the boobs who are currently in charge and replace them with people they think could do a better job?

The point isn’t how much money they need or how much government control would be involved. The fact is that these companies are as dead as John Jacob Astor’s American Fur Company and for similar reasons; an inability to adapt to changing market conditions and create a product that enough people want to buy in order to make the companies profitable. There’s a reason no one buys beaver hats anymore. And its the same reason that no one wants an underpowered, ugly, cramped Chevrolet Aveo.

I feel sorry for the thousands of workers who would lose their jobs if these companies went belly up. But the fault does not lie with the American taxpayer who those representing the workers and executives of failed companies want to saddle with their inadequacies.

We aren’t going to start the fur trading industry again by asking taxpayers to fund a rebirth. Neither should we try and restart the American automotive industry by asking taxpayers to save something that’s already dead.