Backing a company that is too large to fail is an Obama mistake

I have never been a fan of consolidations in government or business. If you track back to my May 31st and June 2nd posts, I explain my position in greater detail. Cost savings are always disguised when the entity grows larger and more complex. Some of GM and AIG's problems grew out of the consolidations of the past.

Of all of the economic maneuvers of the Obama administration, the strategy that has me most concerned is the continued financial backing of companies that are still considered too big to fail. AIG, GM, Chrysler and major banks have been the recipients of tax payer bailouts. I continue to maintain that no company in America can become so large that it's failure would significantly damage our Nation.

I just came across this quotation that I think the Obama team needs to live by:

"Any intelligent fool can make things bigger and more complex......It takes a touch of genus-----and a lot of courage to move in the opposite direction." Albert Einstein

While the auto industry (GM) is shedding divisions like Pontiac, the underlying intent is to make GM as strong as ever. GM officials will seek to do this in a way that would avoid competition. Removing a Pontiac from the market place will water down the competition for GM. Money thrown at AIG and the banks is going to end up in the hands of overpaid, over-egoed executives. This has already been widely reported to have happened. As for the working middle-class; they have been the ones that are forced to "sacrifice".

I keep going back to the AT&T model here. I think that it took courage to bust apart an American corporate icon that simply became too big and controlled too large a sector of the American economy. I maintain that GM needed to be broken into 4 separate corporations left to compete for our dollars. Insurance and banking industries need to be separated and appropriately regulated. We can no longer afford to let this failed marriage experiment in capitalism lead our lives. If we don't move in the opposite direction as Einstein proposed, our problems will remain with us for decades to come.

tomtoak

Sherman Antitrust Act and AIG

I spoke to a good friend last night and he brought up a very good point that I haven't heard mentioned throughout this meltdown in our economy. Is it a good thing for banks to be merging? Bank of America keeps getting larger as is swallows financial institutions throughout our economy. Why was a company like AIG allowed to become so large, that it could not fail?

Remember when the Government broke apart AT&T because of that company's control of the communications industry? In 1982, the U.S. Government took that drastic step. Today it seems like the Obama administration is doing everything it can to keep AIG whole. I have not heard discussions that connect the Sherman Antitrust Act to the situation with AIG. Why not?

As time goes on, mergers throughout our economy are severely limiting competition in the marketplace. We have far fewer oil companies today than existed 20 years ago because of mergers in the industry. I've heard some talk about the necessity of mergers between the big three automakers. Seems like this just may make the situation far worse. Government policy should not lead to building larger more unmanageable companies.

The Justice Department has an Antitrust Division. What's been going on here? The world did not end with the dismantling of AT&T. I don't think that breaking apart AIG will end capitalism as we know it. It might be the best thing. Something tells me that we also can't afford to have banks that are too big to fail. Maybe if the Justice Department focused its attention on this issue, we wouldn't have to deal with today's bailout of companies that simply can not fail.

I've got to thank my friend for the conversation we had last night. There's a lot of food for thought here.

tomtoak

Wisdom from the Woods II

Wisdom from the Woods is an occasional column that outlines complex issues.

I'm in the woods again today as you can see. The rock in the picture is an artifact from Native American ceremonies. I have a dozen of these specimens on my property. The ledge on which this rock sits is perfectly aligned with the rising sun. I've read that the purpose behind lifting the rocks and chalking them as you see here was to allow easy access for rocking the boulders back and forth on the ledge. The sound created was an integral component of the ceremony and could be heard from miles away.

Today I'm thinking about corporate culture and how it contrasts with public sector employment. Having served in the public sector, I'm very sensitive towards criticism, especially when that criticism is unfounded. Today, we are finally seeing for the first time in recent memory, the corporate culture in this country being attacked. There are hundreds of protesters outside of AIG headquarters as I write.

It's funny that our society only seems to care about these things when it perceives that tax dollars are being squandered. Exxon-Mobil can tax us to death and nobody seems to care. Whether the money is coming through the government to the corporation or whether the money leaves our hands directly and goes to the corporation seems like an insignificant difference. AIG is changing the way citizens think of big business.

I worked hard in the public sector for years. Some years I managed to bring an additional hundreds of thousands of dollars to my state for projects that helped everyone. When I was successful, I got no bonus. I never wanted a bonus. My vocation to perform at my job was driven by the vision of a secure future and a wish to do the right thing. That secure future was spelled out in advance to me through the public employee pension system. This is the future that I wanted. Public employment works for the benefit of everyone, but it will only function efficiently as long as employees are provided for.

The corporate culture of annual bonuses, layoffs and huge severance packages is fine if that is what you bought into. I'll never understand bonuses for poor performance, and that is exactly what we are seeing at AIG.

I know many young people today who are making more money than their school teachers that may have been in the profession for 30 years. That's OK; I have no problem with that. It's always been that way. Those school teachers in 90% of the cases that I am familiar with did a great job. There were no bonuses; just good people doing their job. Hopefully, it was a job that they loved. The concern that I have today is the drive to take the future away from our school teachers and long term public employees. You can argue all you want that the public sector needs to be more like the private sector. I think not; just look at AIG. I can imagine what newspapers will be saying on the day that government starts handing out bonuses. Do you want your government to be run like that? I don't!

tomtoak

AIG: Americans In Graft

Graft is defined as the acquisition of money or advantage by dishonest or unfair means; especially through the abuse of one's position or influence through politics. AIG has positioned itself so that it simply can not fail. If AIG fails, reports indicate that the entire banking system is at risk. How does AIG respond to the crisis which is their making? Handing out bonuses to connected executives responsible for the largest corporate losses in U.S. history.

AIG executives in my estimation are traitors. If capitalism is at risk in this crisis, point your fingers at AIG, not the government of the United States. The Huffington Post outlines the situation and decries the abuse of this inexcusable corporate greed. A loss of $61.7 billion and now AIG is going to pay out $450 million in bonuses to top corporate executives. For what? Sending this country and the world into a depression? All of this happens after the citizens of this Nation have supplied a $170 billion rescue package in many installments to this traitoress company.

AIG; Americans in Graft, Americans in Greed, Americans in Gloom, Americans in Glee? Take your pick. This corporate greed needs to stop under the force of law. That's right capitalist America; under the force of law, and corporate greed is responsible not progressive politicians.

tomtoak