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« A Day Late, A Billion Dollars Short - Maybe | Main | Has Anyone Seen Sandy Berger Around? »

You Call This Capitalism?

If there's one thing that Ayn Rand and Albert Jay Nock both understood, it's that businessmen will cut deals with the government when they think it's to their advantage.  Economics may be the sea that business swims in, but if you need to buy off Ahab with a couple of the slower-moving whales well, hey, who asked them to be your calves?

The problem comes when business develops a sort of Stockholm Syndrome about the process, convincing itself - or trying to convince itself - that the presence of the whalers is actually a good thing, even as the herd gets thinner and thinner, the calves somehow never call and never write, and the cow down at the other end of the sand bar needs more and more plankton to get her in the mood.

That's the attitude on display by private equity fund mogul Scott Sperling's apologia in yesterday's Wall Street Journal ("Obama's Auto Plan Is Capitalism at Work").  Wrong on both strategy and tactics, is Mr. Sperling.

The Chrysler creditors are not bad or unpatriotic people. They are appropriately acting as good fiduciaries to their investors. But luckily for American citizens, the Obama administration is also acting appropriately by insisting it will only invest taxpayer dollars if the investment has a chance of succeeding. While the government was willing to pay a significant premium to the debtholders to avoid the "friction" costs that occur in a bankruptcy, the administration was not about to do anything stupid with our money.
There's almost nothing right with this paragraph.  In fact, the President did call the bondholders bad and unpatriotic.  Maybe some bondholders did bid up the price hoping for a government bailout of their own.  A nasty lesson in the dangers of arbitrary power may be valuable, but it's hardly, "capitalism."  And what of those who didn't, who merely priced in their place in line, free of public hectoring by the President?

There's nothing "capitalist" about the federal government going into partnership with the ruling party's major constituency.  Barring such partnership, there's no reason for it to care about bankruptcy's "friction" costs.  Sperling has no idea - none - whether the bondholders got a premium or not.   And while the government's new-found fiduciary conscience it touching, it would be more credible if it had shown up sometime before Obama Partners, ULC. contracted to double the national debt in four years.

Means matter.  If they didn't, we wouldn't have a Constitution that theoretically forbids this kind of neo-feudal behavior by Washington.  Even if, every time, the government managed to magically reproduce or improve on what the market or bankruptcy courts would have done, having a deus Obamica show up and bruit things about this way is extremely dangerous.

This is one reason I'm a Burkean conservative.  The bankruptcy laws have evolved over decades both to give order to the system, but also to embody a reasonably good way of sorting out competing interests.  No politician, or set of politicians is going, time after time, to do better than the accumulated wisdom of hundreds of thousands.

The self-deception that believes the lie
I wish I were in love again
Lorenz Hart, "I Wish I Were in Love Again," Babes in Arms
Mr. Sperling is a heavy, heavy Democratic contributor.  He's is in the business of brokering deals.  Why do I suspect the Mr. Sperling (and his partner, Thomas H. Lee) sleep well at night knowing - or at least, hoping - that it's unlikely that government's going to step in and rewrite their terms of their arrangements.  Beware, Mr. Sperling, many others have been rudely disabused of similar notions.

In the past, he and his company have refused to accept modified terms that didn't suit them.  We'd hear a different story if the government were a major investor in his latest fund, and started throwing its weight around to pick and choose his investments.

After all, we know how Tom Lauria reacted.

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