Private Enterprise vs. the Government
The sooner those banks which don’t need Federal Government loans – Goldman Sachs? Morgan Stanley? Wells Fargo? – can repay them, the better. Because then those healthy financial institutions will be able to compete head to head with their major competitors, now in essence under the control and management of the Federal Government. When that day arrives – and it can’t come too soon – there will be a real test of private enterprise versus the Government, of capitalism versus socialism. I know where I will put my bet for who will be the winner, and it ain’t with the Federal Government.Government runs in ways that are intellectually and instinctually different from private enterprise. The core difference is embodied in one word: PROFIT. Profit is not the motive of Government (nor should it be). Equally as important, profit is the primary focus of private enterprise (as it should be). And the rules of the game in the two different modes of enterprise are logically and necessarily different.Government derives its revenues from taxes and has no right to spend more of those revenues than is essential for the wellbeing of its constituents. On the other hand, capitalism is charged with providing the favorable returns on the capital it raises from its owners. Without profits based economy, capitalism turns into socialism, both ideologically and de facto. Socialism has a miserable record of providing economic growth and prosperity.The moment that Government enters the domain of the private sector, profits become endangered. And watching the rhetoric in Washington D.C. as members of Congress excoriate the private sector’s compensation practices, I fear that the Federal Government is aching to change the rules that determine the rewards for capitalism. This is a serious matter.Last fall, when the first TARP money was distributed and Congress started spending its waking hours on hearings involving banks, brokerage firms and the auto industry, I wrote that the nose of the camel was under the tent and that foretold danger. Today, not only is the nose of the camel under the tent, it seems to me that just about everything but his tail is there.The housing debacle certainly needed to be examined and understood, and admittedly, some egregious behavior brought the housing economy to its knees. But the blame for that must be shared by both the Federal Government and the private sector. Somehow in all the haranguing emanating from Washington, one doesn’t hear a single ‘mea culpa’ from a single member of Congress and the most vociferous excoriators of the banks – Barney Frank and Chris Dodd – ought to be making the loudest ‘mea culpas’.But this creeping sense of righteousness oozing from the halls of Congress is only likely to increase as the economy continues to stumble and falter, and I am afraid that by the time the economy rights itself and starts to emerge from recession, there will be choking Government bridles on the ability of the private sector to enjoy the benefits of the regained profits. By hook or by crook, the Government will demand that the private sector repatriate its printing of money today. That will likely take the form of onerous income taxes on success. And it won’t be limited to the banking and auto industries. It will affect all industries and all companies, both private and public.And that is no April Fool’s Joke.