Article: Failure of Ego - Bailout Sustains Financial Cartel

As Barack Obama and his entourage developed his campaign strategy, many political pundits declared his plan as an impossible path to the White House. At the end of the day, Mr. Obama not only won, but by a large
margin. Obama's strategy to use the internet's social power was well understood, but McCain's camp ran the same, tired, attack-strategy campaign. According to The Guardian, future elections will require a strong online presence.1

Obama brought into this election new ideas for how to run a political campaign. Contrary all prevailing wisdom and, to many, against rational odds, Mr. Obama redefined the way the business of political campaigns will be handled. While some are reveling in Obama's win, and others may be cursing it, let us turn our attention back to one huge problem, that of the government's Fascist (See A Fascist Republic) plan to bail out companies considered too large to fail.

If there was ever a company too large to fail, it was the pre-1984 AT&T.2 Yet, what happened after their government-forced break-up? Scores of "baby bells" sprouted up all over the country, bringing in new thinking, new products, and renewed competition. Over the years, many of these companies failed, and either disappeared or were swallowed up by competitors. In fact, when forced to compete on a fair playing field, AT&T was ultimately bought Southwestern Bell Corporation, who later
took on the AT&T name.3

So, what do you think would have happened if AIG, or any of the other companies on the government's bailout list, were to be allowed to fail? There are scores of entrepreneurs waiting around to take the place of the old machine and replace it with new ideas and better practices. Our shallow-thinking government doesn't believe it can happen, because the high falutin executives falsely believe they are gods. Their companies are a failure of their self-anointed egos, and the false faith that their omniscience cannot possibly be overcome by others.

For comparison's sake, the U.S. government, under the Carter Administration, bailed out Chrysler Corporation, then considered to be a company too large to fail.4 At the time, the $1 Billion package was not considered large enough, but the company managed to survive anyway, although the bailout didn't end up saving some 60,000 jobs, nor did it keep their creditors from suffering a heavy dose of losses following the
large influx of money.5

Yet, today, we're facing the same situation again, not only from the financial industry companies who have laid off almost a million of the people the bailout was designed to help, but also from Chrysler. They're making the same mistakes again, and reaching out for more money like a spoiled teenager from an affluent neighborhood whose just wrecked the BMW their parents bought them for their birthday.

Even worse, if Chrysler is bailed out again, along with it will come the bailout of GM. The merged company will be run by Rick Wagoner. As I pointed out in Recession Free Job, Mr. Wagoner received a 64% increase in pay even though GM is in such bad straits that it now needs a bailout along with the mortgage cartel. It's simply the Boys Club at work again. One of the biggest investors interested in the GM-Chrysler merger is a company called "Cerberus", a private equity firm run by John Snow, President Bush's former Treasury Secretary, former vice-presidential candidate Dan Quayle, and Stephen Fienberg, Cerberus' CEO.6

It turns out, though, even the mighty Cerberus couldn't save Chrysler from failing. Cerberus may not be the prodigy the propechies might make them. Cerberus has been the long-time equity firm for Mervyn's, a company who recently announced the cessation of their business.7

With over a million people now out of work8, and millions others losing their homes and the standard of life that has been stolen from them by greed and one of the most incompetent administrations in the history of the U.S., the bailout isn't helping the people. As we've seen from AIG and Fannie Mae, the bailout money seems to be to ensure executive pay and lavish outings with their golf buddies (See "What's Good for the Goose" and "Bailout Retreat" in Quick Cuts).

If the government continues to bail out the big guys, they will continue to stifle the kind of competition that brings innovative ideas. Big companies whose culture and thinking is locked in old dusty trunks need to fail to make way for those better, brighter ideas that can creatively produce a new breed of businesses. These businesses will employ many people, and provide better customer service in a competitive market.