Last week I attended part of a panel discussion between John Canning, chairman and co-founder of Madison Dearborn Partners, Stephen Schwarzman, chairman and co-founder of the Blackstone Group, and Gao Xiqing, general manager and chief investment officer of the China Investment Corp, China’s sovereign-investment fun. Between them they control roughly $230 Billion in assets. They all seemed to agree that a big reason (among many) we are in the current crisis is because of a well-intentioned government meddling with the free market.
They specifically pointed to government pressure placed on banks to make loans to low-income households. They described these loans as being fundamentally, unrepayable. Having heard this, I was especially annoyed yesterday when I saw the Illinois Governor Rod Blagojevich was trying to force Bank of America to lend money to a closed factory in Chicago. He threatened Bank of America by saying that the state would do no business with BoA unless they made the credit available to the factory.
So in the face of the economic mess we are in, once more a politician is putting pressure on a bank to make loans the bank has denied. I was furious and frustrated having read about it, so you might imagine the satisfaction I took this morning in reading that Gov. Blagojevich has been arrested for a very, very, very long list of corruption charges. It is a long list of bribery, pay for play, as well as trying to auction off Obama’s Senate Seat.
Justice is served.
Last 3 posts by Taylor
- Obama's Second Act - Very Very Scary - July 16th, 2010
- No Politics in the Goldman Sachs Enforcement Action? - April 20th, 2010
- Moral Relativity Reigns...except - April 9th, 2010
It’s really good to hear that powerful people are actually saying the problems are from government programs. Not many people are willing to recognize that.
Is Blagojevich serious? When I heard about the allegations against him (like trying to sell a Obama’s senate seat) I was speechless. One word: idiot.
Hopefully more stories like this will unfold and people can start to see that it’s not the free market that has caused our financial “crisis”.
It’s always so heart warming to hear people such as yourself stick up for His Highness Sheikh Mohammed Bin Khalifa Al-Thani . Oh yeah, he’s the majority owner of Bank of America. The old sheikh has made a few bad business decisions recently, but never fear, taxpayers of America will bail him out.
I think the last commenter has missed the point. Personally, I am no more in favor of providing taxpayer dollars to BofA than I am to AIG or the automakers.
I think the point of the post, which I fully agree with, is that it is very dangerous for governments to force, coerce, and to put it bluntly - blackmail - businesses to perform in a manner other than their best interest. Fannie and Freddie responded to government pressure and made loans available to those considered “uncreditworthy”, which is a huge part of the source of the sub-prime mess. If Fannie and Freddie were a private or public business, instead of being government-sponsored, they could have told the gov’t to cry about it.
Let’s just say BofA provided the loan after receiving pressure and then it defaults. Why shouldn’t BofA go to the government for assistance? We need to stop this cycle.
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