On Monday, September 15, 2008, Henry (“Hank”) Paulson, the Treasury Secretary (bald guy you’ve seen on TV talking about the economy), announced that although he felt it was necessary to bailout Bear Stearns and outright take over Fannie Mae and Freddie Mac, that the government was getting out of the business of takeovers and bailouts.  He announced that the government would not come to the aid of Lehman Brothers as they filed for bankruptcy and that no government money would be given to AIG – that it “has got nothing to do with any bridge loan from the government. What’s going on in New York is a private sector effort.”  Mr. Paulson nobly went on to state, “I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.”  Perhaps one of the most admirable statements that Paulson made was, “We’re very vigilant, but we do not take, and I don’t take, lightly ever putting the taxpayer on the line to support an institution.”

Transcript here: Paulson Transcript

After hearing this speech I was somewhat pacified, I thought that Paulson, Bernanke, and Bush had determined that there had been enough government intervention and that the United States would resume its free market activities.  I went to bed relatively pleased on Tuesday night.

As I walked into the office on Wednesday morning I saw that I was the first one to arrive and picked up a copy of the Wall Street Journal outside.  As I unrolled it in my office I soon realized that I had been misled, the headline in bold lettering on the top of the front page read, “U.S. Plans Rescue of AIG to Halt Crisis; Central Banks Inject Cash as Credit Dries Up.”  Paulson had lied about the federal government not providing a bridge loan to AIG, which had become clear.  The U.S. Government is to lend AIG $85 billion to be repaid within 24 months.  But that is not all, the U.S. Government also assumed an 80% stake in AIG – meaning the company is now owned and operated by the United States of America.  This after the government had already nationalized Fannie and Freddie.  The U.S. Government has officially begun nationalizing what were previously private companies – the first step toward socialism.

If it were to end there then I would hope that there would be widespread outrage among the public, but nothing worthy of panicking over, just some disgruntled seekers of liberty.  Unfortunately it doesn’t end there . . . it doesn’t even come close to ending there.  Paulson, Bernanke, Bush, and apparently most of the legislative branch are now pushing hard for a $700 billion general bailout package.  In this package the government would essentially buy assets for much more than they are worth from struggling financial institutions and other companies.  In return, the government would receive shares in each company that took part in any transaction and the government would hope that the assets would appreciate in value and be sold at a later date.

Read story here: WSJ Article

In addition to this, Henry Paulson has taken it upon himself to advise that the legislative branch and the president give him absolute control of the $700 billion to be distributed as he sees fit without any interference from the courts or any other branch of government.

Read story here: Bloomberg Article

Hank Paulson essentially wants to have a $700 billion account to go around buying assets and companies for the U.S. Government on his own authority with no checks or balances.  The problems with this are glaring.

The scary part of all of this is that everybody in the media and in the legislative branch seem perfectly content with everything that is being suggested.  Let us consider the magnitude of $700 billion for a minute.  The value of Microsoft, General Electric, and Toyota combined is less than $700 billion.  The U.S. Government could purchase almost every major financial institution for $700 billion.  To put it another way, it is about $2400 per person in the United States – young or old, rich or poor – almost $10,000 for a family of four.

Perhaps most important is the question, “Where does all of this money come from?”  Well, the same ways the government gets all of its money, by taxing citizens and by creating inflation (see inflation article on riseofreason.com).  Whether or not you agree with this plan, you will end up paying for it, every American will, rich or poor.

For those of you that believe this measure will help “Main Street” America and that spending our tax dollars is worth it, consider this: everybody in the United States will be responsible for paying for this, no matter how rich or poor you are, but it will only seriously benefit the very wealthy.  The government will be buying assets that are held by the wealthiest people in America via large financial institutions.  These people’s stocks, bonds, and other assets will be propped up to values that are nowhere near what the market would pay and the entire country will have to pay the tab.  If you are trying to help the average American, this is not the way.

Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.  That is the definition of socialism.  This is where we are headed.  Socialism is the exact ideal that is supported by all of these bailouts.  Socialism will destroy America if we continue on this path.

You may think that the government will keep its word and sell off these assets for more than they bought them for and sell off AIG and all of the other companies it has bought and will buy after the market “stabilizes”.  You may think that.  Given what the government has told you, it would be nothing less than reasonable to think that.  But if you have lived long enough or studied hard enough the actions of government and the history of such blatant interferences with the free market you will know that the reversal of such acts is damn near impossible.  Take my word, Fannie, Freddie, and AIG will be government owned for as long as we are alive, and so will any other companies that the government nationalizes after this day.  Fannie and Freddie own between 60% and 70% of the liens on residential properties in the United States and AIG is the largest insurer in the nation.  The government has taken large steps to gain more power and have a better hold on every person’s life in this nation.  Perhaps I am early to sound the alarm of impending socialism, but if this nation continues on the path she is on today we will all be dreaming of yesteryear.

Long live the free-market and liberty in these United States of America.