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Romney and the Rice Card

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With the Republican Convention set to begin on August 27, we are heading toward the final phase of the GOP Veepstakes.  Currently, the mainstream media mania is focused on the belief that Romney will play the Rice Card.  It won’t happen.  The excitement concerns the possibility that playing the Rice Card will enhance support from African-American and female voters.  Unfortunately, Condoleezza Rice lacks the degree of charisma one would expect in a Vice-Presidential candidate.  Worse yet, the baggage she brings from her testimony before the 9/11 Commission, particularly in response to the questions posed by Richard Ben-Veniste concerning the August 6, 2001 Presidential Daily Briefing is the most important reason she will not be picked.  Her failure to seriously heed the warning, “Bin Laden Determined to Attack Inside the United States” would become a big issue – once again.  Her response to Ben-Veniste’s interrogation was asinine:

Commissioner, this was not a warning.  This was a historic memo — historical memo prepared by the agency because the president was asking questions about what we knew about the inside.

We often hear pundits recite the Cardinal Rule for Presidential candidates, in selecting their Vice-Presidential nominee, as: “Do No Harm”.  In other words:  Don’t screw up your campaign by choosing a controversial running mate.  If Romney were to play the Rice card, he would append to his own campaign the Bush administration’s failure to heed the warnings about the September 11 attacks.  It won’t happen.

Wall Street Journal columnist Peggy Noonan – who considered the choice of Sarah Palin as “cynical” – recently endorsed Rice as the best candidate:

Consider:  A public figure of obvious and nameable accomplishment whose attainments can’t be taken away from her.  Washington experience – she wouldn’t be learning on the job.  Never ran for office but no political novice. An academic, but not ethereal or abstract.  A woman in a year when Republicans aren’t supposed to choose a woman because of what is now called the 2008 experience – so the choice would have a certain boldness.  A black woman in a campaign that always threatens to take on a painful racial overlay.  A foreign-policy professional acquainted with everyone who’s reigned or been rising the past 20 years.

What is really happening here is that potential candidates from minority groups are being paraded before the public, purely for optics.  Last month, it was Marco Rubio and now it’s Condoleezza Rice.  It has been important for the Romney camp to convince the voters that it seriously considered putting a minority group member on the ticket before finally deciding on a white man.

At this point, the smart money is on Ohio Senator Rob Portman.  Portman is from a battleground state and Romney can be confident that Portman won’t make any stupid moves or inappropriate remarks which could damage the campaign.  Romney needs to play it safe and Portman is a safe choice.

Actually, the Rice Card is being played right now.  You won’t see it again after August.


 

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Keeping The Megabank Controversy On Republican Radar

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It was almost a year ago when Lou Dolinar of the National Review encouraged Republicans to focus on the controversy surrounding the megabanks:

“Too Big to Fail” is an issue that Republicans shouldn’t duck in 2012.  President Obama is in bed with these guys.  I don’t know if breaking up the TBTFs is the solution, but Republicans need to shame the president and put daylight between themselves and the crony capitalists responsible for the financial meltdown.  They could start by promising not to stock Treasury and other major economic posts with these, if you pardon the phase, malefactors of great wealth.

One would expect that those too-big-to-fail banks would be low-hanging fruit for the acolytes in the Church of Ayn Rand.  After all, Simon Johnson, former Chief Economist for the International Monetary Fund (IMF), has not been the only authority to characterize the megabanks as intolerable parasites, infesting and infecting our free-market economy:

Too Big To Fail banks benefit from an unfair, nontransparent, and dangerous subsidy scheme.  This isn’t a market.  It’s a government-backed distortion of historic proportions.  And it should be eliminated.

Last summer, former Kansas City Fed-head, Thomas Hoenig discussed the problems created by what he called, “systemically important financial institutions” – or “SIFIs”:

… I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism.  They are inherently destabilizing to global markets and detrimental to world growth.  So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

So why aren’t the Republican Presidential candidates squawking up a storm about this subject during their debates?  Mike Konczal lamented the GOP’s failure to embrace a party-wide assault on the notion that banks could continue to fatten themselves to the extent that they pose a systemic risk:

When it comes to “ending Too Big To Fail” it actually punts on the conservative policy debates, which is a shame.  There’s a reference to “Explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy” but it is sort of late in the game for this level of vagueness on what we mean by “unwinding.”  That unwinding part is a major part of the debate.  Especially if you say that you want to repeal Dodd-Frank and put into place a system for taking down large financial firms – well, “unwinding” the biggest financial firms is what a big chunk of Dodd-Frank does.

Nevertheless, there have been occasions when we would hear a solitary Republican voice in the wilderness.  Back in November,  Jonathan Easley of The Hill discussed the views of Richard Shelby (Ala.), the ranking Republican on the Senate Banking Committee:

“Dr. Volcker asked the other question – if they’re too big to fail, are they too big to exist?” Shelby said Wednesday on MSNBC’s “Morning Joe.”  “And that’s a good question.  And some of them obviously are, and some of them – if they don’t get their house in order – they might not exist.  They’re going to have to sell off parts to survive.”

*   *   *

“But the question I think we’ve got to ask – are we better off with the bigger banks than we were?  The [answer] is no.”

This past weekend, Timothy Haight wrote an inspiring piece for the pro-Republican Orange County Register, criticizing the failure of our government to address the systemic risk resulting from the “too big to fail” status of the megabanks:

The concentration of assets in a few institutions is greater today than at the height of the 2008 meltdown.  Taxpayers continue to be at risk as large financial institutions have forgotten the results of their earlier bets.  Legislation may have aided members of Congress during this election cycle, but it has done little to ward off the next crisis.

While I am a champion for free-market capitalism, I believe that, in some instances, proactive regulation is a necessity.  Financial institutions should be heavily regulated due to the basic fact that rewards are afforded to the financial institutions, while the taxpayers are saddled with the risk.  The moral hazard is alive and well.

So far, there has been only one Republican Presidential candidate to speak out against the ongoing TBTF status of a privileged few banks – Jon Huntsman.  It was nice to see that the Fox News website had published an opinion piece by the candidate – entitled, “Wall Street’s Big Banks Are the Real Threat to Our Economy”.  Huntsman described what has happened to those institutions since the days of the TARP bailouts:

Taxpayers were promised those bailouts would be a one-time, emergency measure.  Yet today, we can already see the outlines of the next financial crisis and bailouts.

The six largest financial institutions are significantly bigger than they were in 2008, having been encouraged to snap up Bear Stearns and other competitors at bargain prices.

These banks now have assets worth over 66% of gross domestic product – at least $9.4 trillion – up from 20% of GDP in the 1990s.

*   *   *

The Obama and Romney plan simply appears to be to cross our fingers and hope no Too-Big-To-Fail banks fail on their watch – a stunning lack of leadership on such a critical economic issue.

As president, I will break up the big banks, end future taxpayer bailouts, and restore capitalist principles – competition and creative destruction – to our financial sector.

As of this writing, Jon Huntsman has been the only Presidential candidate – including Obama – to discuss a proposal for ending the TBTF situation.  Huntsman has tactfully cast Mitt Romney in the role of the “Wall Street status quo” candidate with himself appearing as the populist.  Not even Ron Paul – with all of his “anti-bank” bluster, has dared approach the TBTF issue (probably because the solution would involve touching his own “third rail”:  regulation).  Simon Johnson had some fun discussing how Ron Paul was bold enough to write an anti-Federal Reserve book – End the Fed – yet too timid to tackle the megabanks:

There is much that is thoughtful in Mr. Paul’s book, including statements like this (p. 18):

“Just so that we are clear: the modern system of money and banking is not a free-market system.  It is a system that is half socialized – propped up by the government – and one that could never be sustained as it is in a clean market environment.”

*   *   *

There is nothing on Mr. Paul’s campaign website about breaking the size and power of the big banks that now predominate (http://www.ronpaul2012.com/the-issues/end-the-fed/).  End the Fed is also frustratingly evasive on this issue.

Mr. Paul should address this issue head-on, for example by confronting the very specific and credible proposals made by Jon Huntsman – who would force the biggest banks to break themselves up.  The only way to restore the market is to compel the most powerful players to become smaller.

Ending the Fed – even if that were possible or desirable – would not end the problem of Too Big To Fail banks.  There are still many ways in which they could be saved.

The only way to credibly threaten not to bail them out is to insist that even the largest bank is not big enough to bring down the financial system.

It’s time for those “fair weather free-marketers” in the Republican Party to show the courage and the conviction demonstrated by Jon Huntsman.  Although Rick Santorum claims to be the only candidate with true leadership qualities, his avoidance of this issue will ultimately place him in the rear – where he belongs.


 

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