Available Now! (click cover)

America's Counter-Revolution
The Constitution Revisited

From the back cover:

This book challenges the assumption that the Constitution was a landmark in the struggle for liberty. Instead, Sheldon Richman argues, it was the product of a counter-revolution, a setback for the radicalism represented by America’s break with the British empire. Drawing on careful, credible historical scholarship and contemporary political analysis, Richman suggests that this counter-revolution was the work of conservatives who sought a nation of “power, consequence, and grandeur.” America’s Counter-Revolution makes a persuasive case that the Constitution was a victory not for liberty but for the agendas and interests of a militaristic, aristocratic, privilege-seeking ruling class.

Monday, March 17, 2008

(State) Capitalism in Action

From today's Wall Street Journal:
Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million. Bear Stearns had a stock-market value of about $3.5 billion as of Friday -- and was worth $20 billion in January 2007. But the crisis of confidence that swept the firm and fueled a customer exodus in recent days left Bear Stearns with a horrible choice: sell the firm -- at any price -- to a big bank willing to assume its trading obligations or file for bankruptcy....To help facilitate the deal, the Federal Reserve is taking the extraordinary step of providing as much as $30 billion in financing for Bear Stearns's less-liquid assets, such as mortgage securities that the firm has been unable to sell, in what is believed to be the largest Fed advance on record to a single company.

Fed officials wouldn't describe the exact financing terms or assets involved. But if those assets decline in value, the Fed would bear any loss, not J.P. Morgan.

The sale of Bear Stearns and Sunday night's move by the Fed to offer loans to other securities dealers mark the latest historic turns in what has become the most pervasive financial crisis in a generation. [Emphasis added.]
At Liberty & Power, Sudha Shenoy comments:
In the absence of Federal Reserve intervention & arm-twisting, Bear Stearns would undoubtedly have had to cease trading. And no doubt it would’ve been taken over, eventually -- at an even lower price. All that govt officials could do was to shorten this time period, & possibly prevent Bear Stearns’ value from falling even further. But even the almighty Federal Reserve -- the world’s largest & most powerful central bank -- could not prevent the huge capital losses that Bear Stearns’ shareholders suffered. In short, even the Fed could not stop the de facto failure of one of the world’s largest investment companies.

What does all this signify? Even the US govt -- the world’s largest & most frightening -- is not & cannot be, omnipotent. True, the Fed’s officials did their best to paper over the cracks -- but that was all they could do.
Bear's shares were going for $30 on Friday. They were at $170 a year ago. J.P. Morgan Chase picked them up, with government help, for $2. The government tried to rescue these high rollers, but apparently there are limits to what this virtually unlimited government can do.

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