Wednesday, July 01, 2009

TARP, Stimulus, Healthcare, Cap-n-Trade, and the Culture of Corruption

A small vignette on why extensive government involvement in business never works out as planned: the interests of the country rarely outweigh the individual interests of the governing class.

Take Senator Daniel Inouye (D-HI). Just like every other government official, he's busy gaming the system to benefit himself, in this case by bullying the Treasury into bailing out a bank where he was an investor.

Inouye reported ownership of Central Pacific shares worth $350,000 to $700,000, some held by his wife, at the end of 2007. The shares represented at least two-thirds of Inouye's total reported assets. Inouye has requested a delay in filing his annual financial disclosure for 2008, which was due this spring, and he declined to provide the current value of his investment. Since the end of 2007, the bank's stock has lost 79 percent of its value.

Central Pacific was founded in 1954 by a group of World War II veterans including Inouye who were emerging leaders in Hawaii's Japanese American community.”

So he's not just another investor, but someone who helped to found the bank.

I'm sure that it's just a coincidence that the regulators changed their minds about this bank after receiving a phone call from the Senator's office. Natch, he's also busy claiming that he didn't do anything illegal. It's a variant on the Jimmy Dimora defense – “I'd didn't do anything that any other Senator wouldn't do”. This only illustrates the larger problem.

With the government controlling more and more of the economy, investment in lobbying is probably has the highest rate of return for most businesses.

Large and small – from the Inouye getting a personal bailout, to Chris Dodd's sweetheart mortgage deals, to Charlie Rangel's Caribbean Condo Adventures, to just about every Obama appointee's failure to pay taxes, to the AIG mess, we're going to see lots more of this sort of thing.

Fortuntately, there's still an opportunity for the small businessman – county officials are a significant bargain compared to congressmen.