Wednesday, May 15, 2013

How Government Powers of Economic Control Threatens Free Speech

The recent revelations that the Internal Revenue Service targeted conservative and Tea Party political activist groups drew a sharp rebuke from the NJ Star-Ledger, usually an Obama Administration sympathizer. In response to the S-L's editorial, Nixon's Ghost Visits the Obama White House, I left these comments:

The IRS episode highlights the hidden danger inherent in the government's power over the economy and money; a danger that extends beyond the economy to a threat to free speech.

Recently, BB&T failed the Fed's "stress test" of the 18 largest financial institutions despite being the best-capitalized bank of the 18 and having gotten through the financial crisis in strong shape by avoiding making the disastrous mortgage loans to its customers.

Why is BB&T targeted? It's noteworthy that John A. Allison, who served as BB&T CEO from 1989 to 2008, has long been an outspoken critic of government policies relating to the housing bust and in particular a major critic of the Federal Reserve. He opposed the TARP bailouts and only took the government's "bailout" money after Paulson threatened him--and paid it back as soon as it was allowed. In his new book, The Financial Crisis and the Free Market Cure--an in-depth account of the crisis from an insider's perspective--Allison identified the Federal Reserve as the primary cause of the financial crisis because of its bubble-building easy-money policies.

Is BB&T being targeted in retaliation? This episode stinks of regulatory retribution every bit as much as the IRS's tax retribution. One wonders how extensive the government's abuse of its tax and regulatory powers for the purpose of punishing and/or silencing dissenters is. These two episodes may be the tip of the iceberg, indicating a major covert threat to free speech. This is something any large newspaper--which depend for their survival on the First Amendment--should be concerned about, so I'm glad to see the S-L editors all over the IRS story.

Steve Forbes cited the BB&T story in its lead Fact and Comment section of the May 6, 2013 addition of Forbes magazine. In a piece titled The Fed: Playing Thug Politics With Banks, Forbes notes that four of the 18 banks failed the stress test. Three of the four are well-run institutions. But the CEOs of the three have been strong critics of government policy. Jamie Dimon of JPMorgan and Lloyd Blankfein of Goldman Sachs (also a Romney ally) have been outspoken critics of the Obama Administration, and as Forbes notes:

The Fed’s thrashing of BB&T, however, is especially disturbing, because it is the best-capitalized institution of the 18. The Fed is playing dirty pool here for two reasons. First, the bank’s former CEO John Allison IV, who made BB&T the formidable powerhouse it is today, was unusually outspoken in his criticism of bank regulators. During the financial crisis of 2008-09 he fiercely resisted Treasury Department pressure to take TARP money. The bank took it only after Treasury Secretary Hank Paulson threatened grievous harm.

In his book The Financial Crisis and the Free Market Cure, Allison writes, "the Fed regulates the banking industry, so it is risky for a banker to be opposed to the Fed (writing this book is risky)." Since business in general is heavily regulated, it's risky for any businessman to criticize government. The non-objective antitrust laws are another good case in point. That body of laws are so vague that essentially any business practice could be deemed illegal under antitrust. When Google founder Larry Page spoke out against government regulation of the internet while being targeted by antitrust enforcers, Owen Thomas, writing for Business Insider, chastised him, saying "it's not a smart thing for the CEO of a company facing antitrust scrutiny to say."

Forbes said the three banks "were whacked for political reasons." How often will future bank CEO's be willing to speak out against government policies? How many businessmen keep silent for fear of rankling some regulator? Where are all of the champions of "whistle blowers?"

Related Reading:

The Financial Crisis and the Free Market Cure by John A. Allison

Federal Reserve Joins Vendetta Politics of Obama Regime, by Charles R. Anderson, Ph.D.

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