Just One More? Time to Say ‘No’ to Expanded Treasury Equity Purchases

Posted October 24th, 2008 at 5.01pm in Enterprise and Free Markets.

The Wall Street Journal is reporting this afternoon that the Treasury Department is mulling the expansion of its bank equity purchase program to cover insurance firms. And other firms in other industries, including non-financial companies, are also asking be included. It should just say no to these ill-considered ideas.

The program, begun by the Treasury Department two weeks ago when it purchased major stakes in the nine largest U.S. banks, was from the beginning touted as an exceptional response to an exceptional situation. Not only did bank failures threaten a systemic collapse, but – U.S. policymakers argued — actions by European governments to support their banks raised the prospect of a flight of capital from the U.S. if we did not act. Even so, the bank equity program raised significant dangers.

Now Treasury may compound those dangers by extending equity purchases to the insurance industry. Yet – although several insurance firms are doubtless in financial trouble – the risks posed are very different. There’s little pressure from overseas, and the systemic risk, by most accounts, is less than banks (or AIG for that matter). And there are complications involved in insurance not present in banking. Many insurance firms are still mutually owned, for example – meaning that there are no “shareholders” in the usual sense. How would equity purchases in such firms even be structured?

The proposed expansion of the program also raises disturbing questions about how many more industries the program will be expanded to include. Today’s Wall Street Journal report, in fact, raises the prospect that the auto industry may be among those next in line for federal stock purchases. Like little chocolate donuts, policymakers seem to be finding it difficult to just have one. Banking seems no longer a special case – with officials continuing to chomp until the whole box is gone.

We cannot afford the stomachache such government action will give the economy, and the market system. Treasury should just say ‘no” to this temptation.

Author: James Gattuso
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8 Comments

October 25, 2008 Michelle Malkin » Bailout creep: What the hell is Hank Paulson up to now?! writes:

[...] Heritage Foundation, which sadly supported Crap Sandwich 2.0, weighs in: “We cannot afford the stomachache such [...]

October 25, 2008 Sanjuro writes:

Did you REALLY think it was going to be a one time limited deal? You fell for it.
Y’all need to listen to your WHAT WOULD REAGAN DO? recordings and renew your faith.

October 25, 2008 SM writes:

Finally, common sense appears to be returning to Heritage. Good post.

October 25, 2008 TCO writes:

It was a NO BRAINER not to be for that kind of socialism. That kind of cronyism. That kind of fluffy stupid, macro-econ mislogic. You should just dissolve yourselves, you have wandered so far from conservatism.

October 25, 2008 PM Connors, Phoenix, AZ writes:

Congress and Treasury have surely opened the “Pandora’s Box.” Is everybody in government losing sight of the dangers or risks?

October 26, 2008 Ken, Denver, CO writes:

I can hear the pigs in Washington snorting at the trough all the way here in Denver. I’m POSITIVE Reagan wouldn’t have stood for this had he been alive and in office. I was shocked and dismayed to hear the Heritage Foundation backed this legislation! HF, seemingly, has gone the way of the elitist RINOs and ditched the Constitution. It’s stated there ‘provide FOR the general welfare’ NOT make this country a welfare state.

I remember, quite well, statements touting the end of the world if the legisltion wasn’t rushed through in a few days without lawmakers having time to read through it, delete the pork and prevent the Treasury Department from taking over the financial well being of the country. Well, it seems we are still here and the world HASN’T ended. Act in haste, repent at leisure.

I knew something had to be wrong when Pelosi, Reed and all the other clowns were smiling ear to ear at a photo op after the signing. I knew NOTHING good could come of it and that was the obvious giveaway (in more ways than one). I’m disgusted the so-called Republicans rolled over and back this theft of taxpayer money. The democraps had the votes they needed to pass this without Republican support. Past CEO’s of Fannie Mae and Freddie Mac, along with Dodd and Barney Frank, should be wearing felon orange and sharing a small cell with Bubba by now!

Civil words cannot describe my anger about the rape of taxpayers with this boondoggle and the failure of the Republicans to stand against the attempts to socialize MY country. Is there anyone in DC that isn’t there for self interest? NO one seems to be paying attention to MY or other taxpayers interest.

As far as I’m concerned, Heritage Foundation and the RNC are wasting money on postage sending me pleas for cash. Both have failed miserably to push for my principles and I can’t support someone that won’t support me. You’d be better off and have more luck asking Obama for a cash infusion. If he gets elected, he’ll be the only one you can turn to, (Or maybe ‘Pat’ Paulsen….they’re both jokes)

October 26, 2008 aconservative writes:

It’s easy to hold on to the our ideals, the ideals of our founding fathers and the constitution when times are easy. What we do when things become difficult is what really shows our fiber and that of our nation. Too many compromised those ideals for effervescent promises of safety and security, protection of our retirement provided by big government. Here is a great example of the slippery slope that we conservatives so often talk about.

October 27, 2008 Phyllis in IL. writes:

Amen! Thank you Ken in Denver..

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