Are Larry Kudlow, CNBC, and Wall Street all Communists? No, just like T. Boone Pickens is not really a Communist.. But neither are they free market people, although Kudlow keeps falsely referring to himself that way.
I listened to as much of Larry Kdlow and company as I could stand this afternoon, and I can state this as an absolute fact:
Larry Kudlow, essetially all of CNBC, and essentially all of Wall Street do not believe in free markets, except for other people--a trait they share with most big business people.
AIG bailout? CNBC, wall Street, and I think Kudlow (don't watch him much) were for it. Wall Street bailout bill? Ditto (although Kuldow suggested an "alternative" he knew was never going anywhere, although it had some interesting elements). Then I listened to Kudlow and company this evening, and looked in on CNBC as the market collapsed this afternoon. All they proposed was that Wall Street and the financial system be given a blank check by the Federal Government.
What was the main mantra today? It was that the Fed has not done enough by "lowering" short term rates (admittedly pretty insignificant, since the Fed was already providing money at very little cost) and stepping in to buy commercial paper (corporate debt obligations and paper commitments). What these "free market" (lol) capitalists want is at least the following:
1. For the Fed to guarantee all interbank loans. You might well ask what that has to do with you, and Larry Kudlow would be hard put to tell you. WHY should the taxpayer guarantee loans between banks? Beisides that, with the Fed printing money, why do banks need to make loans between themselves now? Good question. Kudlow and Wall Street are focused on something called LIBOR, which is a measure of the interbank loan rate used by some banks to set things like adjustable rate mortgage rates. Now this admittedly might affect you, but you still might wonder why the taxpayer should stand behind transactions between banks. You might wonder what that has to do with "free" markets. Just like there has been a Wall STreet obsession with so many types of bailout, there has been an obsession with the Fed acting to bring down the LIBOR rate as being a reflection of credit "tightness". Now would guaranteeing interbank transacttions directly help one business or one consumer get a loan? Don't be silly! Like the Wall Street bailout bill itself, a taxpayer guarantee of interbank transactions would not originate a single business or consumer loan, or directly cause any bank to make one. The argument is that this will give "confidence" to people unwilling to commit private money without the government standing behind the transaction. I say bull. Now there may well be needed a Federal "clearing house" for processing credit transactions in a transparent manner, but I don't see that this would mean the taxpayers standing behind, as a backstop, of actually commitments of money beyond a simple "clearing house" function of verifying funds are there.
2. Wall Street--not content with the above mentioned Fed purchase of private commercial paper--wants the Fed (taxpayers) to stand behind every commercial paper transaction involving large commercial institutions, and really wants this done worldwide (as it does for item 1 above), so that the Fed (and similar worldwide institutions) act as a "backstop" for the entire commercial paper market. If you think this is a blank check, you are absolutely right.
3. Wall Street (and Kudlow, who approved of all of this and more) also approves of the new Fed idea of directly injecting capital into banks by the taxpayers purchasing an equity interest in banks.
Kudlow's panel made clear other measures beyond those above might be required. Can you possibly say these people believe in "free markets"? Don't be silly. They don't. They believe in the Federal Government bailing them out. If they do get "bailed out", how can they ever plausibly claim that the homless, individual homeowners, or anyone else should not be "bailed out"? Pretty hard, isn't it. I stand behind my statement above: None of these people believe in free market principles, except for others, except when it is directly to their benefit to profess to believe in them.
Now the "commercial paper" market is important to the operation of international businesses, and even small businesses may need interbank guarantees to accomplish some things. But what who/what are the issuers of most "commercial paper"? Right. Large stock exchange companies. Yes, they are important to our economy, but the idea that the taxpayer needs to guarantee the entire commercial paper market, when big companies cannot get financial institutions to do it, is somewhat bizarre. I would like Kudlow to try to explain it sometime to the local PTA.
Let us get concrete here. My brother is co-owner of a fairly decent sized trucking company. That company may employ--at least before this downturn--some 200 people at decent wages. Truck drivers actually get pretty decent money, even though they may not get rich. Now my brother is in a "redit/cash crunch". He has several million dollars coming in from sale of the building the company owns, but no present financial institution is going to loan him money. He only needs to issue "commercial paper" (a company note) for 90 days. Will the Federal Reserve guarantee my a note for my brother's company? Have you stooped laughing yet?
What is the difference? A note from my brother's company is "commercial paper". My brother insists that he can issue worthless commercial paper just as well as the big boys. And there must be a fear that the "big boy" commercial paper is worthless, or you would not need a taxpayer "backstop". You say that the "fear" is irrational? Well, if it is "irrational", that does not say much for Wall Street--waiting for government bailout instead of acting rationally. It also is a fear created by the very same people advocating these bailuts: CNBC and the media, Bernanke and the Fed, and Wall Street itself. My brother did not create the panic, but these people have no interest in bailing him out (even though the note of his company might be better than the note of some of these banks and financial institutions under attack by short sellers--certainly as good as "commercial paper" from Lehman Brothers).
That brings me to short sellers. You won't believe what his Kudlow panel said about short sellers (see my multiple entries today) . They (I can't make this stuff up) said: "How dare the SEC keep interfering with the operation of free markets". Do you see the sanctimonious, corrupt hypocrisy of all of these people? If you do not, I have failed. Because I have done my best to show it to you.
Short sale restrictions--especially if limited until the financial system gets back on track, and then adjusted to try to stop abuses) do noting to stop "free market" investing. Short selling, right now, is mainly a tool of hedge fund speculators acting in at least implicit concert. Short selling today virtually did in several regional banks, including one (Citizen's Bank) in which I have an investment. As Jim Cramer has said (on CNBC, to be fair), there is no excuse to allow short selling right now. It merely enables game playing by speculators, when real people are getting hurt.
What kind of people think limits on short selling are a significant interference in the free market, when they faovr so much massive, real government intervention in the "free markets" as I have described above? I will answer that. Corrupt people think that way Oh, I am not saying Larry Kudlow, or most of the people on CNBC are personally dishonest in a criminal way (although I am sure some on Wall Street who appear on CNBC as experts are). I am saying that these people are intellectually dishonest.
These people on CNBC, and in Wall Street, see everything in terms of their own self-interest. How is that any different from a person paying no taxes, who votes for Obama because he wants a "tax cut" (check from the Federal Government), or a person who votes for a politician because of a promise of any of a thousand other "handouts". It is no different. I am confident most of the American people see that. I am equally confident that Wall Street, and the Republican establishment, do not see that.
That is a reason Democrats can win elections. People instinctively understand that they can't just expect the Federal Government to give them money forever. The bill will come do (in many different ways). But they don't see Republicans or Wall Street standing for principle either. The public sees those people out for no. 1. Why should the pubic be any different? Well, one reason is that it will end in disaster for both Wall Street and the public, unless someone starts looking at the Federal Government as an endless source of "free" money to bail them out personally.
Let us go back to my brother. Can Kudlow, CNBC, or Wall Street, explain to my brother why Wall Street people should get their commercial paper guaranteed, while my brother's company gets no bailout (even though my brother has money coming in in three months to pay off the "bridge loan")? Of course they can't explain it. Multiply my brother by almost every person in this country with their own financial needs, and you should see how I regard Kudlow as intellectually dishonest, and CNBC as generally a shill for a corrupt Wall Street.
Wall Street, and big business, need to get out of the idea that the small people in this country are going to constantly "bail them out". If they don't get over that idea, God help them. In fact, God help us all if we keep going down this road of believing that the Federal Government should bail everyone out of everything, and provide everybody with everything.