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Socialism Obama-Style--Three Dick Morris Articles


OBAMA'S LEAP TO SOCIALISM

OBAMA SOWS SEEDS OF DEMISE

HOW OBAMA'S SOCIALISM WORKS


OBAMA'S LEAP TO SOCIALISM


By Dick Morris
Published on TheHill.com on April 21, 2009

President Obama showed his hand this week when The New York Times wrote that he is considering converting the stock the government owns in our country's banks from preferred stock, which it now holds, to common stock.

This seemingly insignificant change is momentous. It means that the federal government will control all of the major banks and financial institutions in the nation. It means socialism.

The Times dutifully dressed up the Obama plan as a way to avoid asking Congress for more money for failing banks. But the implications of the proposal are obvious to anyone who cares to look.

When the Troubled Asset Relief Program (TARP) intervention was first outlined by the Bush administration, it did not call for any transfer of stock, of any sort, to the government. The Democrats demanded, as a price for their support, that the taxpayers "get something back" for the money they were lending to the banks. House Republicans, wise to what was going on, rejected the administration's proposal and sought, instead, to provide insurance to banks, rather than outright cash. Their plan would, of course, not involve any transfer of stock. But Sen. John McCain (R-Ariz.) undercut his own party's conservatives and went along with the Democratic plan, ensuring its passage.

But to avoid the issue of a potential for government control of the banks, everybody agreed that the stock the feds would take back in return for their money would be preferred stock, not common stock. "Preferred" means that these stockholders get the first crack at dividends, but only common stockholders can actually vote on company management or policy. Now, by changing this fundamental element of the TARP plan, Obama will give Washington a voting majority among the common stockholders of these banks and other financial institutions. The almost 500 companies receiving TARP money will be, in effect, run by Washington.

And whoever controls the banks controls the credit and, therefore, the economy. That's called socialism.

Obama is dressing up the idea of the switch to common stock by noting that the conversion would provide the banks with capital they could use without a further taxpayer appropriation. While this is true, it flies in the face of the fact that an increasing number of big banks and brokerage houses are clamoring to give back the TARP money. Goldman-Sachs, for example, wants to buy back its freedom, as do many banks. Even AIG is selling off assets to dig its way out from under federal control. The reason, of course, is that company executives do not like the restrictions on executive pay and compensation that come with TARP money. It is for this reason that Chrysler Motors refused TARP funds.

With bank profits up and financial institutions trying to give back their money, there is no need for the conversion of the government stock from preferred to common -- except to advance the political socialist agenda of this administration.

Meanwhile, to keep its leverage over the economy intact, the Obama administration is refusing to let banks and other companies give back the TARP money until they pass a financial "stress test." Nominally, the government justifies this procedure by saying that it does not want companies to become fully private prematurely and then need more help later on. But don't believe it. They want to keep the TARP money in the banks so they can have a reason and rationale to control them.

The Times story did not influence the dialogue of the day. People were much more concerned with the death of 21 horses at a polo match. Much as we will miss these noble animals, we will miss our economic freedom more.


OBAMA SOWS SEEDS OF DEMISE


By Dick Morris
Published on TheHill.com on April 28, 2009

When the Obama administration crashes and burns, with approval ratings that fall through the floor, political scientists can trace its demise to its first hundred days. While Americans are careful not to consign a presidency they desperately need to succeed to the dustbin of history, the fact is that this president has moved -- on issue after issue -- in precisely the opposite direction of what the people want him to do.

Right now, Obama's ratings must be pleasing to his eye. Voters like him and his wife immensely and approve of his activism in the face of the economic crisis. While polls show big doubts about what he is doing, the overwhelming sense is to let him have his way and pray that it works.

But beneath this superficial support, Obama's specific policies run afoul of the very deeply felt convictions of American voters. For example, the most recent Rasmussen Poll asked voters if they wanted an economic system of complete free enterprise or preferred more government involvement in managing the economy. By 77-19, they voted against a government role, up seven points from last month.

And in the Fox News poll -- the very same survey that gave Obama a 62 percent approval rating and reported that 68 percent of voters are "satisfied" with his first hundred days -- voters, by 50-38, supported a smaller government that offered fewer services over a larger government that provided more.

By 42-8, the Fox News poll (conducted on April 22-23) found that voters felt Obama had expanded government rather than contracted it (42 percent said it was the same size) and, by 46-30, reported believing that big government was more of a danger to the nation than big business. (By 50-23, they said Obama felt big business was more dangerous.)

By 62-20, they said government spending, under Obama, was "out of control."

So if voters differ so fundamentally with the president on the very essence of his program, why do they accord him high ratings? They are like the recently married bride who took her vows 100 days ago. It would be a disaster for her life if she decides that she really doesn't like her husband. But she keeps noticing things about him that she can't stand. It will be a while before she walks out the door or even comes to terms with her own doubts, but it is probably inevitable that she will.

For Americans to conclude that they disapprove of their president in the midst of an earth-shaking crisis is very difficult. But as Obama's daily line moves from "I inherited this mess" to "There are faint signs of light," the clock starts ticking. If there is no recovery for the next six months -- and I don't think there will be -- Obama will inevitably become part of the problem, not part of the solution.

And then will come his heavy lifting. He has yet to raise taxes, regiment healthcare or provide amnesty for illegal immigrants. He hasn't closed down the car companies he now runs and he has not yet forced a 50 percent hike in utility bills with his cap-and-trade legislation. These are all the goodies he has in store for us all.

Obama's very activism these days arrogates to himself the blame for the success or failure of his policies. Their outcome will determine his outcome, and there is no way it will be positive.

Why?
  • You can't borrow as much as he will need to without raising interest rates that hurt the economy;
  • The massive amount of spending will trigger runaway inflation once the economy starts to recover;
  • His overhaul of the tax code (still in the planning phases) and his intervention in corporate management will create such business uncertainty that nobody will invest in anything until they see the lay of the land;
  • His bank program is designed to help banks, but not to catalyze consumer lending. And his proposal for securitization of consumer loans won't work and is just what got us into this situation.
So Mr. Obama should enjoy his poll numbers while he may.


HOW OBAMA'S SOCIALISM WORKS


By Dick Morris
Published on TheHill.com on May 5, 2009

President Obama's vision of the future is, apparently, an economy guided, steered and -- when the occasion demands -- commanded by the federal government. Some of the companies will remain private. Washington will take others over. But all will look to the White House, as to an orchestra conductor, for signals as to how and when and where to proceed.

This summary is the vision that emerges from the Chrysler bailout.

Whether or not one believes the claims of attorney Thomas Lauria (I do) that the investment bank Perella Weinberg Partners was strong-armed by the administration, the fact remains that the four firms that accepted the piddling offer of 29 cents on the dollar are all awash in Troubled Asset Relief Program (TARP) money.

Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan Chase all dutifully approved the offer from Washington, while Perella Weinberg reportedly held out for 50 cents. Did the combined $90 billion the four compliant firms owed Washington in TARP funds make a difference in their passive acquiescence? You bet it did.

They shouldn't have said yes. Clearly, Obama was not about to pull the trigger, which would have sent tens of thousands of autoworkers straight into unemployment. Politically, he would have had no choice but to cough up the $4.5 billion loan the feds just gave Chrysler with or without a debt settlement. The political pressures that have always operated on this Democratic president are still there and still in play.

Knowing the ultimate vulnerability of the administration position, any investment bank that was looking out for its clients would have demanded more than 29 cents. But Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan Chase all had a higher calling -- they had to appease King Barack I. To its credit, Perella Weinberg put its investors first.

But this little vignette shows exactly what the new rules of the game will be under this administration. It won't be Soviet-style socialism or Reaganesque capitalism. The system will more resemble the Japanese arrangement where MITI, the Ministry of Trade and Industry, informally guided companies and told them what to do. In Japan, a nod usually suffices to command. In the United States, one has to use a hammer. But the result will be the same: compliant capitalism.

Companies will not look out for their shareholders or their employees or even their customers so much as watch the smoke signals from Washington to decide what to do. The markets won't control decisions. Washington will.

The same balance of government control and nominal private ownership is evident in the mortgage rescue plan and the efforts to rekindle consumer lending. It will be manifest in the cap-and-trade legislation and in the priority that the administration will accord to green lending and job creation.

The strong-arming that obviously led up to the Chrysler deal will also be typical of the Obama industrial policy. When the chips are down, JFK's pressure on U.S. Steel to lower its prices in 1962 will be the model for the Obama years. While terrorists need not fear any violation of their constitutional rights, CEOs of Fortune 500 companies will not be so fortunate.

At the core of the new policy will be the simple assumption that Washington knows best.

But it doesn't. The stagnation of the Japanese economy in the past 20 years is eloquent testimony to the fact that government usually gets it wrong. Sometimes it makes the wrong decision because it fails to anticipate the market (as Japan did when it downplayed laptop computers and stressed mainframes). More often (as is normal in Japan), it is so in the thrall of special interests that it ends up articulating a consensus of those who would divide up the pie among them.

One way or another, the government usually runs the economy into the ground, as it will under King Barack I.
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