The 6 Pack Economist

P.J. O’Rourke said “When the legislature controls what is bought and sold the first thing that is bought and sold is legislators”.  Well as it turns he was wrong.  Who knew that is was the legislators who would be doing the buying of the businesses?

 I am going to explain how this could work out for the better before I tell you how it will actually work.  The government buys large amounts preferred stocks and can start guiding the bank on the right path. The banks will be required to hold the top executives responsible and start making good solid lending decisions.  The economy would start to pick up and they banks would be profitable.  The banks are able to return a dividend and the stock price goes up.  The economy now on its way to recovery the government can now sell its share of the company and use that money toward paying down the deficit (hopefully no new spending, but this is the positive part of the piece so let us assume that).   

 Unfortunately the preceding paragraph has as much to do with reality as my dreams of winning the lottery, moving to the Caribbean with a sail boat and being known as the drunken American sailor.  What will happen is this; the government will start off making good decisions for the bank.  Much like the preceding scenario where lending is restored and top executives can’t pillage the banks coffers; these actions will get the economy moving.  Once people have moved on to a new dog and pony show the rats will show up. 

 The return of the rats will mean business as usual.  These banks will be used as leverage between legislators to get pet projects financed in the legislators’ respective districts and to get deals for their own private homes.  Employment from the mailroom to the boardroom will become a patronage bonanza.  The legislators unwilling to give up control of this grand candy machine will not, I repeat will not sell their preferred shares. 

 The banks being essentially a department of the DMV will stop making smart business moves; instead they will devolve into a fat tub of immovable flesh. The banks will be so dependent on government money they will no longer be able to function on their own.  The patronage jobs and pet projects will have bloated the bank’s own accounting records so much that legitimate loans will be squeezed out.  They will know their master and their master is some legislator who will be voted into office again and again not because of his actions destroying a bank, which will be too hard to explain in a sound bite campaign, but because of his stance on some other issue that the legislators will not change anyway.

 The only thing left to do at this point is to get a large loan from a non-nationalized bank and then use that money to give to a legislator’s campaign.  Then the legislator can get you a big paying job at the bank.  While at the bank you can make a bid to buy the bank you got your original loan from and then lose the paperwork for your loan in the merger.

 Toast your next good beer to taking advantage of government corruption.