Uh oh. According to The Washington Post, the Obama Administration is set to ask Congress for broader authority in seizing and controlling all types of financial institutions:
The Obama administration will ask Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, White House spokesman Robert Gibbs said this morning…
The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to an internal administration document.
This sounds vaguely similar to the Bush administration’s proposal, at the end of 2008, to give then-Secretary of the Treasury Henry Paulson nearly limitless power to distribute TARP funds as he saw fit. Congress balked at giving one man so much power, and Bush backed down. Unfortunately, it looks like Obama’s now up to the same thing, but on a far grander scale.
Clearly, this is Obama’s attempt to prevent any future scandals like the recent AIG exec-bonus fiasco, where his administration looked powerless to control an institution that, in effect, it owned. By giving itself control of wayward institutions, the government can modify the institutions as it sees fit, without having to worry about the political consequences of executive bonuses or other potential abuses.
But it seems to me that Obama is going way too far. Seizing control of nearly-bankrupt banks is one thing. But having the power to take control of all types of businesses, with no Congressional oversight, is quite another. The potential upsides of being able to reform failed businesses from the inside out would certainly be outweighed by the government’s well-known inability to run anything, including itself, efficiently or effectively. Introducing federal bureaucracy into a private business would, at a stroke, neutralize the very things that make private businesses work: flexibility, innovation, efficiency.
There’s a proper boundary between the public and private spheres that should only be crossed in emergencies, and with proper supervision. By granting himself the power to seize private interests without having to answer to anybody, Obama is committing the same sin as Bush did when he authorized illegal wiretaps and otherwise expanded the executive branch’s power without consulting Congress.
I hope Congress has learned its lesson, though judging from their recent AIG taxation stupidity, I have my doubts. But one can always hope.
