Is Ralph Nader correct: USA is now socialist

[Viking Prince]

Nader: Bailout was socialism

Spoiler Alert, click show to read: 

The bailout of Wall Street was the "collapse of corporate capitalist ideology" and was clearly a case of socialism bailing out capitalism, independent presidential candidate Ralph Nader said Thursday in an interview with The Denver Post.
"The bailout was so frantic, so ultimatum-laced, so open-ended, so absent of criteria or standards . . . that it was clearly socialism bailing out capitalism," said Nader, a lawyer, author and longtime consumer advocate.
"I emphasize 'corporate' because the only capitalism left now is small business. They are the only ones free to go bankrupt," added Nader.
He placed part of the blame on trade agreements that have shipped hundreds of thousands of U.S. jobs overseas. "The trade agreements are the mechanisms that facilitate the export of jobs and industries to fascist and communist dictatorships that know how to keep workers in their place. (They) have workers who know how to handle modern capital equipment and work very hard to export back to this country."

He said that he and others will push Congress when it is back in session to make the speculators pay for their own bailout. And it will be up to the enhanced Democratic-controlled Congress and Barack Obama as president to make it work, he said.
"They (the Democrats) finally have no excuses," said Nader. "This is the final test of the Democratic Party. They can't blame the Republicans in the Congress. They can't blame the White House."
Nader said it may be up to billionaires such as Bill Gates, Michael Bloomberg or others to save the country.
Nader said he had a lengthy conversation with Bloomberg just before the New York City mayor announced he wasn't going to run for president. "He said, 'I've done all the surveys, I've done all the polls, Ralph. Here is my conclusion: Fifteen percent of the Republicans who vote for their nominee would vote for their nominee even if he was Leon Trotsky. And 15 percent of the Democrats would vote for their nominee if their nominee was Ayn Rand. So I would start with a 30 percent handicap

Nader states in Colorado stump speech that the bailout is the end of corporate capitalism. With only small businesses being allowed to fail, he believes that it is a collapse of capitalist ideology and the ascendancy of socialism in American governance.

But is this really true?

The five biggest banks are being recapitalized with federal funded equity purchases. The reasoning is that the banks have carried the illiquid investments as mortgage backed securities fell in value and are resisting selling at what they perceive to be a low point. The feds cannot pay a premium without political costs and the bankers will not sell without the premium. The only other solution is recapitalization with the equity purchases. There is a precedent for this from the S&L bailout where the government let the institutions go bust and then liquidated the assets through the Resolution Trust Corporation. This avoided the moral hazard risk involved in negotiating the asset purchase which would support the point that Nader was making.

Big industrial bailouts are also not unique. Conrail was clearly a bailout for the very bankrupt PRR disaster. Amtrak is also a bailout of passenger trains owned by railroad which were subject to local and state commitments and rules. Big steel companies have certainly had their share of government support. The auto makers guaranteed loans (precedent: Chrysler bailout) are also a part of the recent bailout mess.

But is the basic assertion that this is socialism correct? Even with precedents, that does not negate the charge.

Government has a history of intervention in business affairs. The bankruptcy rules are certainly an example. Protection by the court is certainly government intervention. An approved reorganization and extinguishment of debt and ownership rights is then sanctioned by the court. The purpose of the bankruptcy rules is to continue the business for the benefit of the remaining ownership, debtors, employees, and customers. This has never been assumed to be a socialist process.

Government guarantees on debt seem to meet the same test if the guarantees are limited in time and directed to specific companies that would otherwise be bankrupt. So does this mean that the infusion of equity is simply the slippery slope towards socialism? Does the limitation of time and directed to specific companies that would otherwise be bankrupt allow the government cover from the socialist accusation?

I think the Nader position has some merit, but that the limitation of time and the focus on companies that would otherwise be bankrupt does blunt his criticism. This is indeed a slippery slope problem though. The real test will come with Congress addressing the regulations that helped create the problems. By modifying the regulatory obligations that created the environment – the banking equity infusions will be clearly a temporary fix to give the government the time necessary to fix the problems.

The auto maker support is a more difficult problem since it is clearly an attempt to keep the pension funds solvent. No Congressional actions are anticipated and this makes the loan guarantees a much more socialist process. The government must take action to fix the pension rules or simply let these companies go bust. Without the Congressional actions to fix the pension issue, Ralph Nader is clearly right in labeling the support a socialist solution.

[touchmaster]

Yeah he is!

[kev-o]

To a degree yes. Everyone is afraid of losing, and guess what? Thats part of the gamble of life, especially when it comes to capitalism. Even though the bill has been passed the stock market continues to fall. And in the long run my generation and maybe my children's generation will have to pay off this $700 billion "stimulous package" when its due to the scamming morgage loaners and the uneducated people who took them for their word. Why should I have to pay for their mistakes? My parents bought a house at a fixed rate (something you absolutly should do) and we are living fine. But those in my neighborhood...not so good. But thats their fault.

[touchmaster]

To a degree yes. Everyone is afraid of losing, and guess what? Thats part of the gamble of life, especially when it comes to capitalism. Even though the bill has been passed the stock market continues to fall. And in the long run my generation and maybe my children's generation will have to pay off this $700 billion "stimulous package" when its due to the scamming morgage loaners and the uneducated people who took them for their word. Why should I have to pay for their mistakes? My parents bought a house at a fixed rate (something you absolutly should do) and we are living fine. But those in my neighborhood...not so good. But thats their fault.

Aye, you said it, that's our first problem.

[spartan117]

To a degree yes. Everyone is afraid of losing, and guess what? Thats part of the gamble of life, especially when it comes to capitalism. Even though the bill has been passed the stock market continues to fall. And in the long run my generation and maybe my children's generation will have to pay off this $700 billion "stimulous package" when its due to the scamming morgage loaners and the uneducated people who took them for their word. Why should I have to pay for their mistakes? My parents bought a house at a fixed rate (something you absolutly should do) and we are living fine. But those in my neighborhood...not so good. But thats their fault.

Ah but you also have to remember that the house value has also gone done in many of these properties. It doesnt make sense to be paying more than the house is worth. Thus many simply may walk away.

[Dance the older]

To a degree yes. Everyone is afraid of losing, and guess what? Thats part of the gamble of life, especially when it comes to capitalism. Even though the bill has been passed the stock market continues to fall. And in the long run my generation and maybe my children's generation will have to pay off this $700 billion "stimulous package" when its due to the scamming morgage loaners and the uneducated people who took them for their word. Why should I have to pay for their mistakes? My parents bought a house at a fixed rate (something you absolutly should do) and we are living fine. But those in my neighborhood...not so good. But thats their fault.

Agreed. It doesn't effect me, I live in a town home, in no way would I agree to pay so others could have their own homes, what do I get out of this? It wasn't my greed that caused this.

[kev-o]

Well, now they know not to buy a house with a morgage that isn't at a fixed rate. Otherwise you will recieve a nice butt **** from the loaners when they want their money...at 4 times the original rate.

[Mikelus Trento]

Have those pesky adjustable rate mortgages been outlawed yet?

First there were practices engaged in by the lenders, encouraged by the government, amplified by mislabeling bundled bad mortgages,and behavior by the borrows, spiced overall by greed.

KABOOM

I wouldn't call it socialism. I would call it stupidy-fix.

[Hunter Makoy]

no its not because it only pertained to s specific sector of the country. this was not nationalization of banks, it was merely the expropriation of a couple of companies. further more, it is temporary.

the level of increased government was nothing compared to what FDR did, so going by Nadar's logic we've been socialist for 70 years.

now dont get me wrong, i dont like this to happen, and i would prefer everything to stay as invisible hand as it can. the fact is tho that if this didn't happen, and if these banks then collapsed, they would take too many down with them. ordinarily, they would live and die by their own merits. alot of people point out that its a sign of favoring big business or elitests over ordinary people. well, if 2 or 3 of the biggest banks in the nation were allowed to collaps, the ordinary people r still the ones that would suffer the most.

Well, now they know not to buy house with a morgage that isn't at a fixed rate. Otherwise you will recieve a nice butt **** from the loaners when they want their money...at 4 times the original rate.

thats actually not really true. 1. loaners can't demand any interest rate they want, the adjustible rates r still tied to the overnight rates that r set by the FED. 2. the fact that the rates weren't fixed wasn't the really bad part, it was the fact that the people couldn't repay the loans no matter wat, fixed or not. the subprime rate is wat allowed them to become qualified for the loans that were out of their range. granted, fixed rate is better financially, but that specific aspect doesn't have much to do with this. it has more to do with the 'do-gooders' wanted to get poor people in to nice houses no matter the potential problems.

[Surgeon]

The bailout was pretty socialist, yes, and also pointless. I have a strong feeling they're only delaying the inevitable.

[Richard]

The bailout was pretty socialist, yes, and also pointless. I have a strong feeling they're only delaying the inevitable.

I haven't been following the whole thing as it is of no concern to me, but how was it pointless? What was the alternative? Bankrupt banks in America?

[Viking Prince]

I haven't been following the whole thing as it is of no concern to me, but how was it pointless? What was the alternative? Bankrupt banks in America?

I am not suggesting there was an alternative in this case -- the problem is one of moral hazard though. If the banks do not think they risk default, they take greater risks with their investments. Kinda heads I win, tails you lose type of play.

The Savings and Loans went bust a few years ago. The government insured deposits were paid and the assets of the banks were liquidated through a government corporation named Resolution Trust Corporation (RTC). The S&L crisis was resolved by attempting to minimize moral hazard by wiping the shareholders of the banks out for their irresponsible oversight of the management.

This time the big banks played chicken with the feds. They were not going to go bust and they were not willing to sell the illiquid assets for less than they believe they will be worth after a bit. The government decided that the only alternative was to inject capital into the banks through the purchase of stock -- all 5 had to agree so that there would not be a run on the one or two that were a bit wobbly.

We still do not know which are the wobbly ones. COmplaining about being forced into the deal does not indicate strength either. If you play poker, you will understand.

The big problem is that the banks still have the jung on the bank books and they may even be buying more of the stuff. Injecting the capital into their companies may only allow them to double down on risky bets.

[kev-o]

thats actually not really true. 1. loaners can't demand any interest rate they want, the adjustible rates r still tied to the overnight rates that r set by the FED. 2. the fact that the rates weren't fixed wasn't the really bad part, it was the fact that the people couldn't repay the loans no matter wat, fixed or not. the subprime rate is wat allowed them to become qualified for the loans that were out of their range. granted, fixed rate is better financially, but that specific aspect doesn't have much to do with this. it has more to do with the 'do-gooders' wanted to get poor people in to nice houses no matter the potential problems.

I see. But this also backed up with the individuals being less educated in the housing market.

[Hunter Makoy]

I see. But this also backed up with the individuals being less educated in the housing market.

dont get me wrong, i'm not arguing that they were educated, they weren't. i'm just saying the adjustibe rates weren't inherently evil. the people pushing loans on people who couldn't afford them were. if you had taken out an adjustible rate loan in the mid 70's, u'd be making off very well later on when the interest rate went from about 18% to 6, so they rn't always bad. the problem is of course a more human one. the problem is people wanting to do good by putting people into houses, but looking more to their own self image to worry about whether or not they could actually afford it.

its not PC to say, but for alot of these people forclosure would be a good thing. it would actually get them out of the houses they can't afford, and keep the government from having to interfere as much.

[whhyy]

Yes. Because of this and what Obama will do America will become communist. There will be IEDS on the streets and stuffs. Total chaos.

[kev-o]

Yes. Because of this and what Obama will do America will become communist. There will be IEDS on the streets and stuffs. Total chaos.

Strawman. Really.

[Viking Prince]

But what about the broader question? Is it socialist when the government intervenes? Does it matter that the intervention is temporay. Does it matter that it is a de facto bankuptcy reorganization?

[Hunter Makoy]

But what about the broader question? Is it socialist when the government intervenes? Does it matter that the intervention is temporay. Does it matter that it is a de facto bankuptcy reorganization?

like JP said we can't tell know cuz we dont know the extent. if its temporary, then i guess it could be. is the act in and of itself a socialist act? yes it is. does it constitute socialism? NO we've had aspects of socialism in our country for a very long time. it moves us a bit more to the left, but not into socialism. i guess the issue i have with these lables is that there are fairly clear definitions on wat they r, and we just dont fit it.

[Mikelus Trento]

But what about the broader question? Is it socialist when the government intervenes? Does it matter that the intervention is temporay. Does it matter that it is a de facto bankuptcy reorganization?

Does it really matter if it's necessary?

[Hunter Makoy]

Does it really matter if it's necessary?

if i am reading ur question right: does whether or not its socialism matter if its necessary?

then yes and no. I, like most people want to stick to the the basis of this country of being free market and non socialist. but i also do not think that we should allow for our own demise in the name of 'keeping our principles'. this specific situation falls in the middle. the situation is bad enough that something has to be done. it is also not catastrophic enough for us to compromise our principles completely for it. i think that the solution fits rather well in the middle.

while it may be considered socialist by some, it is on a temporary basis, and is only targeted at a select few entities that still make a big impact. in the end though the question of is it socialist, or is it necessary is out weighed by the question of if it will actually work. in part it has worked to an extent as the Dow has recovered some. unfortunately it is still volatile. it is up from where it has been, but is still fluctuating for violently then we would want it too. part of this tho is in response to the plan itself, not just to the problem.

within the next 2 months or so, particularly by the start of 2009, we should have a more clearer picture then we do now. i think unfortunately it will have to be a case of whether the ends justify the means. obviously we do not want to take socialist measure, but we still have to compare that to the consequences of doing nothing.

if we pretend that this is necessary, and that it indeed works. wat we will have to do in the future, regardless of market conditions, is roll back on government alot. putting government in for a bit when things get bad is fine and well, but when it passes, we have to get them out. this is wat has happend so far: government brought in big time cuz things went real bad (FDR), government brough tin even more because things got bad again (GWB). wat we need to look at now is the fact that when businesses ran the market, and it went bad, government was brought in to make it better. now that government is there, the answer will not always be even more government intervention. when this passes, we should be looking at rolling back involvement by the government, or else eventually we will have no where to go.