Corner Office: Defending Corporations As People

Does GE have an asbestos underwear division? Because Jack Welch is going to need a triple-pack after daring to write in the WSJ that, to quote Mitt Romney, corporations are people.

Corporations are people working together toward a shared goal, just as hospitals, schools, farms, restaurants, ballparks and museums are. Yes, the people who invest in, manage and work for corporations are there to make a profit. And yes, corporations may employ some bureaucrats, jerks, cheapskates and even nefarious criminals.
But most individuals working in corporations are regular people, people just like you and your friends and neighbors. People who want to make a living and want to make a difference.
... 

This fact is so obvious that there can only be one conclusion drawn when we hear the pronouncement, "Corporations aren't people"—that it's doublespeak. That is, when people say that corporations aren't people, what they really want to say is, "Business is evil." 

They want to say what they feel, which is that capitalism doesn't work, that it's unfair, and that America needs another system—one that, to quote the president himself, "spreads the wealth around." 

Obviously, we're not in that camp. We know capitalism isn't perfect. But free markets are the best system there is to provide opportunity to those with an idea, or simply the motivation to work their butts off to make their lives better. We also know capitalism can spawn bad behavior; greed is part of the human condition and always will be. That's why regulations and controls exist, as they should. 

But this movement afoot that hates on business is craziness. It will destroy America as we know it because very few jobs get created in an environment that's outright hostile to business. And without jobs, the whole thing falls down. It becomes a welfare state. We become a welfare state. 

If that's what you want, we can't change your mind. But in your efforts, stop hiding behind words. Corporations are people. If you want to put an end to corporations, at least say what you mean.

I love that earnest "say what you mean." As if Pres. Obama and Elizabeth Warren, whom Welch quotes at length are ever going to start doing that. 


It's incredible that anyone has to make such a basic point - plenty of whiny liberals work for big corporations, after all, whinging the whole time - but there you are

Business, Always Personal: American Business & Resisting The Left

Gregg Sherrill - CEO of Tenneco - has a good op-ed in the W$J today about the need for businessmen to be more full-throated in responding to attacks on the free market from our current leftist government: Speaking Up For American Capitalism

Business, in the dual role that politicians try to fashion for it—providing funds to government, and all too often serving as a scapegoat—has taken a pounding on Capitol Hill and at the White House. For the most part, the business community has remained relatively silent. In my view, we simply have not tried hard enough to make our case.

The reaction is partially understandable. We were hit from several directions at once, and the financial crisis turned so quickly into a collapse of demand that our primary concern was just to survive and work our way out of the rubble. Our focus turned inward.

Because the financial crisis and resulting recession caused so much pain, a bashing of our entire free enterprise system may have been inevitable. My fear is that by remaining quiet in the face of this onslaught, we have allowed it to intensify. In fact, other than those companies that were a part of the system of easy credit and disguised risk that so spectacularly collapsed, American business as a whole has nothing whatsoever to apologize for.

The good news is that despite the political cacophony, and our silence, most Americans still instinctively understand this.

Hear, hear; and all that, but...by some magical process, American politics is filled with people hostile to government, regardless of which party is in charge of the White House. Why is that? Sherrill offers some answers:

According to a recent analysis in The Economist magazine, the overwhelming majority of Americans say they prefer the free enterprise system to any collectivist alternative. In one such poll, as the Economist reports in a feature titled "The 70-30 Nation," the Pew Research Center asked respondents whether they were better off in a free market rather than a socialist economy "even though there may be severe ups and downs from time to time." Seventy percent said "Yes"

So why are the 30% in charge of the 70%? According to American Enterprise Institute President Arthur Brooks, the "game changer" was the economic crisis. As he writes in his book "The Battle," "the opportunity to expand the 30 percent coalition was not the Democratic sweep in 2008. It was the financial crisis of 2008-2009, which was used as a tool to attack the free enterprise system . . ."

Furthermore, Mr. Brooks argues that it's time to make "the moral case for free people and free markets." I couldn't agree more.

I can't argue with that, but I don't think American businessmen, especially those who run public companies, should get away with complaining that they are being unjustly attacked. I'm a free market kind of guy, but the behavior of the big league American capitalists during the financial crisis and the years leading up to it was positively embarrassing. How can you look at someone like GM's Rick Wagoner...or Lehman's Dick Fuld...or Merrill's Stan O'Neal...or anyone at Chrysler, Washington Mutual, Fannie/Freddie, Wachovia, or BP (which, just today, is being credibly accused of aiding the bogus "compassionate release" of Libya's Abdel al-Megrahi), and conclude that Big Business is behaving in a blameless manner?

These are guys who destroyed their companies, often in the face of clear warnings of danger. They didn't even carry out the most basic item on their list of tasks, which is to preserve shareholder value. And, then they walk away with multi-million dollar golden parachutes? What does that have to do with the free market? Absolutely nothing. The free market works when people have the space and the resources to succeed on their own and fail on their own. But, the failure part has been gradually legislated and regulated away. Instead, too many of America's businessmen are enthusiastic about their perks and power during good times; but, during bad times, they run to the government for protection - whether through bailouts, "stimulus," "green" subsidies or what have you.

And it gets worse. Health insurers and pharmaceutical companies enabled the passage of Obamacare. UPS has spent years trying to drag FedEx down to its level by seeking legislative mandates that it unionize its workforce. Tobacco companies "settled" lawsuits against them by paying $$ to the government, rather than to actual plaintiffs who had been harmed by their products. ADM and other ag-business titans seek out and receive billions for boondoggles like ethanol and farm supports that are politically sold to the public as supporting "family farms." And, so on.

And, that's not to mention the bad behavior of corporate titans, whether in the criminality of a Richard Scrushy (convicted of trying to buy a seat on a health care regulatory board), or the sheer tone deaf boorishness of, well, take your pick. I mean, what would possess a company like Chrysler to hire a man like Bob Nardelli as its CEO? And yet those are the sort of decisions that come naturally at the highest levels of American business.

The free market doesn't just mean business is free from legal or social responsibility. Call it noblesse oblige if you want, but the capitalists have social responsibilities that go beyond booking profits and making donations to the museum downtown. No, this isn't a call for "socially responsible" investing or "proxy access" or other leftist reforms (as if they care about business!). But, it is a call for business elites to at least pretend they live in the world with the rest of us. Surely, their education and sophistication has taught them that their bad behavior will be seized on by hostile elements in the media, government and society. Surely, they are aware that their bad behavior will reflect badly on the rest of us who are just trying to make a buck.

What we really have now is an increasingly unfettered social democracy where business elites protect their own interests through government fiat, rather than through innovation and competition. Sherrill is right that there are very few among his peers who makes the moral case for free markets. That's because many of them don't know what that case is, since it's been so long since they worked within a free market.

Pet Cemetery: San Francisco Readies Pet Shop Ban

If I told you that San Francisco was planning to regulate the City's pet shops out of existence, you would probably say I got taken in by The Onion. Sadly, this is not satire. SF has a "Commission of Animal Control and Welfare" and they are voting on just such a proposal tonight. But don't call them anti-business! SF Considers Banning Sales of Pets, Except Fish

Sell a guinea pig, go to jail.

That's the law under consideration by San Francisco's Commission of Animal Control and Welfare. If the commission approves the ordinance at its meeting tonight, San Francisco could soon have what is believed to be the country's first ban on the sale of all pets except fish.

That includes dogs, cats, hamsters, mice, rats, chinchillas, guinea pigs, birds, snakes, lizards and nearly every other critter, or, as the commission calls them, companion animals.

"People buy small animals all the time as an impulse buy, don't know what they're getting into, and the animals end up at the shelter and often are euthanized," said commission Chairwoman Sally Stephens. "That's what we'd like to stop."

San Francisco residents who want a pet would have to go to another city, adopt one from a shelter or rescue group, or find one through the classifieds.

According to the linked article, the pet sale ban is intended to combat a problem I was not previously aware of: people are buying (horrors!) hamsters, and are becoming overwhelmed with the responsibilities associated with caring for the little monsters. How these losers can care for themselves, let alone a hamster, is beyond me. Anyway, this leads to such cruel scenes as hamsters being turned over to animal shelters where they are the No. 1 animal euthanized by the City. Seems like you could try to do something less draconian like ban the sale of hamsters, or make people read a pamphlet, or some such (although those are just as intrusive and annoying). But, no, the Pet Commission would rather chase the simple thrill of "banning" all pet sales. No I am not kidding.

The City's pet store owners are, of course, up in arms over this threat to their livelihoods at the hands of the quintessential faceless bureaucrats. I mean, who would guess that your business could be shut down after a midnight vote by a city commission dedicated to pets? And, it could easily happen. There are very few pet shop owners - and the fish store owners will apparently be exempt* - but there are plenty of people in SF who think animals have souls and would rather see a business close and jobs destroyed if that would mean a single mangy little hamster won't have to go to the Big Wheel in The Sky.

Mostly, though, this is yet another example of the progressive's punitive impulse to stamp out fun in our lifetimes. How any adult can begrudge a kid's being able to buy a pet rather than drive out of town or find some questionable stray at the pound is beyond me. But, those are the sort of nags we have around here.

*a politic move on the part of the Commission. Fish stores are fairly common in SF, while traditional pet stores are not. Try to ban the sale of pet fish and you might start a fight, especially in the Chinese community, which seems to operate many of these shops. But, rest assured, they will come for the fish shops next.

A Gusher of Dumb: Cutting BP's Dividend

President Kick-Ass and his ideological allies are calling on BP to cut its dividend to demonstrate its penance for despoiling the Earth. Here's something I am sure these know-nothings have never considered: Dividend Cut Will Hurt Retirees

We have to remember one thing -- BP bought 10 years ago, Amoco, Arco, a very large American corporation with a lot of people working for BP today. And the retirees are pensioners from the Amoco and Arco days. So by cutting the dividend we're penalizing completely innocent people that worked very hard for many years. And now, the dividend is the way they support themselves. So, I don't understand."

The problem with liberals is they think the only way to earn money is by either drawing a regular paycheck (with 1% paid to the union), or by getting some sort of government assistance. Any other income source is either suspect or a complete mystery to them. And, these are supposed to be the smart guys in American politics. They don't even rise to the level of knowledge of two guys arguing in a bar. You have to wonder who they think are receiving those dividend payments.

Chevy Chase

Good to see that GM is as dumb and arrogant as ever. Someone in their marketing department has announced that, henceforth, everyone must say "Chevrolet" and can no longer use the diminutive "Chevy." OK, admiral, we'll get right on it: GM Proposes Leaving A Car's Popular Nickname in the Dust

On Tuesday, G.M. sent a memo to Chevrolet employees at its Detroit headquarters, promoting the importance of “consistency” for the brand, which was the nation’s best-selling line of cars and trucks for more than half a century after World War II.

And one way to present a consistent brand message, the memo suggested, is to stop saying “Chevy,” though the word is one of the world’s best-known, longest-lived product nicknames.

“We’d ask that whether you’re talking to a dealer, reviewing dealer advertising, or speaking with friends and family, that you communicate our brand as Chevrolet moving forward,” said the memo, which was signed by Alan Batey, vice president for Chevrolet sales and service, and Jim Campbell, the G.M. division’s vice president for marketing.

As many others have pointed out, and the NY Times notes, GM is relying on some questionable examples of "strong" brands that Chev***** needs to emulate:

“When you look at the most recognized brands throughout the world, such as Coke or Apple for instance, one of the things they all focus on is the consistency of their branding,” the memo said. “Why is this consistency so important? The more consistent a brand becomes, the more prominent and recognizable it is with the consumer.”

Although the memo cites Coke, it does not note that Coke is shorthand for Coca-Cola — or that Apple is not commonly used in reference to its products, which are known simply as iPads, iPhones and MacBooks.

"Coke" is, of course, a nickname for "Coca-Cola." Also, the development of brand nicknames is generally something that is out of the hands of the company. Indeed, companies usually embrace in the spirit of creating a sense of intimacy with their customers. Think of Radio Shack/The Shack (I thought I was the only one who called it The Shack!); McDonalds/Mickey D's; Burger King/BK Lounge. Or, how about Cadillac/Caddy? Is that the next to go?

To be fair, this was an internal memo to employees telling them to stop saying "Chevy" when talking with each other or the outside world. I guess it's kind of like how Disney insists on calling their employees "imagineers." It promotes a warm glow of exclusivity. It's easy to imagine some new guy at GM (if they ever hire anyone again...) referring to Chevy and everyone else cocking a snoot and sniffing, "This company only builds Chevrolets. "

Then, again, we're talking about Chevys here. If you want to improve their brand strength, you need to do a lot more than battle a nickname. You need to build better cars, simple as that. But, GM obviously thinks it'd be easier to start enforcing bureaucratic speech codes.

The Third Wheel

Even in its government-owned, bailed out form, Chrysler is still the afterthought among the Big Three. While the government happily goes along with the Enron-accounting that allowed GM to claim implausibly that it had paid back its debt to the feds "in full," Chrysler is simply reported as a billion dollar loss: Treasury Takes $1.6 Billion Dollar Loss On Chrysler Loan

The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009.

Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.

Treasury said Monday that Chrysler repaid $1.9 billion of a $4 billion loan, which was extended before the company filed for Chapter 11. The government hopes to get another $500 million from the company that emerged from bankruptcy, Chrysler Group LLC.

Treasury officials said that the government had no plans to boost its stake in the new Chrysler to cover those losses. It also acknowledged another $1.9 billion in potential losses from a separate loan that had been made to the company that went through bankruptcy proceedings. It indicated slim hopes of recouping much if anything from that separate $1.9 billion loan.

The original $4 loan was made in January 2009, when the Bush administration was scrambling to rescue Chrysler, GM and their auto financing arms.

The Congressional Budget Office estimated in March that the government's $85 billion bailout of the automakers would cost taxpayers $34 billion.

FWIW, I saw someone driving a Fiat 500 past City Hall the other day. It looked ... cute. Not cute enough to buy, of course, but I'd like to think there are enough gay men and swinging single chicks in the United States to make it a profitable car whenever it is that Chrysler starts selling them out here.

Class Action

GM's high profile claim that it has repaid its federal loans "in full" has generated wide ranging skepticism, and no wonder. When you pay back a "loan" with government TARP money - itself a loan - rather than earnings from selling Aveos, that doesn't exactly inspire confidence. Also, the "loan" repayment amounted to $6.7 billion. Wait a minute, didn't the feds invest $50 billion other dollars in GM? Why, yes they did! Gee, it's almost like they're trying to fudge the difference in the hope that taxpayers won't notice. And,what happened to that money? Well, the hope is that the taxpayers will recover its investment when GM has its IPO "this fall." Who wants to bet that GM will quietly miss that deadline?

In the meantime, we are left to ponder what kind of world we live in where a corporation can use accounting trickery in a PR effort that seeks to benefit its bottom line AND provide a propaganda coup to the government, with even the president blithely hyping the "repayment." Under normal circumstances, Whiteacre could face potential securities fraud liability for this sort of thing, as Powerline explains, but he knows he can make these outrageous claims because its all done in service of Washington. Investigate This

Whitacre omitted two facts that rendered his column highly misleading. They are the kind of omissions that constitute securities fraud when made by a company in connection with the purchase or sale of a security or when a company reports its financial results.

If any investor bought GM shares based on Whitacre's column, it appears to me that the investor would have a good claim against GM. The SEC would in any event be warranted in taking a look at Whitacre's shenanigans on behalf of the company.

First, Whitacre omitted any mention of the remaining $50 billion or so that the government has sunk in the company's equity. Second, Whitacre omitted any mention of the source of the funds with which GM "repaid" the loan. According to TARP Special Inspector General Neil Barofsky, the source of the funds in whole or in substantial part was the United States government TARP program, not GM earnings.

There's more at the link. Coming at the same time as Carl Levin (D-GM) was cussing out Goldman Sachs for "fraud," and coming after a decade in which "Enron-accounting" became a watchword for the abuses of laissez-faire capitalism, this is almost a too cute example of political corporatism at work.

The Establishment

Tyler Cowan has a fantastic post in response to the theory - advanced in many corners on the Left and Right - that Goldman Sachs and other Too Big To Fail banks exercise outsize power in the US government. Uh, yeah, GS is so powerful they just got sued by the SEC in a maneuver widely viewed as a coordinated political attack on the finance industry by the feds: Do Big Banks Control Our Government?

There's a different way to think about the bailouts, namely that the U.S. government stands at the center of a giant nexus of money raising, most of all to finance the U.S. government budget deficit and keep the whole show up and running. The perception at least is that our country requires the dollar as a reserve currency, requires New York City as a major banking center with major banks, and requires fully credible governmental guarantees behind every Treasury auction and requires liquid financial markets more generally. Furthermore the international trade presence of the United States (supposedly) requires the federal government to strongly ally with major commercial interests, just as our government sides with Hollywood in trade and intellectual property disputes. To abandon banks is to send a broader message that we are in commercial and political decline and disarray, and that is hardly an acceptable way to proceed, at least not according to the standards of the real Washington consensus.

In other words, it's our government deciding to assemble a cooperative ruling coalition - which includes banks -- at the heart of its fiscal core. It's our government deciding who belongs to this coalition and who does not, mostly for reasons of political expediency and also a perception - correct or not -- of what is best for the welfare of American voters. If we don't in this year "get tough" with banking regulation, it's because our government itself doesn't want to, not because of some stubborn recalcitrant Republicans.

That's something that very few people understand. But, it's key to understanding why the bailouts were passed with overwhelming support from mainstream Democrats and moderate Republicans (and against overwhelming opposition from conservatives, progressives, and - d'oh! - the American public). If you are in favor of Big Government, then you need the big banks to help fund it. Even if you are a Hollywood-approved liberal who likes to talk tough about "corporations," the fact is that it was these people - the Party of the Common Man and not the Party of Big Business - that approved the bailouts.

For all their talk about "protecting Main Street," the bigger concern was protecting Pennsylvania Avenue.

It's Too Late, Baby, pt 2

According to the NY Times, when government requires insurers to cover all comers, regardless of their medical condition, the cost of premiums will skyrocket. Which of the 50 laboratories of democracy has endured this phenomenon? New York State! And The Times is just now getting around to learning this? New York an Insurance Lab On Skyrocketing Rates

New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences. Premiums for individual and small group policies have risen so high that state officials and patients’ advocates say that New York’s extensive insurance safety net for people like Ms. Welles is falling apart.

The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market. In 1993, motivated by stories of suffering AIDSpatients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.

New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.

The Times then makes a point last heard coming from the racist hateful mouths of talk radio, Tea Party attendants and right-wing blogs: the healthy people stop paying premiums, thus driving up costs even more! Whodathunk it? It sure would have been nice if this had been part of the public debate prior to the passage of Obamacare:

Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.”

I love the term "adverse selection death spiral."As if a phenomenon doesn't exist unless it has some bloodless term for wonks to use.

“You have a mandate that’s accessible in theory, but not in practice, because it’s too expensive,” said Mark P. Scherzer, a consumer lawyer and counsel to New Yorkers for Accessible Health Coverage, an advocacy group. “What you get left clinging to the life raft is the population that tends to have pretty high health needs.”

Since 2001, the number of people who bought comprehensive individual policies through HMOs in New York has plummeted to about 31,000 from about 128,000, according to the State Insurance Department.

At the same time, New York has the highest average annual premiums for individual policies: $6,630 for single people and $13,296 for families in mid-2009, more than double the nationwide average, according to America’s Health Insurance Plans, an industry group.

The high school graduates attending tea parties understand all of this instinctively. The Ivy League Dems who have been pushing health care reform know it too. They run the damn government in New York! (not to mention, many of them live there). Yet, they - along with their media enablers - were happy to ignore these inconvenient facts until after Obamacare passed. Thanks a lot for nothing.

A Brave Face

After a quarter-century of prosperity and increasing luxury, Americans at the top-end of the economic ladder are becoming more and more familiar with the daily facts of life faced by more downscale debtors: default, bankruptcy, foreclosure, receivership, etc. Add the Berry-Hill Gallery in Manhattan to the list: after the gallery defaulted on a $9.5 million debt, the lender has moved in and started seizing assets, namely the gallery's paintings: Manhattan Gallery's Artworks Are Seized

Representatives of a lender seized artworks from Berry-Hill Galleries, a well-known American art specialist on Manhattan's Upper East Side, after a judge found the gallery had defaulted on a debt of $9.5 million.

As people from the gallery and the bank, American Capital Financial Services, congregated Tuesday on the first floor of the gallery's stately townhouse, handlers carried the artworks, primarily paintings, down the street toward Fifth Avenue, where they deposited them into two large moving trucks.

Berry-Hill's latest troubles come at a time when a number of New York galleries are struggling amid the recession. Nearly two dozen galleries in the city have closed amid the art-market downturn, including blue-chip spaces on the Upper East Side such as Salander O'Reilly Gallery and grittier warehouse spaces like Bellwether in Chelsea and Rivington Arms on the Lower East Side.

But, you have to admire the never-say-die, grace under pressure of gallery chairman James Berry Hill who calmly explained that all of this was a big misunderstanding, and would you please stop using ugly words like "seized?"

In an interview Tuesday, the Berry-Hill gallery's chairman, James Berry Hill, denied that the works were being repossessed.

As workers from Cirkers Fine Art Storage & Logistics removed the art from his gallery, Mr. Hill said: "We're sending stuff to our warehouse" to make way for a new one-person show. When asked whether the artwork was being seized by the bank, Mr. Hill replied: "The word 'seized' is not a word I would use," adding that he found the term "draconian."

"We just had a meeting. We are negotiating to get this resolved," Mr. Hill said. He described the meeting as amicable, and added, "We are negotiating to pay the bank in full."

That's the spirit! Scarlett O'Hara couldn't have put it better.

We Don't Need No Education

Former Education Secretary, and current "folksy" Senator, Lamar Alexander warns of a new government takeover - of the student loan industry. As usual with these things, the numbers are on his side, but no one will care: Why Make The Government the Prime Source for Student Loans?

Here is what the administration and congressional Democrats have told us about this latest attempt: Starting in July, all 19 million students who want government-backed loans will line up at offices designated by the U.S. Education Department. Gone will be the days when students and their colleges picked the lender that best fit their needs; instead, a federal bureaucrat will make that choice for every student in America based on still-unclear guidelines. They say that this will save taxpayers up to $87 billion in subsidies that now go to "greedy" banks. In gleeful anticipation, members of Congress have lined up to spend those billions on Pell Grants and almost a dozen other programs. Banks are punished. Students are helped. Members of Congress look good.

Here is what they haven't told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education -- and to help your U.S. representative's reelection.

Those are good points, but you have to wonder if there are enough practical minded adults in the United States for whom that would be a compelling argument. Certainly the young adults cannot grasp the concept that they will ultimately pay for their "low cost" loans. Even a lot of parents would not want to give up "low cost" college loans from the government. Rhetorically, at least, it's easy enough to waive aside Alexander's numbers with any one of many blithe assurances. Conservatives never win these arguments because the default argument is always the same: crocodile tears over "lost opportunity" (I coulda been somebody, if only I'd been to college!) and media stories about GOP heartlessness. Not fair, I agree, but that's where we are.

Car Facts

The dreaded "internal documents" reveal that Toyota executives have a rather low opinion of the current American political landscape, questioning the business environment, and even the engineering savvy of the regulators and congressmen who would lecture auto executives on how to design and market their wares. What, this is a surprise? Toyota: Democrats Not "Industry Friendly"

Internal Toyota documents derided the Obama administration and Democratic Congress as “activist” and “not industry friendly," a revelation that comes days before the giant automaker's top executives testify on Capitol Hill amid a giant recall.

According to a presentation obtained under subpoena by the House Oversight and Government Relations committee, Toyota referred to the “changing political environment” as one of its main challenges and anticipated a "more challenging regulatory" environment under the Obama administration's purview.

This document, in addition to piles of other records, will be front and center this week as the Japanese automaker girds to face lawmakers hungry for answers about a recall that has the company teetering.

...

The July 2009 presentation also says the Department of Transportation and National Highway Transportation Safety Administration “under Obama administration” is “not industry friendly,” and anticipates a “more challenging regulatory and enforcement environment.”

It says the NHTSA “new team has less understanding of engineering issues and are primarily focused on legal issues.”

Not very flattering, and I'll bet that's something you hear in a lot of boardrooms and executive suites both in and out of the US. And it could be worse. After all it was an American company that designed and sold the supposedly defective accelerator and American factories that installed them. The formulation has been German cars beat Japanese beat American. Now, I think you could edit that to read German beats Japanese beats American-built Japanese beat American. All in all, not a good day for the American system.

It's no secret that a Japanese company like Toyota receives much more friendly handling from the Japanese government, than from ours. They've got their system and we've got ours, and their system lets a company skate by on product liability issues that would land an American company in court, in front of Congress, and on 60 Minutes. The American system is admirably focused on consumer safety, but has its own immense flaws, including the appalling spectacle of Henry Waxman - fresh off drafting legislation based on fraudulent "climate change" data - lecturing auto executives on engineering and safety, as if it never occurred to someone in the business of selling cars to not kill their customers (durrrrr!). As long as we're all lecturing one another on the obvious, how about a PR campaign instructing American drivers that they can stop a run-away car by shifting into neutral?

It's probably too much to expect Toyota to push back on the political attacks against them. They must realize these congressional hearings are nothing more than spectacles for the aggrandizement of the committee, and not a sober inquest. At the very least, they might want to mention that "sudden acceleration" is one of those politically convenient phenomena that don't actually exist, except in the sophisticated minds of the media and political elites that are supposed to be doing the thinking for the rest of us. I'm not holding my breath. The government has the whip hand right now, and Toyota knows it.

Children's Stories

Simon Johnson ridicules the political and media elites conclusion that Americans are "angry" and that the road to policy and political success lies in "populism:" "Populism"

The problem we face is not that the broader population wants pointless or destructive revenge on a financial elite that has done well. Nor is it the case that, if left largely to its own devices, our major banks will guide us back along the path to sustainable growth.

The consensus technocratic assessment is simple: We are smack in the middle of a doomsday cycle of repeated boom-bust-bailout (our version; the Bank of England’s take). The core issue – banks considered “too big to fail” – was not resolved in or after the crisis of 2008-09; if anything, as these banks have increased in size, the problem is now worse. We are therefore doomed to run headlong into another crisis.

The fact that dramatic banking reforms would be popular does not make them populist. It merely means that a broad cross-section of our population has woken up to part of our appalling reality. Sure, they are angry – but with good reason, and the remedies they seek are entirely appropriate. Most of our elites are on the side of the broader population on this issue; only the diseased heart of Wall Street holds out.

Frankly, true populism of the Huey Long variety can't work today because Americans - at least among likely voters - are better educated than in the past. A buffoon like Long wouldn't last 5 minutes in today's environment. Not only that, the idea that Barack Obama - who last year was waving his Ivy League credentials and sending his political allies out to mock Joe The Plumber - can transform himself into a shirt-sleeved populist is ludicrous. The other problem: the resentment and redistributionist impulse underlying populism is not really present - yet. People don't resent the fallen Masters of the Universe for their wealth. They are furious that nothing has changed since the on-set of the financial crisis, except that the economy is in a much more precarious position.

Nearly two years after Bear Sternes, and 18 months after Lehman/AIG, there have been no changes in basic finance law outside of a few marginal adjustments in the rules relating to short selling. Oh, sure there's been a lot of talk about - here we go again - "comprehensive reform." And there's been the faux-outrage over AIG bonuses. But absolutely nothing has changed that could prevent or at least alleviate another failure on the scale of Lehman Bros.

The problem with Lehman was not just its failure; it was that the failure was so chaotic. While the near-contemporaneous failures of Washington Mutual and Wells Fargo were handled expeditiously, Lehman was simply dropped into bankruptcy without warning. There was obviously no mechanism in place to wind down the affairs of an investment bank like Lehman, and 18 months later ... there still isn't! Similarly, we lack any kind of systematic way of handling another AIG situation. Instead, the plan apparently is to improvise a rescue when/if the time comes.

Do we really need "comprehensive reform" to accomplish the basic goal of preventing chaotic failures among financially significant entities? No one complains (much) about the Wachiva/Wamu failures because they were resolved according to settled law by a government agency following established procedures. Lehman and AIG, on the other hand, were improvised solely by the executive branch and the Fed and we are still living with the unhappy results of that improvisation today.

The analogy to the Bush-era post-9/11 reforms are obvious. The Patriot Act may have its noisy detractors, but it was passed and then renewed, by large congressional majorities, and its basic reforms have lasted. Meanwhile, the reforms that the Bush Administration put into place on its own initiative - designating unlawful combatants, military tribunals, GITMO, water-boarding and the rest - have withered from unrelenting assault despite their being useful and supported by a majority of the voters. Would it have killed Bush to involve Congress in the creation of military tribunals from the beginning, rather than go through years of court cases, Supreme Court decisions, and pompous speechifying by the legal Left? I don't think so, and we wouldn't be in the position we are today where GITMO can theoretically be closed at the stroke of a pen.

Similarly, if another AIG or Lehman situation presented itself tomorrow, it would be just as fraught and controversial as its predecessors because - again - regulators would not be acting under color of law, but only improvising in the face of an emergency. It really doesn't have to be this way. Yet, instead of promulgating such basic reforms, we are stuck with Chris Dodd and Barney Frank - two guys widely seen as having contributed to the crisis - arguing over what style of comprehensive reform we should adapt. The problem is that every attempt at comprehensive reform since 2005 has failed, but only after a months-long effort resulting in less than nothing.

People are not furious because they are jealous of someone's wealth. They are furious because absolutely nothing has been done to address even the most basic regulatory gaps that have allowed our economy to be damaged. Populism - even professional grade Ivy League populism - isn't the salve to this anger. Problem-solving and prioritization is.