Wednesday, October 17, 2007

Corporatism

Corporatism can be defined as the merging of "corporate" interests with those of the state. For a more complete discussion, I recommend Paul Weaver's The Suicidal Corporation.

Corporatism is antithetical to capitalism, though leftists would have you believe otherwise. One way in which
corporatism manifests itself is as "going along to get along" by companies whose focus is on immediate regulatory benefit and/or future political advantage - rather than on its customers. Corporatists do not compete for customers, they compete for entitlements and corporate welfare. Think of Lee Iacocca and Chrysler. Think of Archer Daniels Midland and ethanol subsidies. Think of the massive handout to health insurance companies represented by SCHIP. They lobby for it, though it is designed to destroy their industry as a private business. They'd rather be working for government.

Corporatism is the name of the philosophy at which Dwight Eisenhower's warning about "the military-industrial complex" was directed. It has much in common with feudalism and, presently in the United States, requires heavy expenditure on lobbyists as well as sucking up to populist politicians. Think of Mussolini's Italy.

Such totalitarian impulse thrives on populism, ignorance and amoral, rent-seeking pragmatism by business and government. In the case following, it requires government to disregard contract law and basic economics in favor of a mob comprised of imprudent borrowers and speculative lenders. Business is invited to participate. This attack on capitalism would have been unbelievable 50 years ago, even in Massachusetts, but businessmen have come to share the desire for hollow momentary advantage, leavened by a hope for future favors. They submit to programs that, logically extended, would destroy them. Corporatist oligarchs who go along with this looting deserve what they will get. The rest of us do not.

In this case, Patrick to press mortgage companies, it is lenders in Massachusetts who are the target:
Governor Deval Patrick [D, Mass] plans to introduce an ambitious program today to assist Massachusetts communities in preventing foreclosures by pressing lenders to accept losses on their mortgages so that homeowners are able to sell their properties and pay off smaller loan balances.
...

In one key part of the plan, the state would press lenders to agree to a "short sale" with homeowners late on their monthly payments. In a short sale, lenders accept less than the full value of the loan, so that the homeowner can sell the house at today's market price - typically less than he or she paid for it - and use the proceeds to pay off the smaller loan balance. Short sales are a way for borrowers to prevent foreclosure.
...

But Thomas Callahan, executive director of the Massachusetts Association for Affordable Housing, which provides mortgages to homebuyers with modest incomes, said the administration does not have leverage, legally, to force lenders to cooperate. He said most subprime lenders are out-of-state companies that are not regulated by the state.
I think the key phrase there is "regulated by the state." Any lender who volunteers for this insanity should just fold, put investors out of their misery, and leave the clean-up to Governor Deval "Looter" Patrick's tender mercies.

The article does not tell us if there are suicidal corporations stepping up to the sacrificial altar or not. It does tell us the governor of Massachusetts thinks it's worth a try, because he knows he isn't dealing with capitalists.

1 comment:

Mitch said...

Chutzpah!!!

These are the same government agencies who were bullying lenders in the Boston area during the Clinton administration to make more loans to low-income minorities with lawsuits claming that they were discriminating?

Even though the default rates between racial groups were near identical (proof that lenders were NOT discriminating).

So let's look at this - the government uses the threat of litigation to force banks to loan to more low income minorities. So the lending insitutions do this, figuring this is cheaper than fighting the government. They do it, and in the process, help create a credit and housing bubble that pops over 10 years later. Now that same government that pressed for more low income loans are "shocked" that these people got loans and are now bullying them to eat the losses.

Chutzpah! Nothing better describes it I think in one word.