I’ve argued before that nationalizing financial institutions the way the Obama Administration has done is incredibly stupid. If you’re going to nationalize chunks of the economy, get some people who are partial to doing so. Which brings me to this little story from the New Deal era:
…a special bonus New Deal version of how to deal with rude letters from corporate types–in this case, the chiefs of the New York Stock Exchange, asked by the SEC to reorganize in light of recent events.
… the matter of reorganization was referred to the Exchange’s Law Committeee–in other words, to Richard Whitney…. After due deliberation, the Law Committee concluded that reorganization … was impracticable, and that negotiations with the SEC should therefore be broken off. It drafted a harsh letter to [William O.] Douglas saying so…. [W]hen an Exchange lawyer delivered it to Douglas in Washington a few hours later, the SEC chairman merely nodded and said grimly, “All right, then, we’ll take the Exchange over.”
That’s how you reassert control over an out-of-control financial system. The reason the AIG bonuses are problematic isn’t the money (it is a pittance compared to the coming boondoggle that is the Geithner/Obama plan), it is that our political system has become subservient to a very limited subset of economic interests.