Friday, July 24, 2009

Politicians plague firms that received federal funds

Members of Congress are participating in a free-for-all of requests,demands, and not so subtle coercion of the more than 600 companies that have received "bail-out" money. As unabashedly stated to Bloomberg by California Representative Brad Sherman, a Democrat on the House Financial Services Committee, "It's natural for elected officials to make demands on corporate officers, and the money the government lent gives lawmakers new rights."

Representative Sherman may be correct in the cases of GM, AIG, and Chrysler, but otherwise he is not. The government is a lender with a guaranteed return but not a managing shareholder. Nevertheless some firms are reporting a ten fold increase in requests from various politicians. Detailed in a Bloomberg article is Senator Charles Schumer's call to Vikram Pandit, CEO of Citigroup, to intercede on behalf of a mall developer seeking a loan in declining upstate Syracuse, New York. Pandit eventually stood firm, to his credit, but given his precarious situation it is likely at his peril.

Even with the few firms that have more or less ceded ownership to the government, the congressional demands should be organized, and managed through some central oversight group rather than be a feeding frenzy for the friends of members of Congress.

This seems all so obvious, but the behavior of Congress that we are seeing is just an extension of an ingrained pattern of arrogance by some portion of our elected officials.


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