Once upon a time, a long time ago and very far away, there was a joke in which four political philosophers — who are all dead now and can’t be subpoenaed by Congress — were asked what the appropriate response would be to a couple having sex on the steps of the public library. The conservative said it was okay if the couple had benefit of clergy. The liberal said it was fine, as long as it was mandatory. The communist said it didn’t matter because they were going to be shot afterward, anyway. And the libertarian said: There shouldn’t be any public libraries.
The libertarian’s answer is pertinent to the present controversy over corporate salaries and the government bailouts.
Let’s start by applying the libertarian’s position to the issue of whether prayer should be allowed in public schools. Your answer may depend on what prayers you think will be said. If you’re Catholic, Protestant, or Jewish, you may think prayer means something from the mainstream of America’s traditions. But suppose your community is now largely Muslim. Do you still want prayer in the public schools?
The easy answer to that question, for conservatives and libertarians, is: There shouldn’t be any public schools.
What about federal government aid to colleges and universities? Any institution that accepts federal grants is barred from doing certain things that the government deems unacceptable, such as practicing discrimination — as discrimination is defined by federal bureaucrats, which is not the way ordinary mortals would define it. Most educational institutions, public and private, have succumbed to federal control in this way. A few, notably Hillsdale College and Grove City College, have not, on the same reasoning, more or less, that guided our libertarian: that there shouldn’t be any federal aid to educational institutions. Hillsdale and Grove City don’t accept federal money.
Now what about the bailouts?
President Obama “lashed out” (the Financial Times’s description) at “shameful” (Obama’s word) Wall Street executives for doling out billions of dollars in bonuses (“the height of irresponsibility” — Obama again) as their institutions lined up at the federal trough (not Obama’s term) for taxpayers’ money.
But who’s to say what is an appropriate salary for a bank executive? Or what is proper business activity?
Jes Staley, head of global asset management at JPMorgan, said recently that the biggest risk facing his bank was political interference in the management of lenders, including JPMorgan, that have taken bailout money from the feds. Mr. Staley warned against big banks being “geared for public policy as opposed to economics.” That’s not just a risk for JPMorgan; it’s a risk for America’s free-enterprise system.
Banks have been criticized by Washington politicians not just for paying too much money to executives, but also for lending too little money to companies and consumers. Yet Bert Ely, writing in the Wall Street Journal, says that data just released by the Federal Reserve show that commercial banks increased their lending by 5.63 percent during 2008 and by 2.36 percent in the last quarter of 2008. One problem — at least it is a problem for the politicians — is that many people don’t want to borrow money just now. They are trying to cut down on their debt. And, Mr. Ely reports, bank examiners are criticizing banks’ weak loans and requiring them to tighten their lending standards.
Meanwhile, back in the city that gave us the Community Reinvestment Act, Fannie Mae, and Freddy Mac, the politicians and the bureaucrats at tax-challenged Timothy Geithner’s Treasury Department have required the 20 largest recipients of bailout money to provide monthly reports about their lending and investment activities.
Is that a prelude to requiring them to make loans? Against their better judgment, and that of the bank examiners?
How soon will it be before the banks are criticized — and penalized — for not lending money to “green” companies, or to companies otherwise engaged in what the Obama administration and the New York Times think are “socially useful” activities? Hey, it’s “our” money. If “we” are going to finance the performers, shouldn’t “we,” through our elected representatives, be entitled to select the music?
Our libertarian friend might have gone too far, a long time ago and very far away, if he’d been asked what to do about sex on the steps of the Treasury Department. It may be that the United States needs a Treasury Department — but it should not be in the business of running banks.
– Daniel Oliver is a senior director of the White House Writers Group in Washington, D.C. He served as chairman of the Federal Trade Commission under President Ronald Reagan.