One of the more annoying things I've been hearing the last few weeks is the phrase "free enterprise", especially as it pertains to the way modern businesses are supposedly being run these days.

President Obama's visit to Wall Street yesterday brought my thoughts into sharp relief. I saw a headline that read "Into The Lion's Den" and immediately recoiled - "Into The Laughing Hyena's Den" might be more like it.

There is nothing like bankers who were insolvent a year ago - bankers whose complicated liabilities that they created themselves would have totally annihilated the value of the assets they had on their books - who are ready today to pop the champagne again and pat each other on the back for "pulling themselves up by their own bootstraps" and piling up record profits.

They have conveniently forgotten that it was the American public (YOU) who provided the bootstraps AND sweetheart terms for their homegrown toxic securities.

Because the Jedi Mind trick your mega banks have been using lately have not only been successful at getting the media to give up the "bailout money = government cheese" theme, now they are repackaging the same damn securities that built the real estate bubble in the first place.

Guess who will end up buying them?

The people who run YOUR 401(k).

You gotta love these Laughing Hyenas on Wall Street, who are always going to be scavengers at heart.

The question that sits at the tip of my tongue every time I see a smarmy faced pundit or my buddy Rush Limbaugh insisting that we protect "free enterprise" and get out of its way so it can work its magic is, are we talking about "don't tell me what to do when I need government money" free enterprise or are we talking about "when my business runs out of money it closes down" free enterprise?

Real free enterprise at the corporate level did exist in this country, but it didn't look anything like what we have now.

The nineteenth century version of the corporate world made the shenanigans of the mobsters on The Sopranos look like child's play.

I own quite a few exhaustive biographies of business titans from the 1800's, including John Rockefeller, J.P. Morgan, Andrew Carnegie and Jay Gould. I've been reading Fortune, Forbes and the Wall Street Journal for over twenty years. Our modern day scandals are more creatively executed, but they don't come close to the old days in terms of human brutality and financial chicanery.

The one thing that jumped out at me after reading the fourth or fifth book about our eighteenth century business moguls was the disservice we do to our youth by teaching history and economics separately.

The amount of bribery of government officials that took place was staggering.

The abuse of laborers, and the murder of those who dared to form unions, would rival the kinds of conditions found in migrant worker camps in the 50's and 60's. The outright theft of a corporation's property by its officers was commonplace. The prosecution of such theft was far and few between.

Practically all of the stock market methods and procedures that were originally banned in the 1933 and 1934 Securities Acts were either perfectly legal, or were maneuvers that could be executed in such a manner as to escape the boundaries of existing law. This is the kind of thing we gloss over in the news, as if modern business emerged fully formed into a regulatory atmosphere that was always there.

Jay Gould, the least known titan of the four men I mentioned above, was the Michael Millken of his day, a master of manipulating minority bond holdings into controlling interests in a variety of companies, including Western Union, A&P, the Erie Railroad, and the Great Pacific & Western Railroad.

He was a master at "puffing" the stock price of companies who teetered on the brink of insolvency, selling out at a high price, then shorting the same stock before beating the price back down by controlling the release of inside information that would be damaging to the enterprise.

He owned an interest in a few banks, mostly so he could certify checks when he didn't have ready cash available.

The robber barons, though, with all of their bribery of government officials and sweetheart contracts, etc, were still men who feared the unknown. They operated their businesses at a time when America's government coffers were thin. There was no one to bail them out if they failed. The only thing awaiting a troubled enterprise in those days were the vultures, who would pick a company's carcass clean of its valuables and leave the rest to rot.

What we have now is a prostitution of the ideals of corporate governance. Try to organize a resolution to be voted on by your fellow shareholders in any company you own shares in today and see what happens. Even bankrupt companies who have generated massive shareholder rights groups who have figured out how to use the power of the internet to aggregate their proxies have demonstrated time and time again that in the end, you have no say so in what happens to the pile of money that you and your fellow shareholders have handed over to the companies executives.

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Vancouver BC real estate said...

Hi. Speaking as a foreigner here, yes, on one hand the bankers can be blamed for the current situation, on the other hand people should also blame themselves. There are used to living in debt and taking loans, but they never think about the consequences. I understand that America needs reforms now, however, I'm not very sure whether the reforms introduced by Mr. Obama won't lead to another housing "bubbles".
Take care,

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