Tag: Crony capitalism

All the Rents That Shall Be Paid

The taxi business has been one sweet gig for corrupt city leaders. Taxis pay enormous fees for medallions in order to be officially licensed. The city, in turn, helps them establish a monopoly so that poor service, high fees and a refusal to go to certain areas of town don’t cost them market share.

Uber and Lyft have challenged this status quo. So what do you do?

How about make them pay blood money to taxi cartel?

Massachusetts is preparing to levy a 5-cent fee per trip on ride-hailing apps such as Uber and Lyft and spend the money on the traditional taxi industry, a subsidy that appears to be the first of its kind in the United States.

Republican Governor Charlie Baker signed the nickel fee into law this month as part of a sweeping package of regulations for the industry.

Ride services are not enthusiastic about the fee.

“I don’t think we should be in the business of subsidizing potential competitors,” said Kirill Evdakov, the chief executive of Fasten, a ride service that launched in Boston last year and also operates in Austin, Texas.

Some taxi owners wanted the law to go further, perhaps banning the start-up competitors unless they meet the requirements taxis do, such as regular vehicle inspection by the police.

The law levies a 20-cent fee in all, with 5 cents for taxis, 10 cents going to cities and towns and the final 5 cents designated for a state transportation fund.

The fee may raise millions of dollars a year because Lyft and Uber alone have a combined 2.5 million rides per month in Massachusetts.

Does anyone, does anyone think this fee will stay at 20 cents a ride? Anyone? In the back there? No? You with the beard? Yeah, didn’t think so.

And that’s a Republican governor who signed this piece of garbage. You almost have to admire the brazenness of it. This isn’t regulating Uber like a taxi service, which you could at least argue levels the playing field (although it really doesn’t). This is forcing an innovator to subsidize their rival. It is as if we’d taxed Netflix and given the money to Blockbuster.

We want to limit your stinking data!

If you own any kind of mobile device, you know that service providers are trying real hard to cap data usage even when you are fine paying their exorbitant prices, and basically claim that’s needed because it affects their infrastructure negatively. While some might actually think this makes sense, hard analysis says otherwise:

I won’t argue that data caps have no positive impact on wireless networks—they can prevent the most egregious overuse of what is a limited resource. But it’s a crude tool at best, targeting monthly averages with no regard for whether the network is congested at a particular time or place.

Recent actions and statements from carriers suggest this is the case: data caps are largely a profit play, not an efficient means of preventing network problems. After Sprint offered “double the high-speed data” on its network, 20GB per month for family plans, AT&T responded by doubling data, too, through shared plans of 30GB to 100GB a month. Verizon doubled its own customers’ data, while Sprint offered yet another doubling to stay ahead of AT&T and Verizon. Suddenly, network constraints had apparently disappeared.

Where did all this extra capacity come from? The carriers’ networks didn’t double in size overnight. The capacity was always there—carriers just weren’t allowing customers to use it until one decided to boost data and the others followed. Behavior like this helps explain why federal regulators have blocked mergers that would reduce the number of nationwide carriers from four to three.

Yeah, well, big government is in bed with these monopolies, and that’s why they do this sort of shit. These caps are not about protecting the network and assuring equal access, and have everything to do with profitability without having to be competitive. In short, monopolies, and then, the kind of monopolies a big fat cat can buy from government types always ready to sell the people out to line their own pockets.F rom the article:

It probably wouldn’t be smart for carriers to promise everyone limitless data, because there are real capacity constraints in wireless networks. But the specific limits imposed on consumers are chosen not to prevent congestion but to maximize profit.

I have nothing against profits. I just want you to make them because you are selling a great product people want and beat the competition fair and square. This always benefits the consumer. I have a huge problem when you want your profitability to come at the expense of the consumer, and then, because of some shitty monopoly you bought from politicians that love the idea they get to pick winners and losers. For a fee, of course.

Oh Shiz.. Another default nightmare?

Get ready for a llot more news like this one as the real Chinese economy gets to finally come out and play:

On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.

The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the world’s largest by assets, on Thursday suggested it will not compensate investors, stating in a phone interview with Reuters that “a situation completely does not exist in which ICBC will assume the main responsibility.”

There should be no mystery why this investment, known as “2010 China Credit-Credit Equals Gold #1 Collective Trust Product,” is on the verge of default. China Credit Trust loaned the proceeds from sales of the 3.03 billion-yuan ($496.2 million) product to unlisted Shanxi Zhenfu Energy Group, a coal miner. The coal company probably is paying something like 12% for the money because Credit Equals Gold promised a 10% annual return to investors—more than three times current bank deposit rates—and China Credit Trust undoubtedly took a hefty cut of the interest.

Zhenfu was undoubtedly desperate for money. One of its vice chairmen was arrested in May 2012 for taking deposits without a banking license, undoubtedly trying to raise funds through unconventional channels. In any event, the company was permitted to borrow long after it should have been stopped—reports indicate that it had accumulated 5.9 billion yuan in obligations. Zhenfu, according to one Chinese newspaper account, has already been declared bankrupt with assets of less than 500 million yuan.

The Credit Equals Gold product is not the first troubled WMP, as these investments are known, to risk nonpayment, but Chinese officials have always managed to make investors whole. CITIC Trust did that in 2013 on a steel-loan product in Hubei province, and a mysterious third-party guarantee rescued a Hua Xia Bank WMP. An investment marketed by ICBC’s Suzhou branch was similarly repaid.

Maybe Zhenfu was another victim of Obama’s anti-coal agenda. Who knows? Anyway, the big problem here, as I am hearing from people in the know, is the fact that this is going to start happening a lot because even the Chinese government can’t provide cover for these bad investements anymore, and it is going to have world wide implications. Crony capitalism sucks and fails everywhere, I guess.

You Can’t Peddle Prosperity

Ilya Somin makes a great point on the Detroit bankruptcy:

Detroit’s sixty year decline, culminating in its recent bankruptcy, has many causes. But one that should not be ignored is the city’s extensive use of eminent domain to transfer property to politically influential private interests. For many years, Detroit aggressively used eminent domain to promote “economic development” and “urban renewal.” The most notorious example was the 1981 Poletown case, in which some 4000 people lost their homes, and numerous businesses were forced to move in order to make way for a General Motors factory. As I explained in this article, the Poletown takings – like many other similar condemnations – ended up destroying far more development than they ever created. In his prescient dissent in Poletown, Michigan Supreme Court Justice James Ryan warned that there was no real reason to expect that the project would produce the growth promised by GM and noted that Detroit and the court had “subordinated a constitutional right to private corporate interests.”

Eminent domain abuse certainly wasn’t the only cause of Detroit’s troubles. But the city’s record is a strong argument against oft-heard claims that the use of eminent domain to transfer property to private economic interests is the key to revitalizing economically troubled cities. In addition to the immediate destruction and dislocation caused by such takings, they also tend to deter investment by undermining confidence in the security of property rights. One of the main findings of recent scholarship in development economics is that secure property rights are an important factor in promoting long-term economic growth. As economists Daron Acemoglu and James Robinson put it in their much-praised recent book Why Nations Fail, “secure private property rights are central [to development], since only those with such rights will be willing to invest and increase productivity” (pg. 75). Detroit is an abject example of what happens when policymakers ignore this reality.

Always remember: the lot that the Supreme Court let New London boot Suzette Kelo out of ended up vacant. And the specialized tax breaks New London gave Pfizer left Pfizer packing the second they expired. These “big deals” to bring in businesses never work because if locating a business there was such a hot idea, the businesses wouldn’t need eminent domain, special tax breaks and subsidies.

But pay close attention to Somin’s second paragraph about how eminent domain and other attempts to “promote” businesses undermine the very basis of the economic system. In that respect, this is just another form of crony capitalism. Connor Friersorf today discussed this in a different context. He references an NYT article about how Goldman moves around giant piles of aluminum to take advantage of government regulations on the price. It nets Goldman billions while harming the economy by making aluminum artificially more expensive. There are innumerable ways in which this is happening — private industries using government loopholes and regulations to become rich without actually doing anything.

Preventing this sort of thing ought to be a high priority for anyone who wants to see free-market capitalism succeed in America. So long as our economic system resembles what Adam Smith described — the profit motive benefiting everyone, as if by an invisible hand — much of the American public can be counted on to support politicians who campaign as unapologetic capitalists, even if people are rewarded unequally, based on the value their labor is producing.

But if “capitalism” starts to be associated in the public mind with Wall Street profiting by deliberately slowing down industrial productivity (or with Mitt Romney making millions by buying companies and gaming the tax implications of shuttering them), Americans are not going to support capitalism. They’re going to regard it as a rigged system that only profits wealthy insiders.

In the short term, Republicans and Democrats alike benefit by allying themselves with the wealthy insiders. Like the GOP, President Obama has benefited from Wall Street money. But in the longer term, enough stories like this New York Times scoop will destroy Republicans, because rhetorically, they’re the ones insisting that the market is beneficial and more or less fair, even as a transparently corrupt financial sector consumes a larger percentage of the overall economy.

Crony capitalism is the antithesis of free-market capitalism. It is similar to what Adam Smith was writing against.

But, as Detroit shows, it doesn’t even have an economic benefit. Detroit, like New London, ended up with nothing for all their seizures, subsidies and graft. Is that the model we want for America? Because it’s certainly the model we’re pushing.

Post Scriptum: Now if you want to see someone get it totally wrong on Detroit, enjoy.

If you think this WH isn’t agenda driven

And basically steering our money to their friends, then you are not paying attention. First there was that pesky Solyndra scandal. When I brought up that this was basically crony capitalism at its worst, with the WH using the economic crisis at that time and their big lie that a near trillion dollar stimulus was the only remedy to what ailed us to funnel billions of tax payer dollars to industries that can not exist without subsidies, and that’s not my opinion, I was demagogued by the usual suspects. When I pointed out that the attempts to link the Bush WH to this or claim that the loan had not been fast tracked by Team Obama, against the advice of several financial experts, including the OMB, the GAO, and finally even the DOE which had originally pushed the thing through only to realize this was going to blow up in their face, I was accused of not having the facts right.

Then it became obvious this whole thing was tied to a money bundler billionaire investor that had raised beaucoup money for the Obama campaign, and I pointed out how the loan was restructured at the WH’s behest to favor the investors over the tax payers, at a time when everyone started picking up Solyndra was going to implode regardless of the tax payer money it got, and when I mentioned that I was told, yet again, that there was no proof. And then there is this latest revelation. We need some investigations here to find out the details of why the tax payer was yet again duped by the guy that now wants to rip taxpayers off to the tune of something close to another $2 trillion of our money to pay for his party’s vote buying schemes.

Of course, by now all these things have borne out exactly as I predicted they would, but if you still are dubious that this is not the way the WH is running things and going to argue this was an isolated incident, then here is yet another such example of WH crony capitalism:

LightSquared, a wireless network backed by billionaire Democratic donor Philip Falcone, could beam broadband Internet everywhere—but some military officials fear it could interfere with critical GPS signals. Now, as The Daily Beast’s Eli Lake exclusively reports, two U.S. officials allege the White House tried to influence their testimony to rush key testing, to LightSquare’s benefit.

That we now have not one, but two incidents where big Obama donors – those evil capitalists that Obama and the left love to demonize and accuse of stealing money from the little guy – and then in two different industry sectors to boot, accused of getting special favors from the WH, both with damaging consequences to Americans, isn’t a coincidence. What we are seeing here is a systematic pattern of government by those that think it is their duty to pick who wins and who loses. And the fact that the ones that are picked to win are either members of the green movement, big donors, or both, is not a coincidence either. The left is engaged in the very nefarious practices it projects constantly on the other side in order to demonize them and justify the whole class warfare bullshit agenda. Can you imagine the furor in the LSM if this had happened while Bush was president? Remember the constant talk of “Halliburton”, while forgetting Bill Clinton’s relation to the same, back when? Where is all that feigned outrage now?

The American people are being done a huge disservice by these crooks. Both in the LSM and the WH. And I do not expect this to be the last such scandal to be revealed and ignored as much as possible by the LSM. Of course, the bloggosphere will drag them kicking and screaming into doing damage control, and eventually into reporting far more of the truth and facts than they would feel comfortable with.

Ain’t that a bitch?

Guess who so far has ended up being the biggest beneficiary of the Dodd-Frank financial regulation law? For those of you not familiar with Dodd and Frank, here is some background. Chris Dodd was a senator from my state, Connecticut, and one of the instrumental people behind the previous laws and government push to force lending to high risk people in his political career, ending up as the banking committee chairman (better to rob us blind!) right at the time the crisis happened. His meddling, in the name of “social justice”, but always while larding his friends and donors with government largesse, made him an instrumental player in setting the stage for the practices that led to first the housing and the following economic collapse back in 2007/2008. Dodd also was the guy that put regulation in the “must have” bailout plan to protect the big wigs and their bonuses at AIG. He was mired in one scandal after another, and basically decided not run for reelection in 2010, opting instead IMO to go steal people’s money doing something else.

Barney Frank, is a representative from Massachusetts. In addition to having the distinction as the only congress critter that dated a guy that run gay prostitution ring from their shared residence, he was also the head architect behind the scandalous and criminal repackaging of high risk loans, to make them palatable, through the government owned and run, but mysteriously categorized as private sector entities, Freddie Mac/Fannie Mae, and a key player in protecting Freddie & Fannie from any serious scrutiny – another one of his lovers was put in charge of running one of those – by accusing those pointing out the problem of being racists, until the whole house of cards came tumbling down.

As a reward for their roles in the horrible crisis and economic collapse it cause, these two where allowed, well they demanded, to be given the reigns of power, to produce the new series of regulations which they told us would prevent another crisis like the one their previous involvement caused. As expected, they didn’t do anything to end either the idiotic practice of having governments force lending institutions to give loans to high risk people looking for a loan, or to address the massive problems at Freddie/Fannie, but created a slew of regulation in a bill with over 2300 pages of bullshit, designed to allow people in government to increase their ability and power to pick which businesses would be winners and whom the losers. In return for some large donations, of course. So, don’t be surprised that the clock is already ticking on the next economic implosion, courtesy these two morons.

But back to the original question: guess how is making out real good because of the Dodd-Frank’s financial regulation law? Well, the very people involved in writing the rules then turning into evil lobbyists, of course.

It may not prevent another bailout or protect consumers from dangerous financial products, but the Dodd-Frank financial regulation law — now one year old — has already benefited one group of people: the government officials who wrote and implemented the law before cashing out as lobbyists or consultants for Wall Street, hedge funds and big banks.
The top staff lawyers in charge of crafting the legislation in both chambers of Congress have both left Capitol Hill for K Street, as has a Securities and Exchange Commission staffer who helped implement the law. This is “private-sector job creation, Obama-style,” as blogger Ira Stoll drolly notes.

The Great Wall Street Cashout is another example of how President Obama’s agenda of bigger government — and congressional Democrats’ style of leaving the key details up to executive-branch regulators — accelerates the revolving door and breeds crony capitalism.

Dodd-Frank was supposed to prevent future bailouts, tamp down on excessive risk taking by financial institutions and, through a new agency called the Consumer Financial Protection Bureau, protect regular people from predatory lenders or harmful and complex financial products.

SAY IT AIN’T SO!

Seriously. Why is this news? It’s of the “Dog bites man” variety. The very regulators engaged in writing this piece of garbage leave government, become lobbyists, and then rake in the cash? Who would have thunk that!

I can’t blame these guys for pulling this stunt, but I certainly can go off on the next leftist asshole that tells me how evil capitalism or Wall Street is. These government scumbags and their games make those guys look like pikers. Remember, Wall Street, or for that matter any other business/economic power center, can only do the things people in government write laws to make them do. We got more of the same in the healthcare takeover by government bill too. If we really wanted to curtail these kinds of bad practices, what we should have done is removed the power from government, by removing as much involvement by them from the equation. Instead we did exactly the opposite. Go figure.