Looters - Crony Business-Government Corporatism

[Michael Stuart Kelly]

Looters - Crony Business-Government Corporatism

I'm starting this thread to have a themed place to throw in explanations and examples of what Ayn Rand called "looters."

I don't know why so many people in O-Land confuse Crony Big Business with capitalism all the time, but they do. God knows I have debated this enough online in our subcommunity. So I have the chops to make this claim.

Maybe this thread will help make the issue clearer.

In Randian terms, don't forget that in Atlas Shrugged, Hank Rearden and James Taggart were Big Business people. But there was a world of difference between them. Rearden produced wealth. Taggart got his money from Crony Business-Government Corporatism, i.e., looting.

As Milton Friedman said: You must separate out being “pro free-enterprise” from being “pro-business.”

As an aside, I realize Trump's policies are going to be thrown at me on this point, but I have answers to all that which I will get into as we go along. The gist will be that one cannot be free enterprise on one side of a deal and a looter on the other side, like trade between the USA and the CCP, and call that free enterprise. These lopsided issues exist in the world to the tune of trillions, including the manufacture and sale of weapons, and they will not go away because someone stated a principle. Because of context, they must be dealt with rationally according to several principles, not just one principle alone, on pain of the world being blown to pieces.

 

If you want to see a perfect example of crony looting in today's context, think no further than Big Pharma and vaccines. But I don't want to start with that. Let's start with BlackRock, shall we?

I am a longtime fan of Peter Schweitzer. I just discovered his podcast, The Drill Down and it is fantastic. He puts into a half hour the essentials of a major issue like BlackRock and he does it in layperson language.

Here is his latest. It covers Blackrock:

A Good Day at BlackRock | The Drill Down

THEDRILLDOWN.COM

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By Joe DuffusIt would be hard to find a more connected Wall Street player than BlackRock, and its CEO, Larry Fink. Fink became a true “Wolf...

Here are some of the notes:

Quote

It would be hard to find a more connected Wall Street player than BlackRock, and its CEO, Larry Fink. Fink became a true “Wolf of Wall Street” during the 2008 financial crisis, as BlackRock’s purchase of iShare index funds, among other savvy moves, helped turn the company into a financial behemoth. BlackRock is the world’s largest asset management group, with more than $8.6 trillion under its control, roughly twice the size of the annual U.S. government budget.

Its size and scale have made it a favorite recipient of government contracts In 2020, the Federal Reserve tapped BlackRock’s FMA division – the company’s consulting arm – to manage its emergency asset-purchasing program to respond to the COVID-19 pandemic’s effects on the economy.

According to the Wall Street Journal, BlackRock “will be central players in what is expected to be a multitrillion-dollar overall program of central-bank support to the economy and markets, a program that will help decide which businesses survive the pandemic.” In addition, “BlackRock could reap as much as $48 million a year in fees for its Fed work, according to a Bloomberg analysis. That’s no windfall, especially in relation to its $4.5 billion in earnings last year. But it may further cement the money manager’s ties with policymakers. On May 12 [2020], BlackRock began the first stage of these programs when it began buying [Exchange-Traded Funds].”

. . .

Peter asks: “Is this really functioning as a fully free market? If you have this financial monster, BlackRock, that is a partner of the federal government, that is buying all these mortgage-backed securities, that is getting access to all this information, and they are getting subsidized loans… If that financial monster is competing against somebody in town who’s trying to buy a couple of rental properties, or a regional company, is that really a free market? And I would argue it’s not. The federal government has tipped the scales in favor of BlackRock.”

 

The gist is that BlackRock is basically a front company for the government to buy its own bonds. The fees for that are not that big, but being there gives BlackRock access to a huge amount of inside information. So it is doing its share in the reemergence of the mortgage-backed security scam that blew up in the past. And as a result, BlackRock is causing real damage to the US real estate market.

Basically, BlackRock is getting insider information on real estate development and markets from the government (upcoming laws and so forth), gets dirt-cheap loans from the government that others cannot get, then goes to distressed areas and buys up homes.

The damage will be that many Americans will no longer own homes, but instead rent them from a single giant company that is in bed with the government. What could possibly go wrong?

 

Schweitzer didn't go deeper, but I want to extrapolate from there. Why is BlackRock buying homes at a premium instead of dirt-cheap? I think this has to do with the crash at the end of the Bush presidency and the beginning of the Obama administration.

The mortgage-backed security scam worked like this. The government practically forced banks to give out mortgages to poor people who could not pay them back. Then it allowed the banks to "package" those loans into securities and sell them, and package those securities into more complicated securities and sell those, and even allowed those... and so on. 

The ratings firms were then encouraged to act without integrity (for a variety of reasons and coercions). Just because it was so obvious, they had to rate the subprime mortgages the banks made to poor people who could not pay back the loans as garbage. But they rated the securities made out of that dogshit as AAA. And the banks made a killing selling those AAA securities even as the garbage subprime mortgages started being defaulted on by the poor people like popcorn popping all over the place. They kept doing this and it finally blew up like any Ponzi Scheme.

The weak point, however, that precipitated the blow-up, is that the banks foreclosed on the garbage mortgages. If the banks, which were making money hand-over-fist, had more-or-less fudged on foreclosures, the Ponzi could have continued for a long time. But when greed for the unearned gets embedded into the souls of Wall Street brokers and bankers and a normal structure is already in place like loans must be payed back, these geniuses didn't think twice about the goose that was laying the golden eggs. They slaughtered the goose, had a feast, then wondered why no more golden eggs were coming.

Well, BlackRock is not allowing such widespread foreclosures to happen anymore since it is paying top dollar for homes. This is happening with the money from crony looting, so it is simply a way for the cronies to keep the goose alive for longer and still make it look like business as usual.

And guess what? Mortgage-backed securities are making a HUGE comeback--basically with your money as a taxpayer in the end to keep the scam going. 

Put another way, no government, no BlackRock. And no BlackRock, no mortgage-backed securities scam.

It's that simple.

And to think, this is just one looter scam out of many that falls under the head of Crony Business-Government Corporatism.

Imagine how many more looter scams are out there.

Michael