At first reaction, it’s easy to side with Kenneth Feinberg and at least pretend to restrict executive compensation at bailout banks. But this is a reaction to the bailout, which never should have happened. 

What should have been done regarding executive compensation is absolutely nothing, as Napolitano rightly observes, because those banks, instead of being bailed out, should have been allowed to fail. Had they been allowed to fail, those executives would not have been faced with pay limits, but more likely pink slips from the newly formed corporation’s board of directors, as mandated by angry, wiped-out shareholders.

That act of doing the right thing (bankruptcy) for the right reason (insolvency) would have established the proper lawful response, as mandated by the FDIC prompt corrective action laws. Then, by actually observing the rule of law, the present administration would have set the mark for penalizing reckless risk-taking at best, and criminal fraud at worst, such that the consequence of behaviors run their natural course. Government rewarding the behavior, and then attempting to better manage the level of reward after committing the first egregious error, sends the wrong signal, as proven by the increase in that same behavior today. The response was prompt, but certainly not corrective.

The excuse of systemic collapse simply does not hold water, despite the drama and sensationalism offered as the politically expediant lesser of two evils in the payment of Paulson’s bailout ransom. We now know in fact that the bailout was a chain reaction response to a global liquidity crisis, fueled by years of fraudulently contrived asset bubble inflation, and had that crisis not been addressed, the GLOBAL economy would have fully collapsed.

But prudent regional banks would have been in a position to maintain the necessary credit function to insure recovery. And if not, our Treasury has an implicit mandate to provide this function without the aid of the private banking system. True, we relegated that duty to our Federal Reserve, part of a central banking cartel whose interests lie with the international member banks that collectively own them (as any competent audit will prove beyond any doubt) but invoking Constitutional principle amidst a crisis is probably not a bad idea – America should try it some time.

In essence, GLOBALISM FAILED. But that definition of failure changes when you change your perspective.

From the perpsective of the working class citizens of the world, the international bailout of the global economy is a miserable, continuing failure. To the ruling class of insiders that were big winners in the derivatives bailout, it is a resounding success, secretly shifting taxpayer billions to their balance sheets. For the bailout banks, returning to their former high-rolling ways, big profits and record breaking bonuses, it is a whopping victory, despite any pretense of compensation limits. Compared to unemployment at best, and jail time at worst, this is the free lunch of all free lunches.

How do we find ourselves victim to the parasite of Globalism? By pinning our fate to a white collar economy of predatory “interposers” that feast on productive economic relationships. We have minions of white collar CPA’s, Health Insurance Administrators, Insurers, Investment brokers, Attorneys, Union Officials, Trade Professionals and Financial Professionals who increasingly interpose between parties to any economic production.

We’ll talk about this more in another post, but the closest analogy in today’s society is the role of an attorney in a divorce proceeding. As we all know either from personal experience, or from stories related to us, if the two parties cannot reasonably arbitrate an equitable settlement, the big winner is the attorney. That is a well known fact of litigation — the longer the settlement is protracted, the more litigation fees accrue until neither party gets what they want other than the satisfaction that neither is rewarded–the money is redirected to litigation fees.

In the interposition between patients and doctors, health insurers extract profit (why health care costs have skyrocketed). In the interposition between corporations and taxing authorities, CPAs extract profit (which creates a never ending dance of new taxes and loopholes). In the interposition between investors and corporations, investment brokers extract profit (which incentivizes risk taking). In the interposition between factory workers and management, Unions extract profit (why we offshore blue collar production). In the interposition between creditors and failed institutions, bankruptcy attorneys extract profit (stakeholders get shorted)

… and so on and so on …

This is not to say that a robust economy does not benefit from a certain amount of administrative intervention, but we in America have literally abandoned a productive blue collar production economy where abundant natural resources are freely transformed into consumables both here and abroad. Whenever we attempt to do that, here come the Unions, the Trade Associations, the Attorneys, the Accountants, the Property Insurers, the Employee Health Insurers, and so on, to extract their measure of profit, until they (and the government regulators) are all that’s left of the swollen white collar economy.

And the grossly engourged financial markets — the debt peddlers and speculators – are the grande EPITOME of our self-devouring, predatory economy. This sector has grown so large that it is deemed too big to fail, thus becoming its own, government protected white-collar CLASS, preying indiscriminately upon the entire productive class. When government interposes between American taxpayers and a global liquidity panic, it further enables these bailout predators, and taxpayers are the victim.

We can no more sustain this self–devouring white collar economy than we can sustain the unprecedented debt our government has accrued defending it.

Globalism has failed by any measure that meets any test of real benefit to society. The bailouts should simply have never taken place.

 Had they not, executive compensation limits would simply be a moot point.

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