The Party that cried "Socialism"

Republicans are crying "Socialism!" again. This time, it's because of limited oversight of executive pay in financial companies that would fail were it not for the support of the federal government. As I write this, Fox news is telling me the government wants to "tell companies how much money they can make". The TCOT Report is...wait! they took it down?...WAS running the misleading headline "Socialism Anyone? Pay Restrictions for All", which actually linked through to this Stephen Labaton piece in the NYTimes Politics section, on how the Obama administration is trying to deal with issues of executive pay in regulating an industry driven to insolvency by a culture of executive privilege and greed.

The reason the TCOT headline and the Fox News claim are misleading is that there just isn't any evidence the Obama administration is a proponent of socialism, in favor of dictating "how much money" businesses can make or how much executives should be paid. The administration does seem to be a proponent of responsibly managing the hundreds of billions of dollars that are flowing to private institutions from taxpayer coffers and, at the same time, fixing the regulatory system, whose function it is to help prevent the type of crisis we find ourselves in today.

The American People are now the largest shareholders in AIG, Citigroup, and others. We have assumed a great deal of risk associated with the bailout of these institutions and, as such, have not just a right, but a duty to influence the structure of the turnaround, which is essentially what we're buying.

Let's look at the New York Times article and see if the Socialist Wolf is hiding in there:

"One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company."

This is capitalism, folks. Capitalism works best when compensation is tied to the success of the company. America's best companies operate this way. Does anyone want to argue that we should reward executives who fail? Isn't THAT Socialism?

The article goes on to discuss the need to overhaul regulation of "the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis."

The aim of better regulation is reducing risk across the financial system. Clearly, the "shadow banking system" did not do a good job of self-regulation. And now these institutions are on the receiving end of a huge and ongoing public bailout.

Here's another passage from the Times article:

"During the presidential campaign, Mr. Obama repeatedly urged regulators to adopt new rules to give shareholders a greater voice in setting executive pay for all public companies."

If there is one term squarely associated with capitalism it is "shareholder value". Obama is urging support for shareholder rights, not the government's right to specifically dictate pay.

Instead of grappling with the hard details of the financial crisis left to President Obama, some Republicans are grappling to find fault in the other party's plan, sometimes fabricating mountains out of mice and painting administration policies with broad labels like "Socialist" and "liberal tax and spend", largely ignoring the facts on the ground.

So, once again, there is a lot of crying, but no wolf. Instead, Obama sounds like the kind of responsible capitalist that we need right now. The Socialism charge just doesn't hold water.

When the markets collapsed they turned desperately to the US government because the US government is central to both US and global capitalism - the biggest player in the world. So, to say that the government's involvement in a reasonable solution is "Socialism" is just ridiculous. Every good corporation reviews failure in risk management and modifies systems to prevent a reccurrence. The current financial crisis is due to a failure in risk management across the entire system, therefore new controls are necessary.

I, for one, will be on the lookout for the Socialist Wolf, but until he shows up let's focus on how "Americans" are going to work together to fix a broken system.