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OBAMA'S TERRIBLE POWERS

By DICK MORRIS

Published on TheHill.com on April 13, 2010

If the financial regulation bill that passed the House last year becomes law,President Obama and his Treasury Secretary will acquire the right to takeover any financial institution they wish to, provided that, in their soleopinion, it is both "too big to fail" and on the brink of insolvency. TheHouse bill provides for no judicial review and does not require any objectiveevidence of imminent failure to trigger the takeover provisions.

Once the government takes over such a company, it will acquire the right toreplace the entire board of directors, fire the management of the company,wipe out stockholder equity and even sell off divisions of the company.

Essentially, this bill permits the government to launch an unfriendlytakeover of any financial institution it wishes without risk and with nopoison pill or other counter-measures possible.

This legislation, essentially, confers on the federal government policepowers that, under our system, are the exclusive preserve of state and localgovernment. The blank check the bill gives the feds to take over anyfinancial institution is really more of an exercise of eminent domain than itis an extension of traditional federal regulatory power.

This grant of power to the executive branch is unprecedented and potentiallytotalitarian. Consider:

Will Obama, or any future president, target companies that are particularlyvocal in their opposition to his policies or generous in funding hispolitical opponents? Will the fact that Obama would have this power forcecompanies, investors, CEOs and managers to self-censor their opinions andpolitical involvement because they fear the wrath of a vengeful president?

Will this grant of authority force companies to hesitate before they growand expand? Will it function the same way the antitrust powers of the JusticeDepartment do in making companies re-examine mergers and acquisitions with aview toward what Justice will think of their resulting market share? Inantitrust situations, where a specific action brings companies under scrutiny-- like a merger -- such concern is not unreasonable. But when the simple actof making money, showing a profit and expanding in size puts a company infederal crosshairs, does this not have the potential to attenuate thecapitalist focus on growth?

In an environment where the feds are looking over the shoulder of every

financial institution to see if they should take it over and shut it down,will this not force financial companies to follow the most risk-averselending policies possible? Doesn't this mean that it only makes sense to buygovernment paper, since consumer loans, mortgages and business lending couldbe considered risky and lead to a federal takeover? Isn't this policyprecisely the opposite of what we need to catalyze economic growth?

In a political world where contributions from financial institutions aresought and widely given, doesn't this power give the president and his partyunlimited fundraising ability, simply by baring its teeth and showing the

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power it has to take anybody over and fire anybody? Given the fact thatGoldman-Sachs was the second-largest donor to Obama's campaign, giving$954,795, doesn't this new power raise the specter that the federalgovernment could take over financial institutions so as to make thecompetition lighter for its donors? Already, there is considerable evidence(cited in our new book, 2010: Take Back America -- A Battle Plan) thatGoldman profited handsomely from the decision of its former CEO -- Bush'sTreasury Secretary Henry Paulson -- to allow Lehman Brothers to fail. Nowthat the Treasury secretary will have the takeover power, might it not beused as irresponsibly and with as many bad consequences as Paulson used hispower in the Lehman crisis?

While the focus on the regulatory bill has been on the consumer protectionprovisions, which I tend to support, there has been far less scrutiny onthese horrific expansions of federal power.

Fidel Castro and Hugo Chavez could only dream of this power.

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