Will the Financial Overhaul Bill Nationalize America's Financial Sector?

This week Investor’s Business Daily published a powerful and shocking editorial piece dealing with the current financial overhaul bill being debated in the Senate.  According to IBD: “As it stands, Dodd’s bill amounts to a nationalization of our financial sector.”  It goes on to warn of “permanent bailouts” for companies that regulators deem to be in danger of default and that are engaged in substantial financial activities.  Does this mean that the government will be able to shut down any business in the U.S. engaged in financial activities?  Does this amount to the nationalization of the entire financial sector?  Does this amount to the type of government-directed capitalism practiced by Mussolini in Italy or Peron in Argentina?  Let’s talk about it now.

Rather than eliminate bailouts of companies that are “too big to fail,” the current bill being debated in the Senate gives vast new powers to the government to regulate whatever companies it chooses to regulate; to determine how to regulate those companies; to determine what companies to give bailouts to; to determine what companies to close down entirely; to determine what creditors to pay; and, to determine how to pay the favored creditors.  Talk about power!  Talk about control!

With the proposed, new Consumer Financial Protection Bureau, the government also would essentially gain control over credit allocation across the economy.  In effect, the government would control the terms and conditions of financial products and services.  It could also decide certain practices were “abusive” and shut them down.  That’s tremendous control.  That’s incredible power over companies and consumers.

Plus, if you are an entrepreneur attempting to create a new business or one of those “angels” who help start-up companies, you will find new company-killing and investment-killing regulations in your way.  It’s been estimated by the Angel Capital Association that this bill would disqualify about 77% of current accredited investors.  Remember that start-up companies account for most new jobs that are created.  Indeed, although start-up companies make up less than 1% of companies, they create 10% of all new jobs.  So, the government will also exercise considerable control over new business ventures.

It’s fair to say the financial overhaul bill being debated in the Senate gives the government vast new powers to control America’s financial sector.  Just as the health care bill essentially nationalizes the American health care industry, the financial overhaul bill essentially nationalizes the American financial sector.  This is one more battle in America’s Economic War, a war of ideas and economic philosophies.  Yet, a war that profounding and directly impacts our freedom, money and lives.

My recent book, America’s Economic War, continues to become more and more prophetic as each battle plays out.