I’m just going to publish this without much comment and no explanation.  If you want to know how you can promise the electorate that they can have everything without explaining how you pay for it (sound familiar?), this is it.  It’s a comment by an lawyer/economist with over forty years of experience in the trenches of big-boy finance as a now-retired partner of a law firm whose name strikes terror into the hearts of its opponents.  There’s some accounting arcanae in it.  Read the whole thing:

A lot of [government] programs that were initially criticized as wasteful turned out to be profitable to the government, and thus amount to a kind of tax. I think most of the bank financing during the recent crisis turned out to be highly profitable (particularly the warrants the government insisted on). Also, the AIG financing turned out to be profitable, as did the GM financing. What this tells me is that the accounting process is  at fault – it claimed that these companies were about to collapse, when it turned out that all they needed was interim financing.  The end result was that the shareholders of these companies lost heavily.

This result has created aberrant behavior from an economist’s point of view. I’m  referring to the now well-recognized bias of large corporations towards holding cash, rather than taking risk. Is it just possible this is one of the root causes of the sluggishness in the labor market?

Some of these problems are an outgrowth of FAS 157, which required mark-to-market accounting for assets that were being held for the long term. When it was adopted I noted that it “might” (I didn’t have the insight to say it “would”) wreak havoc in the financial markets. It did, but the media (being a bunch of English and Journalism majors) couldn’t figure it out, even after it happened.

As to student loans, why is the government bent on distorting the market for education? It is just as inefficient as the distortions introduced into the market for housing by home mortgage deductions, Fannie, Freddie and the FHA.  Answer – it gets votes – the ultimate currency.

It gets votes — the ultimate currency.

“Wonder ye now at the fiery hunt?”