Congress Looks Out of Control

03/23/2009 11:43 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

“Nearly all men can stand adversity, but if you want to test a man's character, give him power.” -Abraham Lincoln

President Obama may now reflect on this profound comment from his mentor, President Lincoln.  He has the reins of power in his hand, and the world is mesmerized by his charm. It’s the kind of power that is irresistible. And he’s taking advantage of it to press his agenda.

But he’s about to test that power against an equally powerful force: the United States Congress.

Which brings to mind that well-known statement from Lord Acton: “Power tends to corrupt, and absolute power corrupts absolutely.

Nothing more perfectly describes the heady action taken by Congress late last week when the House of Representatives approved a 90% retroactive tax clearly aimed at those who had received $165 million in “retention” bonuses from AIG (although, of course, the bill’s language was a bit broader).  

If you’re not an expert in Constitutional law (which our president is), check out Article 1, Section 9, paragraph 3 of our nation’s guiding document. It provides that Congress shall not pass any legislation that singles out any individual or group for punishment without a trial. 

The bill passed 328-93, and may get by the Constitutional prohibition because it is aimed at anyone who earned more than $250,000 at any company that received at least $5 billion from the financial rescue plan since December 31, 2007.

Let’s hope cooler heads prevail when a similar measure is debated in the Senate this week. Or else, America may find out there are no limits to absolute power.

Any pool of money tempts Congress. They’ve already co-opted the Social Security “trust fund.”  Yes, this year’s $1.8 trillion estimated deficit includes all of that money that was supposed to be accumulating for baby boomers’ retirement.

Now a bill introduced by Rep. Gary Ackerman (D-NY) would encourage public pension funds to invest their money in preferred bank stocks as part of government takeovers, or to “lend the government their money to loosen the credit freeze.”

Pointing to the roughly $250 billion to $300 billion in total public pension fund assets that's "just sitting out there," [his words], the congressman rationalizes: "By guaranteeing public employee pension fund investments in financial institutions, the federal government will use its balance sheet as a way to inject much-needed funds into the nation's banking system rather than using more public money."

I’ve got news for Rep Ackerman:  Pension funds are already free to invest in bank stocks or to buy US Treasuries—a “loan” to the government. And it does matter whose pocket provides the money. While pension funds, like Calpers, have lost on average 25% of their assets in this bear market, at least there’s some hope that they will earn the money back!

There’s no way you can even dream that about the “investments” the government is making!  What do you think? Please join the conversation and have your say.

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