The “Agency” term being announced in the tech world expands on our American tradition of “Rugged Individualism” since the olden days and through the Reconstruction Finance Corporation in 1932…
… but I would like to know if this will hold during the next financial crisis.
History suggests that the privatization of gains is usually met with socialization of losses during the crisis. We all know what happened 17 years ago. Hopefully, rugged individualism will hold true for everyone this time around – even big tech.
In 1932, President Hoover passed the Reconstruction Finance Corporation intended to help “everyone” and not be for big institutions. Even then, New York Congressman Fiorello H. LaGuardia predicted it to be a “millionaires dole”. And before the Act was even signed into law, “[a] swarm of attorneys and hired lobbyists had descended on Washington.” It was a “fat-bellied and well-groomed breadline”. According to Edward Ellis, the Van Sweringen railroad family, Morgan and Pennsylvania groups got $156M of the first $264M loaned out to the railroads. Of the first $61M loaned to 255 banks, $41M went to three banks and $15M of that went to Bank of America. 90% of the loans wasn’t 90% of the money loaned out.
Senator Robert F. Wagner of New York marched to the Senate Floor at the signing, declaring “[w]hen adverse circumstances compelled the railroad presidents to come to Washington, we listened attentively to their story…. We replied that we would lend them the aid of the federal government; that we would lend them money out of the United States Treasury…. We did not preach to them rugged individualism. We did not sanctimoniously rollout sentences rich with synonyms of self-reliance. We were not carried away with apprehension over what would happen to their independence if we extended them a helping hand. But when millions of Americans, foot-weary and heart-sick, cry out in despair, ‘Give us Work!’, we suddenly are overwhelmed with devotion for the preservation of self-reliance. We plug our ears to the cry of the multitude while the prophets burn incense upon the altar of rugged individualism.”
History also suggests that you take what your public leaders say during the crisis with a large grain of salt and skepticism. They’ll tell you not to hoard, but you’ll want to hoard. Jesse Jones used to give the classic example of a large South Dakota farm being picked up $12,000 in a can.
I may be a product of my cynical geriatric millennial season of life, but I am ready for another financial pull back during the 4th quarter this year. It seems T-Bills at 4.3% (following Buffett) for new money are the best option for those of us who don’t have private lending operations yielding 10-12% or a new business we are personally grinding out. I wonder who will get bailed out next time if the economic boom and success I see all around collapses.