Herman Cain is running for president and has quickly established himself as a TEA Party favorite. He is usually identified in the press as a former CEO of Godfather’s Pizza. There is much to admire about Herman Cain. He has had a very distinguished and successful business career. What has raised some eyebrows in some conservative circles is his involvement with the Federal Reserve Bank of Kansas City (FRBKC), and specifically, his idea’s on the bank bail-outs including a dismissive comment about “free market purists.” Uh-oh.
For the record, Mr. Cain was chosen as one of three area business leaders to serve as on the Board of Directors of the FRBKC in 1988. He was elected the deputy chairman of the Board in 1992, and served as the chairman from ’95-’96. He seems to have served his time there in peaceful anonymity. The FRBKC website barely mentions him.
Over the last several years, he has been writing weekly political columns as a free-lancer. His most recent work can be found on World Net Daily. The offending comment was from October 20, 2008 and published on North Star Writers Group. In that piece, after explaining why the Bush bail-out (TARP) was a good deal, and not nationalization of the banks, he writes this:
The free market purists’ objection to this is that it smacks at government control of the banking industry, which is called nationalization. They are correct. It smacks, but it is not nationalization because that would require the government to own at least 51 percent of the entity for an indefinite period of time.
He’s probably right about the definition of nationalization, but for the sake of context, I went back further in the archives to see what he was writing in the run-up to the crash and subsequent bail-outs.
Most of Mr. Cain’s writings are pretty standard red meat republicanism with little economic theory. For instance, in January, February, and March of 2008, as the warning clouds gathered on the horizon, Mr. Cain chalked it up to mainstream media acquiescence to Democratic Party spin. This is an excellent example of what stock market analysts call confirmation bias; the tendency to see the facts that conform to a preconceived idea, while ignoring the facts that don’t.
Even as late as July, he was still convinced it was all just “mainstream media” hype:
Former Senator Phil Gramm got it right. Most of our economic woes are a figment of our whiny imaginations.
The mainstream media and the Democrats in Congress have been trying to talk the country into a recession ever since they won control of Congress in 2006.
On a side note, I seem to recall many in the “mainstream media” blaming doom and gloom bloggers and gold bug pessimists for whipping up a frenzy. Maybe that’s just me.
September 22, 2008, Mr. Cain comes out in favor of TARP, a.k.a. the Bush bail-out. The October 20 column was a continuation of that argument. Perhaps not surprisingly, by December 29, when then President-Elect Obama was floating the idea of another round of stimulus, he came out against deficits.
This is the very thing the TEA Party was supposed to counteract. Placing party loyalty above conviction is an invitation to defend the indefensible.
Suppose that in 2008, instead of a banking crisis, there had been a pizza crisis. (Pizza crisis? Hang with me on this one a moment). Suppose Godfathers had been saving for a rainy day and would make it through in good shape. Would Mr. Cain have been in favor of bailing out Domino’s, Round Table, and Pizza Hut? Probably not.
One doesn’t need to be a free market purist to understand that federal tax revenue is supposed to be used for the good of the country as a whole, or that government involvement in the marketplace distorts the natural pricing mechanisms that knowledgeable investing requires, or that rewarding failure has a negative influence on the genuinely successful. TEA Party patriots would do well to remember that never having held public office doesn’t necessarily make one an outsider.