A few weeks ago Mitt Romney made a statement that set him up for ridicule and bashing from the left. He stated that corporations are people and effectively should be treated like people. Now, while I don’t agree with Mitt Romney about everything and am actually supporting some of his competitors in the race for the nomination, this statement actually made quite a lot of sense. However, he was vilified for it and has had to explain it away ever since. Why, you may ask?
Well, apparently, corporations are now the enemy of the people and even President Obama played upon it during his press conference yesterday. The whole movement that started on Wall Street last week and seems to now be spreading across America is based upon the “evil” corporations and banking system or something along those line. Frankly, I don’t even think the protesters know what they are protesting about, but that’s a whole different column.
My inspiration for this column came yesterday when I had a small argument on Facebook with Shannon Ivey who used to be a regular contributor herein. She made a statement along the lines that she was no longer doing business with Bank of America because their CEO had the nerve to state that the corporation deserves to make a profit. At that time, I pointed out to her that they did deserve a profit and that there were many people like myself that were suffering because of the decline in their stock price. I, and many other hard working Americans, have Bank of America stock in our retirement accounts. And, right not Bank of America seems to be on the verge of bankruptcy. People are being effected. In fact, my IRA is down almost 25% in the past quarter and has never reached its pre-collapse high.
Prior to the collapse of the financial markets in 2008, Bank of America was trading at about $35.00 per share. It is currently teetering at the all important $5.00 per share price. If it dips below that amount, it can no longer be held by institutional investors and/or many pension plans. Based upon these figures it has dropped approximately 85% in about three years. During that time period, it was forced by the Obama Administration to buy the nearly bankrupt Merrill Lynch and had previously bought the nearly bankrupt California based mortgage company Countrywide Savings and Loan.
Both of those companies were going down because of the banking crisis which was caused by bad mortgages. This was start of what I am now calling the Second Great Depression. Bank of America, against its better judgment, agreed to buy these entities in order to keep the economy alive and/or, in the case of Merrill to get TARP money. They were bullied into it by both the Fed and the White House. At the time, they had many troubled assets, but they were also doing well enough to be the savior of these two failing companies.
Bank of America was not the cause of the Second Great Depression. It was caused by the financial crisis which was caused by members of Congress who forced these institutions to make mortgage loans to people who could not and should not have had mortgages. They could not afford to buy homes and banks were forced to lend to them. This can all be blamed on Barney Frank and Chris Dodd who led the charge into the sub-prime market by passing regulations allowing these loans to happen. The evil corporations were directed by people and the people who survive because of these evil corporations are now feeling the effects.
According to Hoovers.com, Bank of America employs about 288,000 human beings worldwide. Those are people. Bank of America stock is held by many IRA’s and large pension funds. Those are directly benefiting people. Accordingly, Mitt Romney is right, corporations are people. They are not evil entities. If they fail because of market forces, people are hurt. The entity ceases to exist, but real, living people are hurt.
Don’t get me wrong, I do not believe in corporate bailouts. I believe in the free market. The United States government should not have bailed out GM or Chrysler or any of the banks. They were failing because of human error. However, our citizens should not get caught up in this left wing idea that corporations are evil. They are not evil. They are people. And, in that sense, once again, Mitt Romney is definitely right.