Of Visions and Reason

At age 14, in the year 1820, a young boy, Joseph Smith was visited by God the Father and His Son, Jesus Christ. It is very reasonable that the Father and the Son appeared to this boy.

First of all, it is very reasonable that God, the Father of our spirits, is interested in communion with His children. It is natural and reasonable to want to communicate with those whom we love. Parents certainly are more eager than most to want to communicate with their children. It is unreasonable to assume that God the Father, the perfect parent and possessor of infinite love, has no desire to communicate with His children.

Certainly it cannot be claimed that God the Omnipotent lacks the ability to communicate with His children. The scriptures provide ample evidence that God communicated directly with His children throughout the thousands of years of antiquity. Is it reasonable to assume that God has somehow lost that ability and no longer has it in modern times? Remember that for those living in antiquity, those were modern times. God has always had and continues to have the ability to communicate with His children.

Nor can it be reasonably asserted that there is less need today than anciently for God’s children to receive the light, wisdom, and instruction that come with divine communication. As recorded in the scriptures God has spoken with His children about the need for honesty, kindness, diligent labor, peace within the society and proper relations among societies. He counseled on respect for life, the worth of the individual, fairness in financial dealings, marriage and childrearing, care for the poor and needy, and healthy foods and hygiene. Which of these issues are unimportant to modern man? Which are free of controversy today? It is reasonable that man today could benefit from Divine guidance on each and all of these issues, and on many new ones besides.

As happens among human families, perhaps some estrangement has occurred in God’s family, between the Father and His children. There is some truth in that. Again, the scriptures provide numerous examples of the estrangement between God and man, as men have rejected God and turned to idols and other alien loves. The Egyptian captivity of Israel and the Babylonian captivity of Judah are two prominent examples. What the scriptures also demonstrate is that, not unlike human parents, God has been persistent in His efforts to overcome that estrangement, to bring His children back into His presence. That was the mission of many of the prophets. Indeed, foremost of all, the sacrifice of Jesus Christ is all about the infinite effort by the Father, through his Firstborn Son, to bring His children back into His presence. Being brought back into that presence has always been accompanied by an increase in direct communication between God and man. It is reasonable that God is as persistent in His efforts with modern man as He was with ancient Israel to overcome the estrangement of man from God and strengthen divine communication.

A major consequence of the estrangement of man from the Father is the enormous confusion that prevails today among the children of God about the nature of their Father. Indeed, the simple knowledge so commonly held anciently that God is the actual Father of our spirits and that we are His children and heirs has been replaced by any number of man-made ideas and speculations. It is reasonable that the Father would want His children to know who and what He is, particularly since it is so important to their understanding of who and what they are. God could tell His children, as He has and does, but it is very reasonable that He would want to show them, as He also has done before. What more effective and reasonable way to break through the web of confusion about the nature of God that prevails in the world today?

It is extremely reasonable and sensible that the Father would choose a young boy to be the recipient of this great vision of the Father and the Son. Joseph Smith was old enough to understand, at the age when young boys’ queries of the Divine and the nature of the universe and themselves can become acute. At that age and with his limited exposure to the world and its ways, he was free of crippling vices and possessed a mind largely free of preconceived notions and indoctrination in human theories. The young boy Joseph was a clean vessel into which the Lord could pour divine knowledge with little fear of it being clouded with evil dispositions or mixed with false notions. The fourteen year old boy Joseph Smith was a very reasonable choice for God to reveal the pure and bright truth of His nature.

Why then and there? It is often difficult for modern man to appreciate that he is living in historic times, when great and historic things happen. It is when someone’s “modern times” become history to a new age of moderns that the mind can give more room to acknowledge a great event. That is why some are more willing to accept that God appeared to the ancients than they are the idea that He might do so today. But it did happen, and the time was right for it.

The religious freedom that prevailed in the United States in the early nineteenth century—which is still so foreign to so much of the world today—was a relatively new and fragile achievement in 1820. There was just enough of it enshrined in the Constitution and generally accepted by the people that God the Father could make a new attempt to restore direct and open communication between God and man without governments or mobs seeking to destroy it and its challenge to their ways of thinking and doing things. As it was, it was touch and go. Those who accepted new direct revelation from the Father were driven by mobs and local governments from town to town and state to state.

But it did survive, and since 1820 the estrangement between God and man that restrained communication between the Father and His children has been receding all across the globe. It had to begin with someone. God had to talk to someone first. For these and many other reasons, God the Father, and His Son, Jesus Christ, appeared to the young boy, Joseph Smith, and God has continued to increase His communication with His children ever since. Today the Father is in direct communication with millions of His children across the world, and more every day. It is very reasonable that He do so.

Of Faith and Works

I wish to share a recent conversation on the subject of faith and works. Some very theoretical theologians seek an artificial—and non-biblical—separation between the two. The presumed differences erected between faith and works by these arguments are seemingly philosophical and semantic, but they lead to very different practices that can mean great differences in real life. I repeat the conversation below, simplified into its chief elements. I will refer to my partner in the conversation as Sam.

Sam: Christianity is divided into faith-based churches and works-based churches.

WAA: I reject that division. I think that it’s artificial, man-made, not God-made. But so that I might understand you better, explain to me what you mean by it.

Sam: Really, there is a difference. There are those who believe that they have to do works to be saved, that by their works they earn salvation and that they need those good works to be saved. We believe that no amount of works can be sufficient to earn salvation, that Christ provides salvation through His grace, and that we receive that grace through faith in Christ, faith alone. Indeed, we think it presumptive of anyone to think that he can somehow earn his way to Christ’s grace. If you could earn it, it wouldn’t be grace—and in any event you would always come up short.

WAA: I would suggest then, that either there is no difference between what you and I believe on this matter, or you yourself do not believe in what you are saying.

Sam: How do mean?

WAA: Just this. You say in effect that we cannot earn Christ’s grace, that if we do, it would not be grace, that believing is the essential thing and that it is enough.

Sam: That is correct.

WAA: What does belief involve? Can I believe and still swindle my neighbor?

Sam: No, if you are swindling your neighbor, then you probably don’t really believe.

WAA: So it seems that you agree with James, the brother of Jesus, that there is a connection between faith and works. He was the one who taught that our faith is shown by our works.

Sam: But it is the faith that saves, not the works.

WAA: I would agree with that, taking faith in its wholeness. For it is clear that the two are connected, that faith and works are not irrelevant to each other. As James says, without the works there is no faith. Faith without works is dead (James 2:20, 26). But I will go even so far as to say that any good works are good, because they are a demonstration of faith, a demonstration of what you believe. I think that you believe that, too. You act like you do.

Sam: How do you mean?

WAA: You go to church regularly?

Sam: Yes.

WAA: You obey laws, you are kind to your neighbors, you are loyal to your wife and family. All of that is true?

Sam: Yes, all true. But I make plenty of mistakes and have my share of unkind thoughts in the course of the day.

WAA: I think that you are making my point. Why do you do the good that you do—acknowledging that you are otherwise prone to live not so good if you just let yourself go—why do you overcome those unkind thoughts and act kindly?

Sam: Because it would be wrong to be unkind.

WAA: Why? Measured by what? Measured by Christ’s commandments, especially Christ’s two great commandments, to love God and to love your neighbor.

Sam: I can’t argue with that. But by my faith in Christ I am saved, no matter how many good works I do.

WAA: Is that so? Do you really believe that? Do you think that you would be saved if you were cruel to your wife and unkind to your children, swindled your neighbor, cheated your employer? If you stopped going to church, neglected your duties?

Sam: As I said, that would show a lack of faith.

WAA: Exactly. We are saved by our faith because our faith is part of our works. You cannot have faith without it revealing itself. You cannot hide your faith. Faith shows itself in good works. God has spent a lot of time and effort giving us commandments to show us the path of goodness. You have to disregard a large part of the Bible if you assume that commandments and keeping them is not important. It seems important to God. Your good actions—measured by their consistency with God’s commandments—demonstrate your faith in the giver of those commandments.

Sam: But it is never enough. We cannot do enough to merit salvation. The apostle John taught that whoever claims to be without sin is deceiving himself (1 John 1:8).

WAA: That is true. That is precisely why we need a Savior. Christ knows that we would never do enough. But that is no reason to stop trying. There are many things that I have not mastered but that I keep trying to master. For a righteous person driven by faith, falling short is incentive to get up and try harder, having faith that Christ will help you to do better, that with His help you can do better. The Master of all takes our very best efforts, however imperfect, and makes them perfect. He makes up the difference, in fact draws us on and helps us to narrow the difference. And He makes our efforts worthwhile with faith that the Savior will add the necessary finishing touches.

Sam: But only for those who believe in Him.

WAA: Again, we agree. Because we believe in Him, we try to be like Him, we do what He asks. Through our works we show Him—and perhaps show to ourselves—our faith. Or, as John taught, through our works of obedience we reveal that we love God and make that love real (1 John 2:3-6; 5:3). It is to those who have faith in Him, who love Him, in real life and living practice, that He extends His grace and salvation. We may not earn salvation, but in this way we qualify for it by meeting the conditions set by the Savior. The ancient American prophet, Nephi, explained it this way: “reconcile yourselves to the will of God, and not to the will of the devil and the flesh; and remember, after ye are reconciled unto God, that it is only in and through the grace of God that ye are saved.” (2 Ne. 10:24)

Sam: I still think that we disagree.

WAA: It is only if you try to separate faith and works that we will disagree. James described it in a powerful metaphor. He said that as the spirit and body united give life to the body and when separated the body is dead, so faith and works, when separated, become dead also (James 2:14-20, 26). So, we are saved by faith if you mean the faith that produces the works of complying with God’s commandments. If you do not, then your faith is dead and cannot save you because it does not help you to become better. What good is that kind of faith? It is of no value at all. It is the faith of the devils, as James explained (James 2:19), who have known the Savior from before the beginning of time. But God is the God of life and the living, and if your faith is alive it will lead you to the Source of all life, even to God the Father. As Jesus taught, “if thou wilt enter into life, keep the commandments.” (Matt. 19:17)

The conversation continues, but I will leave it there, for now.

Of Thousand-Page Laws and Our Republic

Congress is broken. Few are satisfied that our representative system of government is working. As a very important measure, I would point to massive new 2,319 page laws (which weigh more than 12 pounds, printed on both sides of the page). You have to talk yourself into believing that it is O.K. for a new law to be over 2,300 pages long. After all, the Constitution itself is only a couple of pages long—albeit written with a fine hand on large sheets of paper. Perhaps the most important set of laws in the history of man, the Ten Commandments, is only 297 words long (King James Version). And Jesus Christ reemphasized the teaching of the prophets from the Old Testament that even those words and all other laws are summed up in just two commandments:

Thou shalt love the Lord thy God with all thy heart, and with all thy soul, and with all thy mind. This is the first and great commandment. And the second is like unto it, Thou shalt love thy neighbor as thyself. (Matthew 22:37-39)

I understand and expect the retort that these are two very different kinds of laws. With that I would agree. The difference is not, however, that the Constitution and the Ten Commandments are foundational principles, while the 2,300 page variety of laws referred to at the beginning of this comment (the new Dodd-Frank financial regulatory law, by the way) is in the way of practical implementation. The Ten Commandments are very much in the way of practical implementation. “Thou shalt not steal” is pretty practical. And the first implementation laws passed by the new Congresses under the new Constitution were not thousands or hundreds or even dozens of pages long. The lengthy laws have developed the farther we have come in time and spirit from our Constitution.

The big difference from the laws of the earlier days of the American Republic and the multi-thousand page laws of today’s Obamacare and Dodd-Frank financial regulation is that when government takes upon itself the task of controlling what people should do, of controlling their daily lives through such things as how to manage their health and their wealth, it takes a lot of words. It only takes a few words to say that it is against the law to maim someone or to rob him. That is to say, it only takes a few words to outlaw crime, but it takes a lot of words to “guide” people in the exercise of their freedom and to turn harmless individual choices (such as which medical procedures you want or how to invest for retirement) into crimes.

Our Republic rests upon the notion that we elect and trust a relative handful of people to represent us in the making of laws, at the federal level just slightly more than 500 people out of more than 300 million. They do the legislative work because it would be impractical for all of us to do it together. They stand in our place, voting for us with authority derived from us, the people.

How can we have a representative government, though, where the representatives pass laws that they do not and cannot read? How can they represent us when they do not and cannot know what they are voting on? Do they not, indeed, fall down on their duty to us when they vote for laws that they have not read? Is not their job made impossible when they are asked to consider laws made up of thousands, or even hundreds, of pages?

That is to say, that our Republican form of government is inconsistent with the kinds of laws that Congress has been passing today (a trend which really got going in earnest during the Congresses of the Depression). Only if our representatives get back to passing short laws that outlaw crime, and abandon efforts to direct the lives of the people, can they really do their job and only then will representative government in America work the way it was intended.

Of Individual Worth and the Fatherhood of God

In recent times Jesus Christ declared, “Remember, the worth of souls is great in the sight of God” (Doctrine and Covenants 18:10), a reminder of the high value that Christianity places on the value of the individual. This is unusual where much of the world focuses on masses and classes and elevates rights of the group over the rights of the individual. In much of the world and throughout history individuals have been considered expendable, particularly if expending them could be feigned as benefiting the group. That is certainly at the core of Marxism and other variants of socialism, that read history as the story of classes. It is at the core of statism, that considers all issues in terms of how they affect the state rather than how they affect the individuals in the state. Of course, just like the oriental despotisms (the ethos of which prevails in many “modern” oriental governments) the focus on the rights of groups and of the state or the society is a mask for reinforcing the power of the rulers of the masses who pretend to speak for the masses and govern for their good while continuing to exploit them.

The worth of the individual in the doctrines of Christianity comes from the fact that each man and woman is literally and not figuratively a child of God. That is fundamentally what makes men and women different from all other animals, a fact that requires little reflection to recognize its truth and lots of sophistry to convince people otherwise. You need a lot of explaining to make people believe that they are no different from the dogs and the snakes and the trees, and even then the idea is so foreign to everyday observable reality that few are convinced, and of those, few stay convinced. The intellectual and moral gap between man and beast is too vast, despite enormous efforts throughout the ages to make it appear not so.

Individual worth based on the literal fatherhood of God is an original doctrine of Christianity, found in the first pages of the Bible. Consider these words from the story of the creation. “And God created great whales, and every living creature that moveth, which the waters brought forth abundantly, after their kind, and every winged fowl after his kind” (Genesis 1:21). Notice that the creatures of the sea and air all came forth “after their kind”. Those are not accidental words. Consider the description of the creatures of the land. “And God made the beast of the earth after his kind, and cattle after their kind, and every thing that creapeth upon the earth after his kind” (Genesis 1:25). Again, all of the land creatures were made “after their kind”. Notice how differently the creation of man is described; what was the “kind” after which man was created? “So God created man in his own image, in the image of God created he him; male and female created he them.” (Genesis 1:27)

Of course, this idea of the divine heritage of man is unpopular with despots who choose to use and abuse God's children. In the ancient Americas a prophet of God was killed by his king for preaching “that man was created after the image of God” (Mosiah 7:27).

Again, in the New Testament the Savior and His disciples taught the divine lineage of man. For example, Paul wrote to the saints in Rome, “The Spirit itself beareth witness with our spirit, that we are the children of God: And if children, then heirs; heirs of God, and joint heirs with Christ” (Romans 8:16, 17). That notion probably did not sit well with the Caesars, who were busy eroding the rights of the individual found in much of Roman law.

The worth of the individual is certainly at odds with the modern-day Caesars. Their emphasis on group rights, their programs to divide societies up by classes and ethnic groups, would leave individuals powerless to protect themselves against sacrifice on state altars except by appeal through their membership in some favored group.

The worth of the individual is the foundation for the freedom of the individual. Consider how much of the Constitution—particularly the Bill of Rights—is focused on the preservation of individual freedoms: freedom of religion, freedom of assembly, free speech, right to armed self protection, right to trial by jury, protection of private property, and so on. These constitutional rights are a partial enumeration of what the Declaration of Independence proclaimed to be “unalienable Rights” by which all men have been “endowed by their Creator.” While you may not have to be a Christian to believe in the divine worth of the individual, this very Christian doctrine is embedded in our system of government and at the heart of what has made America different from much of the world and much of history.

That is why those who seek to change America work to undermine all that proclaims the individual worth of each and every man and woman. It is hard to justify treating God’s children like so many cattle; you first have to get people to believe that they are more like cattle than they are like their Father in heaven. So far, most Americans have shown a stubborn adherence to truths that they have held for more than 230 years to be “self-evident” and which God our Father has taught us from the beginning.

Of Liberty and the Caesars

As we near another annual celebration of our Declaration of Independence and the proclamation of American liberty, it is worthwhile reflecting on what that independence and liberty rest. At its core, the American Revolution revolved around the deep desire to preserve something. That something was the rule of law, an elementary principle of government that the founding fathers had found here and nurtured. The rule of law is the fundamental idea that we should be governed by laws and not by men. It is that principle that throughout our history has set America apart from the rest of the world. Embracing the rule of law the founders built our nation upon a written Constitution.

Our founding fathers frequently used the word “liberty” when referring to the rule of law. When they said “liberty” they did not mean wantonness and libertinism, to be abusive without consequence. Our founding fathers meant by “liberty” the freedom that they had found in America to live beyond the wanton grasp of the arbitrary rule of kings, lords, ladies, and even parliaments. Our founding fathers were comfortable with the idea of government only if what the government did—or more precisely, if what the people in government did—was closely and clearly controlled by laws that everyone understood. To them that meant that they had liberty, and they loved it. The Declaration of Independence is a detailed protest by the Congress of the thirteen new States against the arbitrary violations of the rule of law—of American liberty—by the British crown.

Precisely because the American Revolution was an appeal to the rule of law we succeeded in creating a stable government and society where the French Revolution (and many others since)—appealing to the rule of men, albeit a different crowd of men—fell into chaos and anarchy, merely replacing one despotism with another. The French tore down the monarchy in order to replace it with the Reign of Terror. Americans enshrined liberty in a document that still operates today to resist the arbitrary rule of one group of men over the rest. The Constitution protects the rights of each and all—individuals and minorities—through the rule of law.

The rule of law was not a new idea. Rome’s greatness was built upon it. Its weakness and eventual collapse came as the Romans traded the rule of law for the rule of men under the Caesars. Even then, the Roman tradition of the rule of law was so strong that it took nearly 500 years for the progressive rule of men to lead to the sack of Rome and the ushering in of the Dark Ages, an era dominated by the rule of men.

The idea of the rule of law, however, is much older than Rome. It is found at the heart of Christianity, reaching back to the Garden, from which man was expelled by the breaking of law. Man was redeemed from the broken law by Jesus Christ, whose great sacrifice was made to bind up the broken law and create the path for man to live in harmony with divine law. In modern times Jesus Christ explained the eternal purpose of law in these words: “that which is governed by law is also preserved by law and perfected and sanctified by the same.” (Doctrine and Covenants 88:34)

As our eternal freedom is protected by law, so it is with our civil freedom. Law is our shield against the whim of other men. Without the law, our only defense against someone’s whim is the protection provided to us by the whim of someone stronger. That is the essence of feudalism. That is what our founding fathers were so desperate to leave behind in the Old World, whichever “Old World” they left. That same search for liberty under the law inspires many refugees to America today.

That is perhaps why Americans are made nervous by all of the policy “czars” that have been created by the Obama administration. Czars suggest rule by men rather than by law. “Czars,” the Russian variant of the Latin “Caesar,” are justified by the argument that “they can get things done,” but in the doing they rely upon the arbitrary will of single individuals invested with extraordinary power: rule by men (and women).

Congress is on the verge of enacting—unless the Senate votes “No” when it returns to session in mid July—a major restructuring of the American financial system that would replace rule of law with the rule of men. The new structure rests upon enormous power given to new financial czars. There is a new czar for all federally-chartered banks and thrifts, a new financial consumer czar with power to dictate every aspect of any financial product and service that is offered to the public, and a new systemic risk council with authority to reorganize or even break up any company in America if in their opinion its operations are too risky for the financial economy. The authorities that this new legislation would give are broad, the instructions on how to use those authorities vague, and the ability to find appeal from the mandates of the new czars seriously restricted.

Our founding fathers, who escaped from that kind of rule, would have warned us.

Of Wall Street and Pennsylvania Avenue

Who wants another financial crisis? To hear the advocates of the Administration’s financial regulation bill, anyone who disagrees with them does.

Let us walk past the discussion of others’ motives, important as they might be. Let us, you and I, agree that we do no want another financial crisis. Or, phrased better, let us agree that we would like to reduce the likelihood of another financial crisis and minimize the extent of crisis when it comes. Anyone believe that there will never be another one? Recognizing that crises will occur and that we will be better prepared to face them by acknowledging and preparing for their possibility, let us consider which approach is likely to work to reduce their frequency and their severity.

Which is more likely to be more effective at reducing the risk of financial crises: government regulators or market discipline? Relying upon experience as a reliable guide, the question is soon answered. Government was all over the most recent crisis. In fact, the most recent financial crisis was fomented by government regulations and stimulated into panic by unwise government actions, all of which worked to shield key players from market discipline. Government housing programs and guaranties led people to ignore the risks of mortgage lending—ignored by borrowers and lenders. Credit rating agencies (CRAs) were able to classify risky mortgage securities as nearly risk-free, shielded by the Securities and Exchange Commission from market pressures to identify risks that the CRAs were paid to find.

The crisis was fanned into a panic after the Paulson Treasury Department (1) orchestrated the bailout of the securities firm Bear Stearns, then (2) subjected investors to a big tease with Lehman Brothers which they at last decided not to bail out, (3) bailed out AIG, (4) bailed out bond investors in Fannie Mae and Freddie Mac, and then (5) demanded from Congress $700 billion for the catastrophic Troubled Asset Relief Program (TARP). None of the TARP money was used to buy any troubled assets. A third of it went to bail out banks that were not in trouble (until they took the Treasury’s shilling) while other billions went to auto companies that were.

So why are the Administration and leaders in Congress on the verge of enacting legislation that will give Washington bureaucrats virtual control of any and all of the financial system at their whim? Could it be that these friends of regulation, who control the lawmaking powers this year, are unwilling to admit their mistakes? Or is it that the friends of regulation see the financial crisis—whatever its cause—as a wonderful opportunity to expand regulatory controls? Or maybe it is just that once you tell a story—that Wall Street caused the financial crisis—you have to carry the story on to its conclusion, however wrong that might be. In either case, the friends of regulation control the megaphones and the levers of power. If they have their way, though, Time will surely tell whether it was a good idea for Pennsylvania Avenue to replace Wall Street as the financial center of America.

Of Financial Reform Promises and Too-Big-to-Fail Firms

One of the many astonishing things about the Obama Administration’s financial regulatory legislation is that it promises so much and delivers so little of what it promises. In fact, in most cases it delivers the opposite of what it promises. Seemingly, the Administration knows what the American people want, so it uses promises of delivering what the people want and what the nation needs in order to enact changes that most Americans will neither want nor like.

As Senators and congressmen prepared to return to their states and districts the Administration published a list of “Top Ten Things You Should Know About Financial Reform.” Presumably this would serve as a guide to politicians giving their Memorial Day stump speeches. I heard one Democrat congressman at the Memorial Day ceremonies in Waterloo, New York. Neither the list nor the legislation found its way into his remarks. Good thing for the congressman, because the legislation as currently written fails on all ten of the “Things” that the Administration paperwork boasts that it delivers.

Let us examine Thing 1:

1) End of Too-Big-To-Fail: If a big financial firm is failing, it will have only one fate: liquidation. There will be no taxpayer funded bailout. Instead, regulators will have the ability to shut down and break apart failing financial firms in a safe, orderly way—without putting the rest of the financial system at risk, and without asking the taxpayers to pay a dime.

Part of that Administration statement is true, but only part of it, and not the most important part. The legislation would provide regulators with the ability to shut down and break apart failing financial firms. Regulators already have that authority today and have been exercising it weekly for the past two years to close down failed banks “without putting the rest of the financial system at risk, and without asking the taxpayers to pay a dime.” Failed non-bank firms have been closed down through bankruptcy proceedings—again, “without putting the rest of the financial system at risk, and without asking the taxpayers to pay a dime.”

The risk to the rest of the financial system and the demand for taxpayer bailouts have all come in the past few years as the federal government has gotten involved to prop up firms that the federal government did not want to fail. Prior to the recent financial crisis, too-big-to-fail was a theory. Treasury Secretary Paulson made it official policy and practice, which policies and practices have been officially approved and adopted by the new Administration.

The new financial regulatory legislation—even while making it easier for financial regulators to break up and unwind failing financial firms—would also give to regulators legal authority to bail them out, prop them up, and have them born again as clean firms, free of the financial encumbrances of all of their sins of the past. In very real and important ways the legislation would take the theory of too-big-to-fail, turned into official practice by the Paulson Treasury Department, and make it the law of the land.

There are several ways that the legislation would provide this service. One important tool is the new explicit ability of the FDIC (which would become the agency for handling not just failing banks but any failing firm that government leaders considered important enough for the FDIC’s care) to treat the investors in a failing firm differently. The FDIC would be explicitly authorized to protect some investors and not protect others, giving special attention to the customers of a firm and those who have lent money to the firm. Shareholders are supposed to be wiped out and the leaders of the firm fired, but the bondholders and counterparties doing business could be protected.

If this sounds familiar, this is exactly how the federal government has been treating housing giants Fannie Mae and Freddie Mac. When the government took them over in late 2008, shareholders were nearly but not entirely wiped out, leaders were let go, but all of the bondholders, counterparties, and investors in debt securities of Fannie and Freddie became 100% protected by the federal government and remain so today. Several other participants in the financial system were “put at risk,” the government’s exercise of discretion to pick winners and losers precipitating the failure of several banks that were holding preferred shares of Fannie and Freddie that the government chose not to protect. The taxpayer has not been protected either, the Treasury deciding last Christmas Eve to allow Fannie and Freddie to receive unlimited federal support, already totaling hundreds of billions of dollars.

Fannie and Freddie are government sponsored enterprises (GSEs). The government subsidy programs for these GSEs would be the new model available for any firm designated as systemically significant by the federal government under this legislation. That is to say, that under this legislation, in place of two GSEs we would have potentially dozens.

There is a price for this attention. Whether a firm wants it or not, under this new legislation, if enacted, any firm could be given the GSE treatment. Once the government considered a firm to be “systemically” important it could be told in as much detail as the government leaders considered necessary exactly how to run its business. No part of the business of the firm would be exempt from the government’s reach. The federal government would become the effective partner of that firm. And as former Congressman Dick Armey once said, when you partner with government, the government is never the junior partner.

Now, ask yourself this real-world question: as senior partner, would the government ever let any of its partner financial firms fail? If, as is the case with Fannie and Freddie, by following government mandates the firm got so deep in the red that action became unavoidable, the federal government would be able to use another powerful tool in the proposed new law: the authority to create a “bridge bank." As the government has been doing with Fannie and Freddie—and as many suspect the government will do to “fix” Fannie and Freddie—government officials could take over the operations of the firm and use this bridge bank authority to protect whichever investors they wished and make others (not leaving out the taxpayer) suffer loss. Through a legal and financial “baptism” administered by the federal high priests of finance all of the sins of the failing firm could be gathered together into one “bad bank” and all of the remaining operations of the firm could emerge as a new firm washed completely clean of bad debts and uncollectible assets. The new firm could then be offered up again—either with the same name or a new one—to investors. Of course, the federal government would likely remain as senior partner, but this would give comfort to investors who, like investors in Fannie and Freddie, were looking for a place to put their money where the government would be expected to protect those investments.

Ending too-big-to-fail? In the Administration proposal too-big-to-fail becomes the law of the land. The Administration’s number one selling point for financial legislation is a very good reason to oppose its bill.