Keith Hennessey reports the news that President Obama is going for it, with an emphasis on "roads and bridges" and making buildings more energy efficient.

The Wall Street Journal editorial page, having called in January of 2008 for Treasury Secretary Paulson to name a "czar" who "would have the power to replace Fan and Fred's management and directors, as well as give priority to taxpayers above the current private shareholders if the government does inject capital," now complains that under government conservatorship the housing finance institutions are losing too much money. The Journal tries to cover itself by saying that what it wanted back in 2008 was a "receivership," not the "conservatorship" established by Mr. Paulson, but it's an awfully fine distinction. When the conservatorship was established in September of 2008, the Journal editorial cheered: "this time Mr. Paulson has at least demanded something in return for his blank taxpayer check." The Journal's big complaint then was, "We only wish Mr. Paulson had gone further and erased all private equity holders the way the feds do in a typical bank failure. ...the current common and preferred holders deserve to lose everything." The Journal has another really wonderful editorial this morning defending property rights against eminent domain seizure in the Kelo v. City of New London Supreme Court case, but when it came to the Fannie Mae shareholders, the Journal displayed about as little respect for private property rights as the City of New London did. As least in a privately owned company, the losses are the responsibility of the private owners (or should be.) Now that Mr. Paulson followed the Journal's advice and put the government in charge at Fannie and Freddie, the taxpayers are on the hook for the losses. Meanwhile, far-sighted fund managers are snapping up residential mortgage-backed securities at steep discounts, preparing for a windfall in an eventual recovery. A similar self-correcting free-market dynamic might have taken place at Fannie and Freddie, but instead, the government stepped in. The Journal is a giant, great voice for freedom and capitalism and it did some fine work warning of accounting problems at Fannie and Freddie. One can understand the paper's concern with the existence of an implicit federal guarantee for Fannie and Freddie debt. But a lot of the anti-Fannie and anti-Freddie fervor was driven by Wall Street banks who didn't like the competition and yet, when it came down to it, had government guarantees of their own. Some of the rest of it was driven by funds shorting the stock. Those funds did pretty well, while taxpayers are now stuck with the bill. What today's Journal editorial is acknowledging, in so many words, is that taking Fannie and Freddie out of private hands and putting it under government control hasn't worked out so well. There were those who warned at the time that it was a bad idea.

The idea that the 1999 repeal of the Glass-Steagall Act, which had mandated the separation of investment banks and retail banks, was a major factor in the financial crisis is rebutted by H. Rodgin Cohen, chairman of the law firm Sullivan & Cromwell, in an interview with the Daily Deal. He says that Lehman, Bear Stearns, Fannie Mae and Freddie Mac, Washington Mutual, and Wachovia all had nothing to do with Glass-Steagall. "Much of the problem was the unregulated mortgage bankers and brokers, who ultimately polluted the system," he said. He's probably right about Glass-Steagall, though it's worth remembering the history, which is that Glass-Steagall wasn't just an arbitrary restriction on banks, but the law that created large-scale, permanent federal deposit insurance. If the federal government is going to guarantee bank deposits, there's certainly a case to be made that it can reasonably impose some restrictions in return on what kind of gambles banks can make with the depositors' money. If a bank wants to opt out of the deposit insurance, and with it the restrictions, that is one thing, but accepting the deposit insurance while bridling at the restrictions is another thing. It's true that a lot of the mortgages that went bad were originated by mortgage brokers that aren't regulated in the way that banks are, but those brokers then sold off those mortages to the big banks and financial institutions that are Mr. Cohen's clients. Those firms made a lot of money on fees securitizing those mortgages and selling them and, until they went bad, holding them on their own balance sheets. To depict all those big banks as a bunch of naifs, victims of pullution by the unregulated mortgage bankers and brokers, is a stretch.

The chairman of the Federal Deposit Insurance Corporation, Sheila Bair, spoke in New York today and offered the following: "To repeat: large banks today need more capital, not less." This is a puzzling thing to say for a whole variety of reasons. First, it undermines public confidence in the banking system. We'd been told that after the stress tests and the capital-raising that followed, the banks were adequately capitalized. Now Ms. Bair tells us they need more capital? When is it going to end? And why should anyone put more capital into a bank now when at any moment some government regulator may come along and order the bank to raise more capital, and thereby dilute the existing shareholders? By not saying which large banks she is talking about, she effectively casts doubt on all of them. Second, she's undercutting the White House message to the banks, which is that they should lend more. A top Obama aide, David Axelrod, said recently on ABC's "This Week, "The most offensive thing is, we haven't seen the kind of increase in lending that we should...They ought to meet those responsibilities, and they ought to express them by increasing lending, which is what we need right now." If the banks follow Mr. Axelrod's advice and lend out their money, that means the money won't be around when Ms. Bair comes around to check how well-capitalized the banks are. The banks are damned if they do and damned if they don't. Not that we have a lot of sympathy for bankers around here -- they are going to be paying out plenty of bonuses and are even showing some profits, which suggests that Ms. Bair's concerns about capital may be overwrought. All along, a lot of these banks didn't have capital problems, they had liquidity problems, which are different.

While Russian state television took notice of FutureOfCapitalism.com early on, the U.S. television types have been a bit slower to catch on. So it's nice to see a link to the segment I taped a few weeks back on "Getting Your Money's Worth" with Judith West. The associate producer tells me the show is schedule to air on cable in New York this Sunday, November 15, at 8:30 a.m. Stations are Time Warner Cable Channel 34/78, RCN 83, VRZN 33.

It takes an unusual person to have served as press secretary to Steve Forbes's free-market-oriented presidential campaign and to have also been the subject of an admiring profile in the left-of-center Nation magazine. So when I heard that the person who fits that description, Gretchen Morgenson, the New York Times reporter and columnist, had a new book out titled "The Capitalist's Bible: The Essential Guide to Free Markets – and Why They Matter To You," I got my hands on one and started reading.

Charles Gasparino has a post up at the Huffington Post in which he derides the former chief executive of Bear Stearns: "The folly that was found at a firm like Bear Stearns, with its CEO caring more about playing bridge and golf (and allegedly smoking marijuana) than tending to the firm's balance sheet, would never happen at Goldman Sachs." It's one thing for Mr. Gasparino to say this now; back in 2007, he was profiling this same CEO for Trader Monthly as being a "Wall Street icon" at the "pinnacle of his profession" with "one of the most storied careers in American finance" who "built Bear Stearns from the ground up with one key ingredient: guts." It's not only the bankers, in other words, who are prone to posturing; the reporters who cover them aren't immune, either.

The next few years belong to Hayek, Amity Shlaes writes.

There's a policy debate underway over whether Congress or banking regulators should force banks to offer "plain vanilla" products. It looks like at least one bank isn't waiting for the government mandate, though. The New York Times reports that "Bank of America is promoting a line of consumer products so simple that the terms and conditions fit on one page. The BankAmericard Basic Visa, for instance, has no rewards and a single interest rate." It's an open question whether the bank would have done this without the threat of government action, or without knowing that the government owns tens of billions of dollars in preferred shares of the bank. But it's certainly possible that one of the nifty things about capitalism is its ability to dynamically self-correct. If a bank actually finds it profitable to market to customers with the pitch that its products are less complicated and more easy to understand than the competitors' products are, that might be a good thing, no? Customers who want vanilla might be able to get it without congressional action. In this case, the bank -- even a huge one that is part-owned by the government -- has moved faster than Congress has. The bank already has a product in the marketplace -- it even has a trademark on the word "basic" -- while Congress hasn't passed the financial services regulatory overhaul.

While most industries are shrinking, there is one that is growing, reports the Web site OpenSecrets.org:

During the third quarter, corporations, unions, trade associations and other special interests spent $849 million on federal lobbying, the Center for Responsive Politics has found. This is the largest single-quarter lobbying expenditure since firms began filing quarterly at the start of 2008 -- about $8 million more than was spent during the third quarter of 2008.

The year-to-date total spent on lobbying now stands at $2.5 billion through the end of September, with that sum supporting 13,428 individual active lobbyists. By comparison, the total amount spent on all federal lobbying during 2005 was $2.43 billion.

With more federal spending comes more lobbyists wanting to help their clients get a piece of the action.

The Mayo Clinic released its latest perspective (pdf) on the health care bill, including the following anecdote:

The writer of the item disparaging Citizens Against Government Waste over at Columbia Journalism Review's Goldman Sachs-funded business news watchdog site (highlighted here on Friday) has apologized, writing in the comments thread of the article, "I do apologize for that language. 'Obscure' is just wrong; and 'tea-bagging' carries connotations I certainly didn't intend."

Over the weekend the Wall Street Journal had an article about the wind energy investments of Warren Buffett's Berkshire Hathaway. The Journal article includes an interview with the chairman of a Berkshire-owned utility, MidAmerican, David Sokol, and notes that Mr. Sokol "has said the wind-power industry still requires government support." The Journal doesn't really follow up on the point, but for Mr. Buffett and Mr. Sokol, this isn't just an abstract belief. On September 22, 2009, the Treasury Department and the Department of Energy announced a $93,419,883 grant for the Barton Wind Farm in Kinsett, Iowa, which, according to this report, is owned by MidAmerican. "This Recovery Act program is an example of a true federal partnership with the private sector," Treasury Secretary Geithner said in announcing the grant. During the Reagan administration, there was a catch-phrase for the poor who got government subsidies, sorry, were in "partnership" with the government -- "welfare Cadillac." Welfare for the poor was reformed under the Clinton presidency and the Gingrich Congress, but welfare for the rich seems to be going strong. What's the right catchphrase? Welfare windmill? Warren Buffett, welfare queen? Welfare Netjet? We don't mean to single out Mr. Buffett -- we've been focusing here on the way the windmill subsidy is a wealth transfer to the rich for quite some time, in a variety of cases. In any of these "partnerships" between federal government and the private sector, the people who really prosper are the lobbyists and the politicians' campaign coffers. Senate records (ignored by the Wall Street Journal) indicate MidAmerican reported spending $1.5 million on lobbying just in the third quarter of 2009. Federal Election Commission records (ignored by the Wall Street Journal) indicate that its affiliated political action committee, the MidAmerican Energy Company Executive PAC, to which Mr. Sokol is a contributor, has spent tens of thousands of dollars over the years supporting politicians such as Rep. Tom DeLay. In 2008 and 2009 the MidAmerican Energy Company Executive PAC gave a total of $10,000 to the Hawkeye Pac of Senator Grassley, a Republican of Iowa, and $10,000 to the campaign of Michael Johanns to win election as a Republican Senator of Nebraska. So don't be fooled by all of Mr. Buffett's appearances with Democratic presidential candidates Obama and Clinton. This is another example of the way both parties in Washington participate. It's Washington as vending machine -- insert lobbying fees and campaign contributions, extract tax breaks and government subsidies.

The so-called "sugary drink tax" is a topic we've been following on FutureOfCapitalism.com for some time (see, for example, here, here, here, and here). The topic even came up the other night at the Aspen Institute/New York Public Library event about Capitalism and the Future, as PepsiCo's CEO, Indra Nooyi, was pressed about whether her company's flagship product (not to mention some of its snack foods) contributed to child obesity. She responded by saying her company is pursuing a three-city test to put physical education back into schools, and that it is committed to transform its "portfolio" (by which, she means, I think, its product line) in a way that is audited by the Robert Wood Johnson Foundation. The latest development on this front is reported by HealthLeaders Media, which says that 20 doctors from Contra Costa Health Services in Martinez, Calif., have quit the American Academy of Family Physicians in protest of the AAFP's deal with Coca-Cola to develop "consumer education content about beverage sweeteners and other health topics." As the HealthLeaders Media dispatch suggests, there's a kind of cultural shift under way in which Coke and Pepsi seem to be headed the way of tobacco or alcohol or McDonald's meals as a product that, while still legal, is subject to all sorts of sin taxes and advertising restrictions. It's not necessarily because these beverages are more dangerous than other foods, such as, say, butter croissants or ice cream sundaes, but just that they've all of a sudden become unpopular. One wonders what this will mean for the Coca-Cola stake held by Warren Buffett's Berkshire Hathaway.

Senator Grassley, a Republican of Iowa, has a press release out citing a report from the Congressional Research Service in suggesting that the Health and Human Services may be breaking at least three federal laws with a Web site that urges Americans to write a letter to the president to "state your support" that "health reform must be enacted this year." The law bans HHS from spending money on publicity or propaganda designed to support or defeat legislation pending before the Congress. The Secretary of Health and Human Services insists that the Web site is "entirely legal and proper." For the "both sides do it" file, Mr. Grassley noted that when the Bush administration tried to use the Social Security Administration to advance its Social Security overhaul, Democrats cried foul, with Nancy Pelosi, then the House Democratic Leader, issuing a statement saying, "These underhanded tactics are not worthy of our great democracy. The President's commitment to freedom around the world should extend to the freedom of the American people to live without their tax dollars being used to run a government propaganda machine."