The rash of government bailouts in the last 16 months was aimed at averting financial meltdown, but its effects on American capitalism will last long after the last TARP funds are (if they are) paid back, the Wall Street Journal predicts. Obama adviser Larry Summers argues that the interventionist moves were nothing more than short-term rescue operations, but with Washington now wielding influence over a broad swath of big companies, many aren't persuaded.
"While we may be past the emergency, we're still in a mode that will create similar interventions for quite a while, even for minor emergencies," says a former Bush Treasury official. "We have a bailout mentality in this country." Companies are bending to Washington’s will even when it's not mandated, the Journal notes. US Bancorp and Bank of America, for example, have already paid back their TARP funds. Yet Bancorp nevertheless asked Fed regulators if it was okay to raise its dividend, while Bank of America checked with the Treasury before hiring its new CEO. Pay Czar Kenneth Feinberg didn’t like the $40 million BoA planned to pay to lure its preferred candidate, so the bank promoted an internal candidate instead. That candidate? Brian Moynihan, who had been working to massage the bank's relationship with Washington.