Lenders Don’t “Pay” for Borrower Purchases

Suppose you borrow $1,000 from a bank to buy furniture. The bank is the lender. Who pays for the furniture? You or the bank. The answer is that you pay. You make the deal with the furniture dealer. You write the dealer a check. You take possession. You own the furniture. If it’s stolen, the bank can’t go after the furniture dealer. You are the one who owes the bank. The lending bank doesn’t make an exchange with the furniture dealer. The bank doesn’t write a check to the dealer. The bank doesn’t pay for the furniture. The bank provides money to you so that you can pay for the furniture. Your actual and legal position isn’t the same as the bank as lender. Borrowers and lenders are not an amalgamated entity.

None of this basic finance is understood by Ocasio-Cortez in her questioning of a Wells-Fargo loan made to the owners of the Dakota Access Pipeline. She asks the CEO:

“So, hypothetically, if there was a leak from the Dakota Access Pipeline, why shouldn’t Wells Fargo pay for the cleanup of it, since it paid for the construction of the pipeline itself?”

Obviously the reason is that Wells Fargo doesn’t own the Dakota Access Pipeline. A loan doesn’t provide an ownership interest. There are strings attached to such loans, found in the loan covenants, but loans typically do not give lenders an equity position. Bonds are not stocks.

Ocasio-Cortez shows a remarkable lack of understanding, while her questions do accurately reflect her political agenda and that of other Democrats (socialists, communists).

Let me insert here an excellent observation from “Eric”. “Why stop at the lender for responsibility? How about anyone who had a deposit with the lender (say if it were a bank)?” How about those who supported the depositor? And here’s a good one from Nate Schuette: “Or if a murderer got a loan for a house and murdered people in it. Then the bank should be charged with murder.” These flow from Octavio-Cortez’s “bizarre form of logic”.

By ignoring freedom of contracting, Ocasio-Cortez shifts responsibility to her targets, but she destroys contracts and property by doing this. She’s a consistent but destructive marxist.

A loan financier is not in the same position as an operational controller or owner. That’s how the CEO chose to reply:

“Because we don’t operate the pipeline. We provide financing to the company that is operating the company.”

In a second instance of Ocasio-Cortez’s failure to understand the nature of financing, she accused Wells Fargo of being “involved in the caging of children” because it provided financing to a company involved in prison construction.

Welcome to the world of the anti-capitalists. Elizabeth Warren and others are on the same page. They would radically alter ownership and financial structures of companies so as to promote causes dear to their twisted little hearts, such as being “socially responsible”. They’d alter ownership and control radically.

Boards of Directors would have to accommodate political and social agendas. Warren wants employees to vote for 40% of the Board. Warren’s “Act contains a ‘constituency statute’ that would give directors a duty of ‘creating a general public benefit’ with regard to a corporation’s stakeholders, including shareholders, employees, and the environment, and the interests of the enterprise in the long-term.” The criterion of maximizing shareholder wealth would disappear, and with it goes wealth creation. Instead there’d be constant infighting, intrigue and conflict of interests among the “stakeholders” of whom shareholders are but one faction.

Warren, Ocasio-Cortez and other socialists/communists intend to destroy freedom and capitalism by transforming its currently existing institutions in substance while their forms remain as empty shells, devoid of real freedom and capitalism. These people’s proposals and ideas are exceedingly dangerous to us all. They need to be rejected strongly out of hand.

Ocasio-Cortez would break down the most basic elements of finance. She’d do away with distinctions that are elements of finance discovered and utilized for centuries, even in Roman times. She is a civilization destroyer, as are Warren and several other prominent Democrats. Let us not rule out finding a good many ignorant Republicans who endorse like proposals.

The destruction of free market finance would destroy freedom generally while ruining this country’s productivity in nothing flat.

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1:43 pm on March 13, 2019

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