Investors Business Daily 2 Fer
Investors Business Daily: And The Wrong (9/19)
Article Link: http://www.ibdeditorials.com/IBDArticles.aspx?id=306716270814143
And The Wrong
By INVESTOR'S BUSINESS DAILY Posted Friday, September 19, 2008 4:20 PM PT
Election '08: Barack Obama's quasi-presidential address offering a four-part solution to the financial crisis offers little more than veiled pork-barrel programs. It signals a mind more focused on elections than answers.
How else can one explain why, against all data and market indicators, Obama's painting the American economy as gloomily as possible?
Obama seems to think that if he can persuade voters the sky is falling, his halo as savior will be brighter, even if he doesn't have a credible grasp of economics. That's why he's begun a nonstop verbal drumbeat of misery on today's difficulties, never mind the facts.
And what would Obama do instead? We're beginning to find out. In a four-point action plan Obama presented on Friday, he goes beyond "hope" and "change" oratory and moves on to what really matters to him: the big-government spending he's been selling all election.
And here's what Obama proposes:
• Point one, Obama calls for subsidies to "working families" to beat high food and energy prices. The problem: High food and energy prices won't be helped by subsidies, but by more supplies. The real solution is to force a Democratic Congress to allow domestic drilling for oil. Thus far, Obama isn't even "present" on that one.
• Point two, dubbed "mutual responsibility and reciprocity," calls for banks to subsidize bad borrowers to "protect homeowners and the economy." This would eliminate personal responsibility. Demagoguing false details — such as about bankers getting golden parachutes, instead of 25,000 of them losing their jobs — Obama insists the solution is simple: Banks shouldn't foreclose on delinquent home buyers. Obviously, he hasn't heard of how bad loans drained Japan's economy of its vitality for a decade.
• Third, Obama seeks "new oversight and regulations of our financial institutions." That means forcing new bureaucracies and regulations into the private sector, the very phenomenon that has made navigating our health care industry such a delight.
• Fourth, Obama seeks to empower unelected foreign entities to the same "globally coordinated (rescue) effort." But Bernanke and Paulson have already done the heavy lifting, as the rest of "the world" has done next to nothing. One more global bureaucracy won't make America's financial system any healthier.
Obama makes a final point by blasting the failure of "common-sense regulation and oversight," to the financial system.
He ought to bring this up with fellow Democrats in Congress. In the 1990s, Rep. Barney Frank blocked key reforms even as he took campaign cash from banking interests. In 2004, President Bush attempted to revive the reforms, but Democrats blocked them.
Today's bank crisis isn't due to the inherent evil of the private sector, as Obama claims. It's due to Democratic leaders who were bought off by political donations and hostile to reform.
Obama, curiously enough, is one of the top recipients of cash from Fannie Mae and Freddie Mac. Small wonder, then, that his main election argument would expand the scope of government by using the banks' subprime woes as leverage. (woes? at 2%?)
More from Business Investors Daily:
'Crony' Capitalism Is Root Cause Of Fannie And Freddie Troubles
By TERRY JONESINVESTOR'S BUSINESS DAILY Posted Monday, September 22, 2008
Link: http://www.ibdeditorials.com/IBDArticles.aspx?id=306978378974502
In the past couple of weeks, as the financial crisis has intensified, a new talking point has emerged from the Democrats in Congress: This is all a "crisis of capitalism," in socialist financier George Soros' phrase, and a failure to regulate our markets sufficiently.
Well, those critics may be right — it is a crisis of capitalism. A crisis of politically driven crony capitalism, to be precise.
Indeed, Democrats have so effectively mastered crony capitalism as a governing strategy that they've convinced many in the media and the public that they had nothing whatsoever to do with our current financial woes.
Barack Obama has repeatedly blasted "Bush-McCain" economic policies as the cause, as if the two were joined at the hip. Funny, because over the past 8 years, those who tried to fix Fannie Mae and Freddie Mac — the trigger for today's widespread global financial meltdown — were stymied repeatedly by congressional Democrats.
This wasn't an accident. Though some key Republicans deserve blame as well, it was a concerted Democratic effort that made reform of Fannie and Freddie impossible.
The reason for this is simple: Fannie and Freddie became massive providers both of reliable votes among grateful low-income homeowners, and of massive giving to the Democratic Party by grateful investment bankers, both at the two government-sponsored enterprises and on Wall Street.
The result: A huge taxpayer rescue that at last estimate is approaching $700 billion but may go even higher.
It all started, innocently enough, in 1994 with President Clinton's rewrite of the Carter-era Community Reinvestment Act. Ostensibly intended to help deserving minority families afford homes — a noble idea — it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.
Subprime's Mentors
Fannie and Freddie, the main vehicle for Clinton's multicultural housing policy, drove the explosion of the subprime housing market by buying up literally hundreds of billions of dollars in substandard loans — funding loans that ordinarily wouldn't have been made based on such time-honored notions as putting money down, having sufficient income, and maintaining a payment record indicating creditworthiness.
With all the old rules out the window, Fannie and Freddie gobbled up the market. Using extraordinary leverage, they eventually controlled 90% of the secondary market mortgages. Their total portfolio of loans topped $5.4 trillion — half of all U.S. mortgage lending. They borrowed $1.5 trillion from U.S. capital markets with — wink, wink — an "implicit" government guarantee of the debts.
This created the problem we are having today.
As we noted a week ago, subprime lending surged from around $35 billion in 1994 to nearly $1 trillion last year — for total growth of 2,757% as of last year.
No real market grows that fast for that long without being fixed.
And that's just what Fannie and Freddie were — fixed. They became a government-run, privately owned home finance monopoly.
Fannie and Freddie became huge contributors to Congress, spending millions to influence votes. As we've noted here before, the bulk of the money went to Democrats.
To read more: click or paste on above link.
Article Link: http://www.ibdeditorials.com/IBDArticles.aspx?id=306716270814143
And The Wrong
By INVESTOR'S BUSINESS DAILY Posted Friday, September 19, 2008 4:20 PM PT
Election '08: Barack Obama's quasi-presidential address offering a four-part solution to the financial crisis offers little more than veiled pork-barrel programs. It signals a mind more focused on elections than answers.
How else can one explain why, against all data and market indicators, Obama's painting the American economy as gloomily as possible?
Obama seems to think that if he can persuade voters the sky is falling, his halo as savior will be brighter, even if he doesn't have a credible grasp of economics. That's why he's begun a nonstop verbal drumbeat of misery on today's difficulties, never mind the facts.
And what would Obama do instead? We're beginning to find out. In a four-point action plan Obama presented on Friday, he goes beyond "hope" and "change" oratory and moves on to what really matters to him: the big-government spending he's been selling all election.
And here's what Obama proposes:
• Point one, Obama calls for subsidies to "working families" to beat high food and energy prices. The problem: High food and energy prices won't be helped by subsidies, but by more supplies. The real solution is to force a Democratic Congress to allow domestic drilling for oil. Thus far, Obama isn't even "present" on that one.
• Point two, dubbed "mutual responsibility and reciprocity," calls for banks to subsidize bad borrowers to "protect homeowners and the economy." This would eliminate personal responsibility. Demagoguing false details — such as about bankers getting golden parachutes, instead of 25,000 of them losing their jobs — Obama insists the solution is simple: Banks shouldn't foreclose on delinquent home buyers. Obviously, he hasn't heard of how bad loans drained Japan's economy of its vitality for a decade.
• Third, Obama seeks "new oversight and regulations of our financial institutions." That means forcing new bureaucracies and regulations into the private sector, the very phenomenon that has made navigating our health care industry such a delight.
• Fourth, Obama seeks to empower unelected foreign entities to the same "globally coordinated (rescue) effort." But Bernanke and Paulson have already done the heavy lifting, as the rest of "the world" has done next to nothing. One more global bureaucracy won't make America's financial system any healthier.
Obama makes a final point by blasting the failure of "common-sense regulation and oversight," to the financial system.
He ought to bring this up with fellow Democrats in Congress. In the 1990s, Rep. Barney Frank blocked key reforms even as he took campaign cash from banking interests. In 2004, President Bush attempted to revive the reforms, but Democrats blocked them.
Today's bank crisis isn't due to the inherent evil of the private sector, as Obama claims. It's due to Democratic leaders who were bought off by political donations and hostile to reform.
Obama, curiously enough, is one of the top recipients of cash from Fannie Mae and Freddie Mac. Small wonder, then, that his main election argument would expand the scope of government by using the banks' subprime woes as leverage. (woes? at 2%?)
More from Business Investors Daily:
'Crony' Capitalism Is Root Cause Of Fannie And Freddie Troubles
By TERRY JONESINVESTOR'S BUSINESS DAILY Posted Monday, September 22, 2008
Link: http://www.ibdeditorials.com/IBDArticles.aspx?id=306978378974502
In the past couple of weeks, as the financial crisis has intensified, a new talking point has emerged from the Democrats in Congress: This is all a "crisis of capitalism," in socialist financier George Soros' phrase, and a failure to regulate our markets sufficiently.
Well, those critics may be right — it is a crisis of capitalism. A crisis of politically driven crony capitalism, to be precise.
Indeed, Democrats have so effectively mastered crony capitalism as a governing strategy that they've convinced many in the media and the public that they had nothing whatsoever to do with our current financial woes.
Barack Obama has repeatedly blasted "Bush-McCain" economic policies as the cause, as if the two were joined at the hip. Funny, because over the past 8 years, those who tried to fix Fannie Mae and Freddie Mac — the trigger for today's widespread global financial meltdown — were stymied repeatedly by congressional Democrats.
This wasn't an accident. Though some key Republicans deserve blame as well, it was a concerted Democratic effort that made reform of Fannie and Freddie impossible.
The reason for this is simple: Fannie and Freddie became massive providers both of reliable votes among grateful low-income homeowners, and of massive giving to the Democratic Party by grateful investment bankers, both at the two government-sponsored enterprises and on Wall Street.
The result: A huge taxpayer rescue that at last estimate is approaching $700 billion but may go even higher.
It all started, innocently enough, in 1994 with President Clinton's rewrite of the Carter-era Community Reinvestment Act. Ostensibly intended to help deserving minority families afford homes — a noble idea — it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.
Subprime's Mentors
Fannie and Freddie, the main vehicle for Clinton's multicultural housing policy, drove the explosion of the subprime housing market by buying up literally hundreds of billions of dollars in substandard loans — funding loans that ordinarily wouldn't have been made based on such time-honored notions as putting money down, having sufficient income, and maintaining a payment record indicating creditworthiness.
With all the old rules out the window, Fannie and Freddie gobbled up the market. Using extraordinary leverage, they eventually controlled 90% of the secondary market mortgages. Their total portfolio of loans topped $5.4 trillion — half of all U.S. mortgage lending. They borrowed $1.5 trillion from U.S. capital markets with — wink, wink — an "implicit" government guarantee of the debts.
This created the problem we are having today.
As we noted a week ago, subprime lending surged from around $35 billion in 1994 to nearly $1 trillion last year — for total growth of 2,757% as of last year.
No real market grows that fast for that long without being fixed.
And that's just what Fannie and Freddie were — fixed. They became a government-run, privately owned home finance monopoly.
Fannie and Freddie became huge contributors to Congress, spending millions to influence votes. As we've noted here before, the bulk of the money went to Democrats.
To read more: click or paste on above link.
posted by J.C. "Fanz23" Lewis, Jr | 11:44 AM
<< Home