When The Government Is Immoral

Dan Friedman sent that to me and it landed in my inbox along with the best article that R.S. McCain has written (yet). It’s about the immorality of the American taxation system. You’ll want to read the whole thing:

Whereas transactions in a market economy are voluntary and peaceful, the actions of government are essentially coercive, backed with the threat of violence to those who disobey. What government does, it does “at the point of the bayonet,” so to speak. Therefore, the fearsome power of government ought to be constrained to limited and specific purposes — defending the life, liberty and property of citizens.

When government begins to meddle in the economy, picking winners and losers, using appropriations and fiscal policy to transfer money from one group of citizens to another, it divides society into two classes, taxpayers and tax consumers, punishing the former in order to reward the latter.

Such a policy is not merely misguided, it is immoral — indeed, it is sinful, as I told the Christian homeschoolers — and by displaying the spectacle of government engaging daily in legalized theft, the welfare state tends to corrupt the morals of its citizens.

Many people viscerally dislike the bailout because it seems obviously wrong. It offends anyone who has a sense of fairness. For those who want a new car or a new house or a business line of credit and don’t qualify, they are not so happy. But should they be getting this money to begin with.

I wonder if the House Republicans will have the strength of character to withstand the pressure coming to bear upon them now. Michelle Malkin quotes Margaret Thatcher: “This is no time to go wobbly.” Michelle has a list of Congressmen and their phone numbers. I just got off the phone with my Congressman’s staffer and hope to do an interview with him, because he alone, in Houston, voted for the bill the first time around. Is he seeing something other conservatives are not?

And to those of you who might lose a significant chunk of your 401K should the whole banking system go South: Are you willing to lose it in the greater principle of free markets, eliminating unfair taxes and keeping this sort of financial power out of the hands of the government?

Cross-posted at RightWingNews.com

Posted in Political Animals, Show Me The Money | 1 Comment »

Is There Anything Worse Than Smug Senators?

The Senate’s version of water-boarding: Gloat to the press about their own wonderfulness and drown the American public in their sanctimony. Ugh, I’m still coughing up sputum. (I’m referring to the Bailout they all seem so proud of right now.)

So a poll. What’s worse? Watching The View women blab about Barack Obama’s sexiness or watching pompous Senators delight in mutual congratulation:

Cross-posted at RightWingNews

Posted in Entertain Me, Political Animals | 1 Comment »

Making Sense Of The Financial Deal–Updated

House Republicans “rebelled“, eh? Maybe it’s because their constituents are burning up the phone lines in all out mutiny. The Republicans have acted like Democrats “lite” for years now. I have a newsflash for the Republicans, including McCain, about this whole bill: It feels wrong to fiscal conservatives and taxpayers generally.

My most liberal of liberal friends gloated in a Facebook message that Bush will be ushering in socialism and add an economic failure to his military failure.

The problem in America is cultural: a bigger portion of the populace lives beyond their means than ever before. Too much stuff, too much house (that isn’t worth the money paid for it), too, too much.

The great thing about America is cultural: risk-taking, the ability to make mistakes and survive them, the opportunity to start again. Americans get a do-over if they make a mistake.

The question facing Congress and the President is this: Does Wall Street deserve a do-over? Does Congress deserve a do-over? Their stupid regulations forcing bankers to loosen credit when people who were very bad bets caused this problem. Why should Americans trust Congress with the solution? I think that’s where the do nothing sentiment comes from.

Will business start-ups be harmed by the contraction in credit? Yes. Will businesses fail? Yes. Will people lose jobs? Yes. Especially employees of small businesses.

It’s no wonder Congress has themselves tied up in knots. There are no guarantees no matter the choices. And there are great risks no matter how it’s handled.

The American patient is sick. Any intervention could potentially make it worse. Lack of intervention, could make it worse, too.

Updated:

The Anchoress says this (mind you, go to her page where she has TONS of links–I’m at a conference right now and blogging during a presentation so I don’t really have the time to give all this the attention it deserves, I will however, try to liveblog the debate):

EARLY RANT: (Scroll past this for latest updates) I need to first opine that the Democrats yesterday blew my mind with their last-minute addition of 56 billion to the bail-out, their sneaky, slippery attempt to play political games with some of this money – directing it to ACORN (!) – and their subsequent attempt to lie and to blame the GOP – the president – anyone but themselves for not passing a bill which the GOP CANNOT BLOCK. We already know that Nancy Pelosi has no leadership skills except in spite and obstruction – we see she is completely out of her depths here, but Barney Frank’s behavior last night, and his disrespect toward the GOP and the President was particularly egregious in a time of crisis. He behaved like a trapped animal trying to distract the hunters toward anyone but him. Meanwhile Chuck Schumer is unusually, uncharacteristically silent; Barack Obama – except when mentioned by a press pretending he is leading – seems irrelevant to the process and to have no genuine ideas or input, or a desire to lead. All he seems capable of doing is whining about the debate while Rome falls about his ankles. McCain is quite right that the debates would be less urgent if Obama had done the Town Halls McCain had asked for – debates Obama said he’d have “anytime, anywhere” before refusing all of them. I say at this point SCREW the moderated debates that tell us nothing and insist that these candidates town-hall it and speak DIRECTLY to the people who will be most affected by all of this – that would be the ordinary folk. And do the same for Biden and Palin if they debate.

The longer this goes on, the less people trust these dolts to take a wise course. Pelosi and Reid act like children bouncing around in one of those ball pits at McDonalds. Obama seems like a vestigial organ on a worthless appendage. Why should we trust these people to fix this problem?

And there is RAGE and I do not use this word carelessly about executive pay. And well there should be. It is outrageous to walk away from failure rich. But, and I’d like to add this, if we’re going to get all socialist about executive pay, lets take the money from all the losing basketball teams, too. What about those fat cat ball players. At least they have a skill. Actors in moronic movies that make no money should also not make a salary. How about that? So, while I think the compensation is vile, I’d like to point out that Tom Cruise makes at least $20 million a movie for essentially playing the same part over and over and over. Good grief, someone actually pays Charlie Sheen. So, life isn’t always “fair” and can’t be “made” to be fair, either.

Cross-posted at RightWingNews.com

Posted in America, Corrupted Culture, Political Animals | 7 Comments »

Bailing On The Bailout Bill–UPDATED

It’s 700 Billion. Today. Assuming…do I need to finish that sentence?

It’s getting porkified.

It rewards stupidity.

It ties Republicans to Bush-Pelosi.

It turns American banking into a socialist enterprise.

It means trusting Paulson.

It has Democrats licking their FDR-loving, bacon dripping chops.

It will, somehow, make those who get paid for failure, even richer.

It reveals the crass political class, yet again.

It means it’s time to get educated about economics.

It reveals American greed. Ace says:

If the federal government were guaranteeing a trillion new dollars for no-money down car purchases with no credit checks or proof of employment or income, what do you think would happen to the price of cars?

They’d triple. For a while.

Housing market turns into dangerously overinflated bubble. Which is what always happens when a trillion fresh, cheap, easy dollars flow into a sector and begin chasing the same limited pool of goods.

[I'd like to point out, as a complete aside, that higher education is inflated in exactly this way. What happens when the government gets out of the student loan business? Why, colleges stop building their edifices and competition enters the market. Right now, tuition is soaring because of student loans.]

It all started with a Democrat policy that was to induce “fairness” and by forcing banks to loan to those who couldn’t afford to pay back the loans, NOW you, taxpaying fool that you are, should pay back the loans someone else couldn’t make.

I’m beginning to think this bill is a bad idea.

UPDATED:

Ben Stein’s take.

Because these giant financial companies never dreamed that the subprime mortgage securities could fall as far as they did, they did not enter a potential liability for these CDS policies anywhere near their true liability – which again, is virtually bottomless. They do not have a countervailing asset to pay off the liability.

This is what your humble servant, moi, missed. This is what all of the big investment banks and banks and insurance companies missed. This is what the federal government totally and utterly missed. This is what the truly brilliant speculators in these instruments did not miss. They could insure a liability they could also create and control. It is as if they could insure a Cadillac for its value upon theft – but they could control what the value the insurer had to pay off was. The insurer thought it might be fifty thousand dollars – but it was manipulated into being two million.

This is the whirlpool sucking down finance.

Now, we are about to have a similar phenomenon happen with commercial mortgage debt, debt from mergers and acquisitions, credit card debt, and car loan debt. Many trillions of dollars in Credit Default Swaps have been sold on all of this, and the prices of all of them have fallen and can be made to fall more.

As I said, the pit of loss is bottomless. Warren Buffett, the smartest man of all time in the world of finance, has called financial derivatives – of which Credit Default Swaps are a prime example – “weapons of financial mass destruction.” And so they are. As with the hydrogen bomb, no one thought they would ever be used to end the world. But unless someone figures a way out – and maybe the new RTC is and maybe it isn’t – we are in real peril. This should never have happened. Now that it did happen, should the taxpayer pay to make the billionaire speculators whole on their bets? What the heck is to be done?

You mean, you don’t know, Ben? Heaven help us. How is the average person supposed to know. In frightening situations, animals fight or flight or freeze. Right now, the collective world is staring, frozen in fear at what we think we might be beholding. Problem is, no one is quite sure what they see. Is this the end of the world as we know it? We don’t know.

Is a bailout the answer? That seems to me to be “fighting”.

Doing nothing, is that fleeing? There will be a run on the banks if this goes south and all the money dries up. Pure. Panic.

Mary Katherine Ham has what the players are saying.

So, I’m still trying to figure out what to do about this mess. If, as a business owner, you extended credit to those who couldn’t pay (and we all have), it’s a right off. But too many bad clients or charity cases makes for an insolvent business and it doesn’t matter how many paying customers you have. You cease to be able to make overhead and can’t produce anything because you don’t have enough money to make your product.

What happens? You go out of business or go beg for money from someone else to keep you solvent while you change your ways. Wall Street is asking for the latter because if they go out of business, they suck much of the economy with them.

But the problem, fundamentally, seems to be that too many Americans are wallowing in debt–not just those unqualified for homes. So, this problem is emblematic of how many Americans are living–way above their means. And this cultural problem extends from the average person all the way up. That is, the debt to income/capital ratio is off for everyone.

If you have money in stocks, you’ve already lost your money unless you’re big enough to be invested with Warren Buffett. So that’s gone for a while. What’s left? Your money market, credit cards, your home (but no one is giving loans against those now), and your cash flow. But you won’t have cash flow if there is a bank run. Is this doomsday scenario possible? That’s the question no one seems to be able to answer.

Posted in Isms, Political Animals, Show Me The Money | 18 Comments »

Democrat Senator Chuck Schumer’s Role In America’s Financial Crisis–Updated

NOTE: I’m putting this post at the top even though I wrote it two days ago. It is important to know the genesis of the stock market crisis we’ve endured. I’m still trying to comprehend it all. Many seriously important things have been missed this year due to the inane political environment. Russia’s actions against Georgia, China’s re-emergence and Pakistan’s straddling the terrorist fence, not to mention Iran’s continued desire to go nuclear, are huge, important stories. They are world changing in their implications. The financial market’s crisis is on the same order as those and with the way the newscycle is these days, it’s difficult to get perspective.

***********

In July, I wrote about New York’s Democrat Senator Charles Schumer’s loose lips being a reason for the current banking crisis–remember he blabbed about IndyMac’s viability and people withdrew 1.3 Billion dollars the next day, guaranteeing its failure. Well, he’s been running his big mouth again, this time on the Senate floor where he said this:

“these unprecedented events have made it clear to the country what many of us have been saying for some time. we are in the midst of the greatest financial crisis since the great depression. eight years of deregulatory zeal by the bush administration, an attitude of the market can do no wrong have led us down a short path to economic recession. from the unregulated mortgage brokers to the opaque credit default swaps market to aggressive short sellers who are driving down prices of even helgy financial institutions based on innuendo, this administration has failed to take the steps necessary to protect both main street and wall street.”

Chuck wants to blame the President, but he needs to look in the mirror. One of the worries with the Gramm-Leach-Billey bill of 1999 was that there would be bank mergers like happened before the Great Depression, but it didn’t happen quickly enough for Chuck Schumer:

The industry’s recognition that banks and insurance companies don’t necessarily make good bedfellows involves impediments in several important fronts:

Regulation. Banks and insurance companies operate within two different regulatory environments. Unlike banks, which have federal oversight by the Office of Thrift Supervision, insurance companies are state regulated. To address one aspect of state regulation, a provision of Gramm-Leach-Bliley requires U.S. jurisdictions to adopt uniform or reciprocal agent-and broker-licensing laws by November 2002 (three years from the enactment of the law) to avoid the creation of a National Association of Registered Agents and Brokers. Although the National Association of Insurance Commissioners said it had succeeded in satisfying the Gramm-Leach-Bliley requirements by having enough state legislatures pass bills permitting reciprocity, there are other issues raised by state regulation, like duplicative administrative processes.

Insurance companies are unable to respond to market changes and consumer demands on a timely basis, because they are subject to regulation (rate filings, new product approval, etc.) by each insurance department in the states in which they do business. To address this, a number of different industry organizations have advocated the federal chartering of insurers. And Sen. Charles Schumer, D-N.Y, and Rep. John LaFalce, D-N.Y, introduced legislation that would permit the optional federal chartering of insurers. Clearly, the regulation of insurance companies is evolving, and it is uncertain how it will play out. (See “State vs. Federal,” Best’s Review, April 2002.)

Mind you, this was in 2002. Schumer possesses an astonishing amount of gall even for a Senator. Maxed Out Mama has everything you need to know about the genesis of this crisis and notes the Clinton administration’s involvement:

The distinction between activities allowed to banks and non-bank financial institutions was largely removed by the passage of GLB, and these institutions were allowed to conglomerate. Note that waivers granted by the Clinton administration earlier in the decade allowed evasion of Glass-Steagall, and GLB’s passage essentially levelled the playing field as well as legalizing the 1998 merger that created Citigroup. ( The Clinton administration’s role in creating the current situation is one of the reasons I considered Hillary’s campaign truly an exercise in Boob Power. Not that the Republicans can escape blame, because a GOP-dominated Congress passed the legislation urged by the Clintons. )

The result was that overall regulation was reduced, the incentives to verticalize were massive, counterparty buffers were eliminated, and within less than 10 years, the financial system imbalances that produced the Great Depression in the US had returned.

The thing is, the President doesn’t legislate, Congress does. Why wasn’t Chuck Schumer sounding the alarm bells in 2002? More importantly, why did he vote FOR the legislation that produced this debacle? This is why. Again from Maxed Out Mama:

Throwing easy money on top of this type of structure is a recipe for a run-up and a crash. During the run-up phase, everyone is making money. Housing is appreciating (and so is commercial real estate). Sure, the underwriting quality tends to become worse every year, because there is no penalty for bad underwriting, good underwriting is expensive, and some goof is always going to cut standards and margins, thus forcing the other competitors to either sacrifice profit or standards. And the goof who cuts underwriting cuts expenses, and provides a better profit to the aggregator, so that goof gains business.

Yet no one’s going to detect the fraud, because although maybe DTIs are too high and people can’t pay their mortgages, yet the easy refi or sale for profit is always out there. The investors get paid, the IB gets big bucks, the NRSRO makes easy, large chunks of money, and the realtors are very, very happy. All of these people manage to maintain high levels of campaign donations to local, state and federal politicos, so the Congress Critters are very happy. The Congress Critters also like their cheap loans, and those cute and profitable real estate deals in which they just happen to be offered silent partnerships.

Guys like Schumer didn’t just like their own wheels greased, they pushed Freddy Mac and Fanny May to take MORE risks. Meanwhile now, Schumer blames the current administration, when it was President Bush in 2003, who sounded the alarm and as noted at Sweetness and Light. The New York Times didn’t look to fondly on President Bush’s attempts. Why, that’s a surprise! Here’s their analysis:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

By STEPHEN LABATON

September 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Now, about tying McCain to Bush being a bad deal. Well. John McCain also was concerned about the impending crisis and this was in 2006. Here is what he said:

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

And what happened with this legislation? Nothing. Democrats like Charles Schumer, in the pocketbooks of lobbyists, killed it. You see, by this time, the Dems controlled Congress.

So, you see, Charles Schumer’s arrogance knows no bounds. There is plenty of blame to go around about this and a big chunk of it rests on Schumer’s shoulders.

More here.

Updated:

Lorie Byrd has more. McCain was right on this. Obama was wrong. How wrong? Who managed his Vice Presidential pick? That’s right, the former CEO of Freddy Mac.

Glenn Reynolds has even more, as usual.

The Anchoress has much, much more:

Levin quotes the GOP senate in 2003 on their worries and their desire to address the coming problem. He also quotes the Democrats who blocked it. He has a lot of citations, here are a few:
In August of 2007, Sen. Chuck Schumer (D-NY) and Sen. Chris Dodd (D-CT), heading the Senate Banking Committee argued to life the portfolio cap from Freddy & Fannie to create more loans and allow F&F to buy more sub-prime mortgages “to calm the market.”

Senate Majority Leader Harry Reid, (D-NV) in 2005, in response to an effort by the GOP to trim Fanny & Freddy’s portfolios: “The legislation from the Senate banking committee, passed today on a party line vote by the Republican majority, includes measures that could cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership,” said Sen. Harry Reid, D-Nev., the Senate Minority Leader Thursday…”While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process,” Reid said.

It occurs to me that the wealthy elites got rich, the poor who couldn’t afford homes got homes beyond their means (and middle and upper class, too, but mostly the poor) and the middle class and upper middle class will be working a long time to make sure the bills are paid.

Meanwhile, Ace notes this little nugget:

Not a Surprise: Obama Finance Chair Penny Pritzker, the Queen of Subprime Mortgages, Is Substantially Responsible for Our Financial Crisis
Surprise: It’s Actually Being Noted by Lefties at the HuffPo
The Michael Milken of subprime mortgages. Obama’s bestest buddy. His top fundraiser/bundler. His national finance chair.

From Jeff Jarvis: What could $700 Billion buy?

Of course, these comparisons are specious. We’ll see a lot of op-ed charts that make such apples-and-kumquats correlations. The point will always be the same: Where are our priorities? Where are we investing our money?

And what are we getting out of spending this $700 billion. We, the people, damned well better make demands on our representative to set something for our money.

UPDATED AGAIN 9/22:

Bloomberg’s Kevin Hassett blames the Dems, too:

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”

Obscene then. Obscene now.

Posted in Political Animals, Show Me The Money | 9 Comments »

Imagine If Charlie Rangel’s Name Was Jim McCrery

Every time I see a Democrat up to his neck in a scandal and then thumbs his nose at any form of punishment when an average American would be in jail (and is defended, by the way by the Speaker Nancy Pelosi), I exchange his name for a Republican’s name. When it comes to sex scandals, it’s about the hypocrisy!, the left shrieks. How about now? Is it about the hypocrisy, with Charlie Rangel? It seems pretty hypocritical to be a tax cheat and be on the committee that regulates ways and means.

Cross-posted at RightWingNews

Posted in Political Animals | No Comments »

Republican Traitors To The Cause, Well, To What Used To Be The Cause

And what is the cause? The cause, quite simply, is money. Money is the root of all evil. Well, that’s certainly the case in Washington, D.C. where Congress seems to believe that your hands on your money is evil, while their hands on your money is good.

The Republicans have one issue that nearly every voter can agree on: the federal government stinks at knowing what the heck to do with your money and shouldn’t get a dime more. Let me rephrase that: the Republicans HAD one issue that unified voters of every stripe. Not now. Republicans have sold out the country and their voters by spending like drunken liberals.

So now, the Democratic Congress wants to raise taxes, but they need enablers from across the aisle and you can count on moderate Republicans to enable. Soren Dayton notes:

A bad day for Don Young is a good day for America. Thank you to Grover Norquist for helping to deliver a bad day to Young by declaring him a Tax Pledge Violator

Don Young (R-Alaska) violated the solemn oath he took to his constituents by voting for H.R. 2642, the Blue Dog Tax Hike. [...] “Republicans that vote for tax increases are like rat heads in Coke bottles,” said Grover Norquist, president of Americans for Tax Reform. “They ruin the Republican brand for all members. It should be readily apparent to a former ’Hero of the Taxpayer Award’ recipient that you don’t vote for tax hikes.”

Bless Grover’s heart. And give money to Sean Parnell.

Go Grover!

But the bigger issue remains: Republicans have lost credibility with voters because of how they have spent and behaved with America’s money. And they just don’t get it. And they will lose elections because they just don’t get it. You know why? Because Americans can elect Democrats if they want gluttonous fat cats spending their money.

Republicans need to catch a clue. And McCain needs to lead the charge by simplifying his blathering. He needs to repeat a couple mantras instead of mumbling vague policies. Keep it simple, John:

This isn’t rocket science, I swear. But when Republicans undercut their core principle by acting, well, unprincipled, people hate them. There is a reason Congress has a 9% approval rating and Republicans contribute to the disapproval because they’re acting like….Democrats. Who needs Republicans when they act like Democrats? That’s what voters are asking themselves. Conservative Republicans get apathetic and stop giving money to campaigns because they’re disgusted with the whole lot of them.

Well, I do believe there are good, solid fiscally conservative people in Congress and running for Congress and they deserve support, like Soren mentions. But the Republican leadership have a lot of work to do to win over their voters. They need to start speaking the principles and more importantly, acting on them.

Cross-posted at Right Wing News

Posted in Political Animals, Show Me The Money | 1 Comment »