Even as Americans wrestle with the after-effects of one of the most hare-brained social enngineering projects ever devised, subprime mortgages on a mass scale, the government refuses to face reality.
In a new report to the World's Worst Man-made Catastrophe, the United Nations, Secretary of State Hillary Clinton and some of her co-conspirators write this:
"The recession in the United States was fueled largely by a housing crisis, which coincided with some discriminatory lending practices." Those practices, the report strongly implies, resulted in a market where "fewer than half of African-American and Hispanic families own homes while three quarters of white families do."
So, it wasn't the mortgages-for-everybody scheme devised by Washington politicians and the Federal Reserve that caused the housing bubble and subsequent collapse. It was the antecedent to those policies, also known as a policy of mortgages only for those who could afford them, that was the problem.
Being an organization run by liberals and radicals, some from the third world, the UN demands victims. Being Democrats, Clinton and her coconspirators are willing to supply victims, even if the supporting story line boggles the mind.
Writing in American Thinker, Jack Cashill notes that "the U.N.'s 192 Member States assess their respective human rights performance over the preceding four years and submit a report on the same to the HRC, the U.N. Human Rights Council.
"During this past year, under the guidance of our HRC, Hillary Rodham Clinton, "senior representatives" from "more than a dozen" federal entities wandered the country listening to the self-serving laments of various liberal pressure groups. At the end of the process, they compiled these gripes into a 29-page report and sent it to the U.N. HRC for review.
"Among the reviewing states of the HRC are human rights luminaries like Cuba, Russia, Red China, Saudi Arabia, and -- when not busy sending "emergency transaction" e-mails -- Nigeria.
"Our State Department calls the UPR process "a unique avenue for the global community to discuss human rights around the world." Any sane person would call it a self-deluding boondoggle and, if its recommendations are followed, a self-destructive one as well.
"I could write a book on the various absurdities of the report we submitted -- e.g., a soulful plea for the rights of the transgendered and not a word on those of the unborn -- but let me focus on one that has the potential to wreak havoc anew on the world's economy: the call for "fairness and equality in housing."
"The recession in the United States," the report insists, "was fueled largely by a housing crisis, which coincided with some discriminatory lending practices." Those practices, the report strongly implies, resulted in a market where "fewer than half of African-American and Hispanic families own homes while three quarters of white families do."
"To prevent similar crises in the future," the report continues in its smugly accusatory way, "the federal government has focused resources and efforts to determine whether and where discrimination took place, as well as to ensure greater oversight going forward." As proof of the administration's eagerness to solve the problem, the report cites its "major financial reform legislation."
"I wish I were making this up, but our official 2010 UPR submission to the United Nation argues that discrimination against minorities in the housing market somehow caused the economic crisis and that the misbegotten Dodd-Frank act will somehow repair it. It is no wonder that the authors of this report oppose capital punishment. Upon reading it, even Sister Helen Prejean would want them taken out and shot.
"While the Obama apparatchiks were busy compiling this report, I was busy writing a book -- Popes and Bankers -- on the real causes of the economic crisis. What they see as the solution I see as the cause, and I can prove my point.
"To make the accusation of discrimination work, the report writers had to ignore the most telling set of data, namely default rates. In 2004, the Department of Housing and Urban Development did a comprehensive study of FHA loans that originated in 1992. The sample size was substantial -- nearly 250,000 loans.
"Given that the FHA insures only modest loans for low- and moderate-income people, the cross-racial comparisons were for comparable properties. What the study revealed, among other results, was that after the seven prosperous years from 1992 to 1999, blacks were defaulting on their loans more than twice as frequently as whites, and Hispanics were defaulting three times more frequently.
"Here is the crucial point: if minorities had been held to a higher standard than whites, their default rates should have been lower than whites, not higher. These numbers suggest the opposite and the obvious: blacks and Hispanics were held to lower standards and have been for at least the last forty years. Chinese-Americans, by the way, actually did have lower default rates than whites.
"As to why black homeownership rates are lower, only the willfully blind can fail to see the problem: namely, the government-induced collapse of the two-parent black family. In 1993, the average income for households headed by divorced women was 40 percent that of married couples; for unmarried women, it was only 20 percent. As the numbers suggest, many of these women could not manage homes of their own. Homeownership rates for female-headed households have struggled to stay above 50 percent. For married couples, by contrast, the rates have hovered consistently in the 80th-percentile range.
"With blacks vastly overrepresented among single-parent families -- by 1993, 57 percent of black children were growing up in a single-parent household, as compared 21 percent of white children -- white homeownership rates inevitably outstripped those for black homeownership. By the early 1990s that gap was at least 25 percentage points, around 70 percent for whites and in the low 40s for blacks.
"The writers of the UPR report, however, refuse to acknowledge family breakdown as a problem, let alone as an explanation for the disparity in homeownership rates. Their preferred explanation for every unequal outcome in every endeavor is the inevitable "discrimination."
"Worse, the report writers -- and indeed, the Obama White House -- seems unaware that the forced march of unqualified buyers into the homeownership field was the single most explosive variable in the subprime blow-up.
"They seem unaware that the Clinton administration demanded that banks quantify -- under duress -- the progress they were making in giving loans to "LMIs," people of low and moderate income.
"They seem unaware that the government encouraged banks to use "innovative or flexible" lending practices -- aka "predatory loans" -- to reach their LMI numbers.
"They seem unaware that HUD, which Congress had made the regulator of Fannie Mae and Freddie Mac in 1992, began to pressure these agencies to set numerical goals for "affordable housing" even if that meant buying subprime mortgages.
"In 2004, under extreme government pressure, homeownership rate reached a new peak. "'Stop! We're at 69 percent homeownership. We should go no further. These are people who should remain renters,'" former HUD secretary Henry Cisneros wished someone would have said at the time.
"Cisneros added that it was "impossible to know in the beginning that the federal push to increase homeownership would end so badly."
"In 2010, everyone knows how badly the push ended -- everyone, that is, save the clowns who wrote the UPR report and the jokers who approved it."
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Friday, September 3, 2010
Monday, August 23, 2010
Why the economy refuses to recover: Americans are on strike against Obama's anti-American, big government policies
Hoist by his own petard.
That's President Barack Obama.
Having assumed office with an illusory mandate to "transform America," he tossed aside public opinion, ignored voters' traditional preference for moderate, not radical, change, and set out to impose his vision of dominant government and a citizenry willing to say, okay, when a designated bureaucrat tells them their time has come to die. In doing so, Obama's minions bribed lawmakers to vote for measures opposed by a majority of voters and made a mockery of the legislative process.
House Speaker Nancy Pelosi will be an unduring symbol with her call for Congress to pass a bill cobbled by insiders so that rank and file members could find out what's in it.
As the nation's debt grew by trillions of dollars, voters recoiled in horror while Obama remained unfazed, and perhaps unwitting. There is, after all, little evidence that Obama has any understanding of economics aside from the obvious fact that many of America's corporate elite will throw money at radical politicians so long as those politicians protect and nurture their corporate interests.
As a leftist nurtured in marxist truisms, he is, of course, dedicated to Keynesian economics, a dressed up ideology that encourages politicians to pay off voting blocs and interest groups that share their aspirations in the guise of "stimulus."
Now, 19 months into his presidency, Obama expresses puzzlement at the stubborn refusal of the American economy to recover despite more than a trillion dollars in "stimulus" spending. Speculation is rife that the economy will turn down again, producing a dreaded double-dip recession.
What's going on?
Sane America has gone on strike against the Obama administration's obsessive effort to impose rule by a leftist elite, including "czars," that has seized control of government and uses it to impose policies that most Americans oppose.
To counter this bizarre assault on American values, individuals, families, small businesses and large corporations are reasserting their individuality and desire for freedom by hoarding cash, withholding spending to thwart a government that some regard as wayward, and many view as their enemy.
If the economy were to recover strongly and quickly, the Democrat-controlled Congress could ramrod the rest of Obama's statist agenda and complete the government takeover of matters traditionally reserved for individual discretion. That is, for many of us, a frightening vision.
By hoarding cash, American individuals and businesses are slowing or stopping the recovery and thwarting the onset of death panels, carbon taxes, social engineering by the Environmental Protection Agency and other nightmarish aspects of the Obama scheme.
So far, the citizenry is defeating Obama and his thug army - the left wing of the Democrat Party.
In 71 days the voters can derail the Obama agenda and begin the process of repealing the parts that have been enacted by reducing the Democrat Party to minority status in the House and Senate.
That's the stimulus that unhappy and frightened voters are looking for, and it would begin to revive the economy.
Once Obama has lost his congressional accomplices, the leftist assault on individual liberty will lose its thrust and American consumers will again be willing to spend and businesses to invest in future growth.
A full blown recovery is unlikely to happen, however, until Obama has an epiphany or is clearly headed for the ranks of easily ignored ex-presidents. At that point, celebratory spending will begin, to be followed by the normal pursuit of things we didn't know we needed until we started believing that we still have a future.
That moment is not yet at hand. If Democrats want to speed its arrival, they could initiate a repeal of Obamcare, begin the abolition of Fannie Mae and Freddie Mac, and start neutering the EPA.
Watching the death throes of costly, redundant, wayward and sometimes corrupt government institutions would be the best stimulus of all.
That's President Barack Obama.
Having assumed office with an illusory mandate to "transform America," he tossed aside public opinion, ignored voters' traditional preference for moderate, not radical, change, and set out to impose his vision of dominant government and a citizenry willing to say, okay, when a designated bureaucrat tells them their time has come to die. In doing so, Obama's minions bribed lawmakers to vote for measures opposed by a majority of voters and made a mockery of the legislative process.
House Speaker Nancy Pelosi will be an unduring symbol with her call for Congress to pass a bill cobbled by insiders so that rank and file members could find out what's in it.
As the nation's debt grew by trillions of dollars, voters recoiled in horror while Obama remained unfazed, and perhaps unwitting. There is, after all, little evidence that Obama has any understanding of economics aside from the obvious fact that many of America's corporate elite will throw money at radical politicians so long as those politicians protect and nurture their corporate interests.
As a leftist nurtured in marxist truisms, he is, of course, dedicated to Keynesian economics, a dressed up ideology that encourages politicians to pay off voting blocs and interest groups that share their aspirations in the guise of "stimulus."
Now, 19 months into his presidency, Obama expresses puzzlement at the stubborn refusal of the American economy to recover despite more than a trillion dollars in "stimulus" spending. Speculation is rife that the economy will turn down again, producing a dreaded double-dip recession.
What's going on?
Sane America has gone on strike against the Obama administration's obsessive effort to impose rule by a leftist elite, including "czars," that has seized control of government and uses it to impose policies that most Americans oppose.
To counter this bizarre assault on American values, individuals, families, small businesses and large corporations are reasserting their individuality and desire for freedom by hoarding cash, withholding spending to thwart a government that some regard as wayward, and many view as their enemy.
If the economy were to recover strongly and quickly, the Democrat-controlled Congress could ramrod the rest of Obama's statist agenda and complete the government takeover of matters traditionally reserved for individual discretion. That is, for many of us, a frightening vision.
By hoarding cash, American individuals and businesses are slowing or stopping the recovery and thwarting the onset of death panels, carbon taxes, social engineering by the Environmental Protection Agency and other nightmarish aspects of the Obama scheme.
So far, the citizenry is defeating Obama and his thug army - the left wing of the Democrat Party.
In 71 days the voters can derail the Obama agenda and begin the process of repealing the parts that have been enacted by reducing the Democrat Party to minority status in the House and Senate.
That's the stimulus that unhappy and frightened voters are looking for, and it would begin to revive the economy.
Once Obama has lost his congressional accomplices, the leftist assault on individual liberty will lose its thrust and American consumers will again be willing to spend and businesses to invest in future growth.
A full blown recovery is unlikely to happen, however, until Obama has an epiphany or is clearly headed for the ranks of easily ignored ex-presidents. At that point, celebratory spending will begin, to be followed by the normal pursuit of things we didn't know we needed until we started believing that we still have a future.
That moment is not yet at hand. If Democrats want to speed its arrival, they could initiate a repeal of Obamcare, begin the abolition of Fannie Mae and Freddie Mac, and start neutering the EPA.
Watching the death throes of costly, redundant, wayward and sometimes corrupt government institutions would be the best stimulus of all.
Friday, July 30, 2010
WASHINGTON (AP) -- The recession was deeper than the government previously thought.
The Commerce Department, in revisions issued Friday, estimates the economy shrank 2.6 percent last year -- the steepest drop since 1946. That's worse than the 2.4 percent decline originally estimated.
The economy's plunge underscores why the unemployment rate surged to 10.1 percent in October, a 26-year high.
The revisions in gross domestic product, or GDP, now show zero growth in 2008. That compares with a 0.4 percent gain previously estimated.The economy also grew less in 2007 (1.9 percent) than earlier thought (2.1 percent).
For all three years, consumers spent less and home builders cut more deeply than had been thought. Those factors help explain the downward revisions on the economy.
The revisions also show that struggling state and local governments cut spending more last year than previously thought. And they spent less in 2007 and 2008.
The economy slid into its worst recession since the Great Depression in late 2007. Many economists think the recession ended last summer, although a panel of academics that dates the start and end of recessions hasn't declared when this one ended. The panel usually does so well after the fact.
From the start of the recession in December 2007 until the April-to-June quarter of 2009, the economy sank 4.1 percent. That was deeper than the 3.7 percent decline previously estimated for the recession.
Friday, April 16, 2010
Tardy: Texas congressman seeks repeal of disastrous Community Reinvestment Act
Rep. Jeb Hensarling, R-Texas, has introduced legislation to repeal the 1977 Community Reinvestment Act, a damaging relic from Jimmy Carter's presidency. The CRA empowered left-wing activist groups like ACORN and the Greenlining Institute to use claims of racism to force banks and other financial institutions to make loans and mortgages on the basis of the ethnic and demographic makeup of neighborhoods instead of the creditworthiness of borrowers. At the time, this tool of political blackmail was cleverly camouflaged by its proponents behind the righteous cause of ending redlining, the practice in which bankers allegedly drew red lines around certain local neighborhoods, putting them off-limits for loans and mortgages. The redlined areas were typically populated by minority residents, usually African-Americans or Hispanics.
But the CRA didn't actually ban redlining, it just reversed the money flow's direction, as decisions on loans and mortgages are still made on the basis of the ethnic identity of the recipients' neighborhoods. (Ultimately, this approach led banks and commercial lenders to invest massively in subprime mortgages backed by Fannie Mae and Freddie Mac, which in turn caused the economic meltdown of 2008). The CRA gave ACORN, Greenlining and legions of similar groups leverage to extort loans and mortgages in return for not conducting devastating PR and political pressure campaigns designed to libel offending banks and bankers as racists. If federal regulators could be convinced that a bank was guilty of racism, it could be prevented from acquiring or merging with other banks. The law created a powerful incentive for banks to pay off the activists groups to make them "go away." When mobsters do the same thing, prosecutors call it a "protection racket." When groups like the Greenlining Institute do it, they call it "social justice."
But the CRA didn't actually ban redlining, it just reversed the money flow's direction, as decisions on loans and mortgages are still made on the basis of the ethnic identity of the recipients' neighborhoods. (Ultimately, this approach led banks and commercial lenders to invest massively in subprime mortgages backed by Fannie Mae and Freddie Mac, which in turn caused the economic meltdown of 2008). The CRA gave ACORN, Greenlining and legions of similar groups leverage to extort loans and mortgages in return for not conducting devastating PR and political pressure campaigns designed to libel offending banks and bankers as racists. If federal regulators could be convinced that a bank was guilty of racism, it could be prevented from acquiring or merging with other banks. The law created a powerful incentive for banks to pay off the activists groups to make them "go away." When mobsters do the same thing, prosecutors call it a "protection racket." When groups like the Greenlining Institute do it, they call it "social justice."
Monday, March 1, 2010
Breaking: Americans get more aid than taxes buy
The so-called "Great Recession" has left Americans depending on the government dole like never before.
Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.
Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.
The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said.
Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.
Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.
The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said.
Thursday, January 14, 2010
Things so tough the UAW is selling its retreat
The United Auto Workers is hoping to sell its $33 million lakeside retreat in northern Michigan, long a symbol of the union's success but now a financial liability.
The UAW cited the recession and shrinking membership as reasons it is seeking a buyer for the Walter and May Reuther Family Education Center, located on 1,000 heavily forested acres near Onaway. The union bought the property in 1967.
The center, named for the union's iconic leader, was a jewel in which many UAW members took great pride. It is expected to go on the market yet this month.
The property includes the top-notch Black Lake Golf Club and the ashes of Reuther and his wife, who died along with four others when their small plane crashed en route to the property in 1970.
The center recently became a target of critics who grumbled that the UAW shouldn't keep such a luxury while hundreds of thousands of its members have lost their jobs or taken buyouts or early retirement as the domestic auto industry restructured.
The facility lost an estimated $23 million in the past five years and the UAW was forced to borrow to keep it afloat, according to filings with the U.S. Labor Department.
The UAW cited the recession and shrinking membership as reasons it is seeking a buyer for the Walter and May Reuther Family Education Center, located on 1,000 heavily forested acres near Onaway. The union bought the property in 1967.
The center, named for the union's iconic leader, was a jewel in which many UAW members took great pride. It is expected to go on the market yet this month.
The property includes the top-notch Black Lake Golf Club and the ashes of Reuther and his wife, who died along with four others when their small plane crashed en route to the property in 1970.
The center recently became a target of critics who grumbled that the UAW shouldn't keep such a luxury while hundreds of thousands of its members have lost their jobs or taken buyouts or early retirement as the domestic auto industry restructured.
The facility lost an estimated $23 million in the past five years and the UAW was forced to borrow to keep it afloat, according to filings with the U.S. Labor Department.
Friday, December 11, 2009
High salaries in government multiplying during recession that has cost 7.3 million jobs
The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.
Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.
Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.
The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.
When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.
The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech. The primary cause: substantial pay raises and new salary rules.
"There's no way to justify this to the American people. It's ridiculous," says Rep. Jason Chaffetz, R-Utah, a first-term lawmaker who is on the House's federal workforce subcommittee.
Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.
Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.
The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.
When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.
The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech. The primary cause: substantial pay raises and new salary rules.
"There's no way to justify this to the American people. It's ridiculous," says Rep. Jason Chaffetz, R-Utah, a first-term lawmaker who is on the House's federal workforce subcommittee.
Wednesday, November 4, 2009
Beware: George Soros and his influential friends are coming to repair the economy
One should never stand in awe of academicians or economists, no matter how big their names or reputations.
The following quotations underscore the need for skepticism:
"Large swaths of economics are going to have to be rethought on the basis of what's happened." So said Larry Summers, President Obama's chief economic adviser, in an interview in the weeks after the markets crashed a year ago."
"Now financier George Soros is announcing a $50 million effort to speed things along," Michael Hirsch writes in Newsweek. "This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of "free-market fundamentalism," among them Nobelists Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees. He's also creating an "Institute for New Economic Thinking" to make research grants, convene symposiums, and establish a journal, all in an effort to take back the economics profession from the champions of free-market zealotry who have dominated it for decades, and to correct the failures of decades of market deregulation. Soros hopes matching funds will bring the total endowment up to $200 million.
"Economics has failed not only to predict and explain what happened but has also failed to protect society," says Robert Johnson, a former managing director at Soros Fund Management, who will direct the new institute. "That's what the crisis revealed. The paradigm has failed. There is no guidance."
None of this bears any resemblance to what actually brought down the economy. This is understandable. Larry Summers and George Soros are Democrats who are intent on building up government's role in the economy.
All of them presumably carry in their heads a century old liberal paradigm, born at the same time as modern industrial capitalism, that assigns members of modern societies to three groups:
First, there are the ordinary folks who cling to their bibles and guns and work hard to improve their lot in life. Unfortunately, to the liberal mind, they do not grasp what is really in their best self-interest, are politically weak and easily misled.
Second, there is the establishment, which comprises the rich, successful
buseiness proprietors and corporate executives and financiers. These are the folks who are commonly said to run the country. Liberals regard them as ruthless exploiters in search of personal gain and little else.
And then, in the words of John Steele Gordon, "there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest."
So, now we have a band of brothers made up of George Soros, Larry Summers, Joseph Stiglitz, Michael Pence, George Akerhof, and Sir James Mirrlees. They undoubtedly will fashion a reprise that will cast full blame for the collapse on ruthless, self-interested financiers while holding government blameless. After all, they can work their magic only if they bend public and political opinion to their conclusions.
They need government to translate their personal opinions into the law of the land.
An antidote is in order.
An unbiased explanation for the ecoonomic collapse would lead inevitably to the conclusion that free markets have not existed in the United States for a very long time.
The housing market was, in fact, deliberately destroyed by heavy-handed government starting in the 1970s, when courts and the armies of compassion forged an alliance, later joined by Republican, as well as Democrat, administrations.
It started with a court order requiring an end to redlining, a practice that made it difficult, if not impossible, for residents of some inner city neighborhoods to get mortgages. The Carter administration responded with the Community Reinvestment Act, which made redlining illegal and required inner-city lending.
Over the years, the minimum lending levels grew, which meant that more and more high-risk mortgages were granted. Under President George W. Bush, usage of the reinvestment act grew sharply. In effect, Bush used the cover of law to move left, broadening his appeal to voters outside the conservative and Republican folds.
In its first modern push to expand home ownership, Congress in 1970 created Freddie Mac, a companion to Fannie Mae, which dates to the Great Depression. Both were instrumental in wrecking a housing market discipline that had endured for 200 years.
Traditionally, a bank or savings and loan would accept a mortgage application, assess the financial condition of the applicant, then grant or deny a mortgage.
Under the new regime, a local bank no longer had to worry about an applicant's finances. The bank would hold the mortgage for hours or days, then unload it to Fannie or Freddie. They no longer had any skin in the game and could increase their profits by being more and more reckless.
Risk, previously the biggest factor in any business transaction, now had legs, and was no longer a factor in mortgages.
Fannie and Freddie bundled mortgages of varied risk levels and sold them to investment banks, which bundled the bundles and sold them as big-ticket securities all over the world.
With investment money pouring in from everywhere, the U.S. housing market boomed. Then, when the economy softened and the defaults started, the economy collapsed.
Now, some giants of economics and finance, such as Stiglitz and Soros, are pointing the finger of blame at free markets, which the founders took pains to establish in the U.S. constitution, and deregulation of markets.
In essence, they are blaming the victim for failing to withstand the blows of the powerful government mugger while excusing the ACORN thugs, the armies of compassion and the political geniuses who systematically destroyed a free market sytem that had exercised discipline over the mortgage process for two centuries.
Former Federal Reserve Chairman Alan Greenspan issued a semi-apology a year ago for a Federal Reserve policy that had held interest rates too low for too long, contributing to the housing market bubble..
He attributeed the “mistake” to his belief that banks, operating in their own self-interest, would do what was necessary to protect their business and its shareholders. Greenspan called that “a flaw in the model ... that defines how the world works.”
In other words, Greenspan admitted participating in a prolonged stimulation of the housing market, then blamed the market for failing to withstand the government intrusion and carry on its gatekeeping function.
Greenspan did not mention, and congressional inquisitors failed to ask, about ACORN thugs who picketed local banks and browbeat bankers who failed to comply quickly with their lending demands.
The founders would not be pleased by the governmental quackery that has badly damaged their careful construct.
The following quotations underscore the need for skepticism:
"Large swaths of economics are going to have to be rethought on the basis of what's happened." So said Larry Summers, President Obama's chief economic adviser, in an interview in the weeks after the markets crashed a year ago."
"Now financier George Soros is announcing a $50 million effort to speed things along," Michael Hirsch writes in Newsweek. "This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of "free-market fundamentalism," among them Nobelists Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees. He's also creating an "Institute for New Economic Thinking" to make research grants, convene symposiums, and establish a journal, all in an effort to take back the economics profession from the champions of free-market zealotry who have dominated it for decades, and to correct the failures of decades of market deregulation. Soros hopes matching funds will bring the total endowment up to $200 million.
"Economics has failed not only to predict and explain what happened but has also failed to protect society," says Robert Johnson, a former managing director at Soros Fund Management, who will direct the new institute. "That's what the crisis revealed. The paradigm has failed. There is no guidance."
None of this bears any resemblance to what actually brought down the economy. This is understandable. Larry Summers and George Soros are Democrats who are intent on building up government's role in the economy.
All of them presumably carry in their heads a century old liberal paradigm, born at the same time as modern industrial capitalism, that assigns members of modern societies to three groups:
First, there are the ordinary folks who cling to their bibles and guns and work hard to improve their lot in life. Unfortunately, to the liberal mind, they do not grasp what is really in their best self-interest, are politically weak and easily misled.
Second, there is the establishment, which comprises the rich, successful
buseiness proprietors and corporate executives and financiers. These are the folks who are commonly said to run the country. Liberals regard them as ruthless exploiters in search of personal gain and little else.
And then, in the words of John Steele Gordon, "there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest."
So, now we have a band of brothers made up of George Soros, Larry Summers, Joseph Stiglitz, Michael Pence, George Akerhof, and Sir James Mirrlees. They undoubtedly will fashion a reprise that will cast full blame for the collapse on ruthless, self-interested financiers while holding government blameless. After all, they can work their magic only if they bend public and political opinion to their conclusions.
They need government to translate their personal opinions into the law of the land.
An antidote is in order.
An unbiased explanation for the ecoonomic collapse would lead inevitably to the conclusion that free markets have not existed in the United States for a very long time.
The housing market was, in fact, deliberately destroyed by heavy-handed government starting in the 1970s, when courts and the armies of compassion forged an alliance, later joined by Republican, as well as Democrat, administrations.
It started with a court order requiring an end to redlining, a practice that made it difficult, if not impossible, for residents of some inner city neighborhoods to get mortgages. The Carter administration responded with the Community Reinvestment Act, which made redlining illegal and required inner-city lending.
Over the years, the minimum lending levels grew, which meant that more and more high-risk mortgages were granted. Under President George W. Bush, usage of the reinvestment act grew sharply. In effect, Bush used the cover of law to move left, broadening his appeal to voters outside the conservative and Republican folds.
In its first modern push to expand home ownership, Congress in 1970 created Freddie Mac, a companion to Fannie Mae, which dates to the Great Depression. Both were instrumental in wrecking a housing market discipline that had endured for 200 years.
Traditionally, a bank or savings and loan would accept a mortgage application, assess the financial condition of the applicant, then grant or deny a mortgage.
Under the new regime, a local bank no longer had to worry about an applicant's finances. The bank would hold the mortgage for hours or days, then unload it to Fannie or Freddie. They no longer had any skin in the game and could increase their profits by being more and more reckless.
Risk, previously the biggest factor in any business transaction, now had legs, and was no longer a factor in mortgages.
Fannie and Freddie bundled mortgages of varied risk levels and sold them to investment banks, which bundled the bundles and sold them as big-ticket securities all over the world.
With investment money pouring in from everywhere, the U.S. housing market boomed. Then, when the economy softened and the defaults started, the economy collapsed.
Now, some giants of economics and finance, such as Stiglitz and Soros, are pointing the finger of blame at free markets, which the founders took pains to establish in the U.S. constitution, and deregulation of markets.
In essence, they are blaming the victim for failing to withstand the blows of the powerful government mugger while excusing the ACORN thugs, the armies of compassion and the political geniuses who systematically destroyed a free market sytem that had exercised discipline over the mortgage process for two centuries.
Former Federal Reserve Chairman Alan Greenspan issued a semi-apology a year ago for a Federal Reserve policy that had held interest rates too low for too long, contributing to the housing market bubble..
He attributeed the “mistake” to his belief that banks, operating in their own self-interest, would do what was necessary to protect their business and its shareholders. Greenspan called that “a flaw in the model ... that defines how the world works.”
In other words, Greenspan admitted participating in a prolonged stimulation of the housing market, then blamed the market for failing to withstand the government intrusion and carry on its gatekeeping function.
Greenspan did not mention, and congressional inquisitors failed to ask, about ACORN thugs who picketed local banks and browbeat bankers who failed to comply quickly with their lending demands.
The founders would not be pleased by the governmental quackery that has badly damaged their careful construct.
Thursday, July 30, 2009
Nouriel Roubini sees "very rough and bumpy" road
"...we are now closer than we were six months ago to the end of the worst financial crisis since the Great Depression and worst global recession in decades. But the road ahead will be very rough and bumpy: The recession in advanced economies will continue through year-end, the recovery will be very anemic and well below trend, the risks of a double-dip W-shaped recession are rising, and the growth recovery of emerging-market economies will be constrained by the weakness of advanced economies."
http://www.forbes.com/2009/07/29/global-economy-depression-recession-unemployment-consumption-opinions-columnists-nouriel-roubini.html
http://www.forbes.com/2009/07/29/global-economy-depression-recession-unemployment-consumption-opinions-columnists-nouriel-roubini.html
Monday, June 22, 2009
Hard times are killing welfare state; who knew?
"Broadly speaking, the U.S. welfare system divides into two parts -- the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: new workers get skimpier benefits.
As metaphor, GM's bankruptcy marks the passage of this model. Companies still provide welfare benefits to attract and retain skilled workers. But these shelters against insecurity are growing flimsier. Career jobs remain, but lifetime job guarantees -- whether formal or informal -- are gone. Last year, about 50 percent of male workers aged 50 to 54 had been with the same employer at least 10 years; in 1983, that was 62 percent."
http://www.realclearpolitics.com/articles/2009/06/22/our_sinking_welfare_state.html
As metaphor, GM's bankruptcy marks the passage of this model. Companies still provide welfare benefits to attract and retain skilled workers. But these shelters against insecurity are growing flimsier. Career jobs remain, but lifetime job guarantees -- whether formal or informal -- are gone. Last year, about 50 percent of male workers aged 50 to 54 had been with the same employer at least 10 years; in 1983, that was 62 percent."
http://www.realclearpolitics.com/articles/2009/06/22/our_sinking_welfare_state.html
Thursday, April 9, 2009
Was subprime mortgage collapse a result, not a cause, of the global recession?
"In 1983, economist James Hamilton of the University of California at San Diego showed that "all but one of the US recessions since World War Two have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum." The years 1946 to 2007 saw 10 dramatic spikes in the price of oil -- each of which was soon followed by recession.
In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."
In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad.
The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems."
http://www.nypost.com/seven/04092009/postopinion/
opedcolumnists/it_didnt_start_here_163630.htm?page=2
In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."
In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad.
The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems."
http://www.nypost.com/seven/04092009/postopinion/
opedcolumnists/it_didnt_start_here_163630.htm?page=2
Saturday, February 7, 2009
Republicans will help pass Democrat bailout bill
Republican Senators are about to explore a level of fecklessness not seen since Sen. Larry Craig went fishing in a men's bathroom at the Minneapolis airport.
By so doing, they will help President Obama rescue the Democrat Party from the likely consequences of its own disastrous social engineering. Their votes will provide the majority Democrats the 60 votes they need to close debate on what is deceptively called an economic stimulus bill.
The defectors are Sens. Susan Collins and Olympia Snowe, of Maine, and Arlen Specter of Pennsylvania, none of them strangers to liberal sirens.
In the absense of the Democrat "stimulus" program, a steroid shot for government growth, one of two things would happen:
* The economy would fix itself over a period of a year or two, with little or no inflation, and government would continue its usually modest role.
* The economy would, for one reason or another, stagnate or make a fitful recovery.
Neither of those outcomes is acceptable to the Democrat regime of President Obama. A passive role for government is not what he has in mind. A stagnant economy might doom his party to defeat in 2010, when all 435 House members and one-third of the 100 senators must stand for election.
Worse, from Obama's standpoint, his own chances of reelection in 2012 might fade as well.
Few things are more lethal to an incumbent party than a prolonged recession. That's why, when one occurs, the incumbent party tends to overstimulate, resulting in a spike in inflation. That is a tradeoff that incumbents accept because inflation, while troublesome, is rarely lethal on election day. The last time inflation played a big role in the defeat of an incumbent president was in 1980, when Democrat Jimmy Carter went down under the twin blows of stagflation, a blend of inflation and recession.
Another consideration also may be coming into play. In recent years, Democrats have been getting more and more of their financial support from the rich and very rich, who don't suffer from inflation because the returns on their investments tend to keep pace with inflation.
If the recession were to endure into the next campaign season, it undoubtedly would damage the Democrats' chances, perhaps severely. If the recession recedes before the next campaign, inflation might hurt the Democrats, but not much.
By so doing, they will help President Obama rescue the Democrat Party from the likely consequences of its own disastrous social engineering. Their votes will provide the majority Democrats the 60 votes they need to close debate on what is deceptively called an economic stimulus bill.
The defectors are Sens. Susan Collins and Olympia Snowe, of Maine, and Arlen Specter of Pennsylvania, none of them strangers to liberal sirens.
In the absense of the Democrat "stimulus" program, a steroid shot for government growth, one of two things would happen:
* The economy would fix itself over a period of a year or two, with little or no inflation, and government would continue its usually modest role.
* The economy would, for one reason or another, stagnate or make a fitful recovery.
Neither of those outcomes is acceptable to the Democrat regime of President Obama. A passive role for government is not what he has in mind. A stagnant economy might doom his party to defeat in 2010, when all 435 House members and one-third of the 100 senators must stand for election.
Worse, from Obama's standpoint, his own chances of reelection in 2012 might fade as well.
Few things are more lethal to an incumbent party than a prolonged recession. That's why, when one occurs, the incumbent party tends to overstimulate, resulting in a spike in inflation. That is a tradeoff that incumbents accept because inflation, while troublesome, is rarely lethal on election day. The last time inflation played a big role in the defeat of an incumbent president was in 1980, when Democrat Jimmy Carter went down under the twin blows of stagflation, a blend of inflation and recession.
Another consideration also may be coming into play. In recent years, Democrats have been getting more and more of their financial support from the rich and very rich, who don't suffer from inflation because the returns on their investments tend to keep pace with inflation.
If the recession were to endure into the next campaign season, it undoubtedly would damage the Democrats' chances, perhaps severely. If the recession recedes before the next campaign, inflation might hurt the Democrats, but not much.
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