Posted by Sal on September 16, 2008
With the collapse of Lehman Brothers to Bankruptcy, and with Merrill Lynch being absorbed by Bank of America, our financial system is foremost on many people’s minds this week. Add to that the federal takeover of Fannie Mae and Freddy Mac last week, and the Bear Sternes collapse earlier this year, and we have a financial mess. All of this primarily has to do with the collapse of the mortgage market, as Bear Sternes, Merryll Lynch, and Lehman Brothers all had significant holdings in mortgage-backed securities that have sharply dropped in value. Both McCain and Obamaare calling for reform and increased government involvement and regulation into the financial sector. This is precisely the wrong prescription.
The problems we are seeing in the current mortgage crisis have very little to do with the free market, and more to do with government regulation. In a free-market system, there is risk and reward. It is natural that if a company is not run right, that company will fail, so there is every incentive to run the company correctly. Since Frannie Mae and Freddy Mac were government-backed, in the sense that there was always an understanding that the mortgage under-writings were backed by the U.S. government. In addition, the Federal Government, beginning with Bill Clinton and continuing with Bush, began mandating increased loans for low-income home buyers, creating the sub-prime industry that created billions of dollars in loans that people could not afford. (This is also to say nothing of the corruption and back-scratching between Fannie and Freddy and various Democrats.) It is because of this government intervention that we are in the crisis we are in. The Freddy and Fannie takeover was necessary, but as Larry Kudlow reports, it is a good thing that the government did not bail out Lehman Brothers. The concept of risk/reward has to remain in our free-market system, no matter what the short-term pain is.
We are in a financial mess — one that will take some time to resolve. It is not a crisis, depression, or recession. It will resolve itself, as the fiscal crisis’ of the past always have. The question is, are we going to make things worse with increased regulation, or are we going to reform, put sensible regulation where needed, but deregulate the mandates and allow the free market to work.
Posted in Politics | Tagged: Congress, Dodd, economy, Fannie Mae, Freddy Mac, Larry Kudlow, Lehman Brothers, McCain, Merill Lynch, Mortgage, Obama, Regulation, Sub-Prime, Wall Street | Leave a Comment »
Posted by Ryan on August 10, 2008
Jim Pinkerton from “The American Conservative” has a new artcile on the Fox Forum which lays out his idea about why he thinks McCain will win in November. His thought: because the Dems are slated to sweep Congress, McCain will be elected President so that the “divided government” concept since World War II will be continued.
I have a problem with this thesis: the numbers don’t look good for Republicans and winning Congress will be a tough slog, but I’ve heard that every election year except 2002 — there were serious tectonic forces at work in 1994, but aside from Michael Barone few people even noticed. So, this idea that the Republicans have no shot is nothing new and lately has been wrong most of the time. Plus, if the Republicans actually run against the socialist Democrat agenda (rather than as Democrat-lite) then I believe this year won’t be the apocalypse some think it will be.
With Congressional approval ratings at historic lows, why wouldn’t there be a possibility for a Republican resurgence, especially in Blue-Dog districts? Take back those seats and the Reps have the House. The Senate’s another issue since only 1/3 are up this year, not all in safe states. Yet, with energy being the #1 issue for voters and the Iraq War turning the corner, Republican ideas on war and the economy are actually and substantively being vindicated less than three months before Election Day.
In the end, I suppose the moral of this election could be either: if you think you’re going to lose, you will; or win the battle in the arena of ideas and the victory is yours.
Posted in economy, Election 2008, Media Bias, Politics, The Iraq Front | Tagged: Blue Dogs, Congress, Democrats, James Pinkerton, John McCain, Michael Barone, Republicans, The American Conservative | 1 Comment »
Posted by Ryan on July 14, 2008
President Bush announced today that he is rescinding his father’s Executive Order which banned off-shore oil drilling. And it’s about time in my opinion! What’s interesting about this development is that Congress imposed it’s own separate ban, meaning that if off-shore drilling were to take place, both branches would have to agree. Now, it’s solely in the hands of Congress.
Come to think of it, President Bush is really gaining a number of important victories over the Dems ever since they took over Congress: Bush stopped the Dems from cutting-and-running in Iraq, securing Bush’s policy through the end of his term — a huge meaningful victory on the Homefront; Bush got his FISA bill through a hostile Congress with nearly all of his proposals in tact — not an easy task for any lame-duck; and now Bush has successfully outflanked the Dems by taking the drilling issue and put it on the laps of Pelosi and Reid!
Brilliant maneuvering from an “idiot” who still has the capacity to outflank his opponents on important issues during the last year of his tenure. This will expose the Dems’ weak and complex rhetoric about how the oil companies “can already drill”, or the mantra “we can’t drill our way out of this” nonsense. They can try to blame Bush policies, but they will confuse the public who understands that gas comes from oil and securing domestic oil is a security issue. Bush has set things up for the Republicans to pound the message home. Will they take it?
Posted in economy, Election 2008, Politics, The Iraq Front | Tagged: Congress, Executive Order, FISA, George W. Bush, Harry Reid, Iraq War, Nancy Pelosi, oil drilling | Leave a Comment »
Posted by Ryan on June 10, 2008
Score one for capitalism today, as the Dem’s “windfall profits” tax bill couldn’t get the sixty votes needed for cloture. Hence, the bill is dead for now. This populist, anti-capitalist proposal underscores the success Dems have had in deflecting the issue of energy prices solely onto the producers, not the regulators. Congress won’t let them drill, therefore Congress affects supply. Talk to Adam Smith — he knows what’s up when it comes to the relationship between supply, demand and price. Fourth graders know this concept too, yet the Dems somehow don’t.
And our future fearless leaders, both McCain and Obama , decided that they were not going to participate in today’s important vote. Truly a profile in courage on both sides. McCain misses a huge opportunity if he and the Republicans don’t jump on this issue quickly, loudly and consistently.
Posted in Election 2008, Politics | Tagged: Adam Smith, Barack Obama, Congress, Democrats, John McCain, Republicans, supply and demand, Windfall Profits Tax | 1 Comment »