Saturday, September 20, 2008

Dang, Now I Have to Get Serious


Because I'm so hopping mad about the gub'ment "bailout" of Freddie and Fannie. It screws all of us. So if you do nothing else today, read this:

http://www.lewrockwell.com/rockwell/imperative-sound-money.html


If you don’t have time to read the whole thing, here are some of the most important points:

What I also find striking is the way in which this move was announced. Let me read to you from the New York Times: "The Bush administration seized control of the nation’s two largest mortgage finance companies on Sunday…. It could become one of the most expensive financial bailouts in American history."

Even the most sophisticated observers of our present scene had to blink their eyes in reading such words.
Without debate, without votes, without anything other than an executive fiat, the White House just decided, on its own, to seize the mortgage market. Actually, this is an action to excuse dictators the world over, past, present, and future.

This sort of thing makes a mockery of the Constitution and the very idea of freedom and the free market, to say nothing of the idea that we have a limited government. What's more, if we can believe press reports, President Bush had very little to do with the decision. It was the work of Henry Paulson, the secretary of the Treasury and former head of Goldman Sachs, working on behalf of the nation's most well-connected financial elites.
Nobody elected this guy. Most Americans don't even know his name.

And look at how he throws around trillions of our money. The New York Times says that this is expensive. That's one way to put it. It makes the S&L bailout look like the warm-up.
Freddie and Fannie carry about $5.3 trillion in mortgage commitments and another $2.4 trillion in financial exposure. The total cost of this operation is unknown; it could reach to $2 trillion, with untold amounts of future exposure. [TRILLIONS, Party People! Can you even imagine a number that big – let's pause while we all try, shall we? Whoa . . .]

These two New Deal institutions were founded to speed up the home ownership process for people that banks would otherwise consider unqualified. In time, under LBJ and Nixon, they were given legal permission to expand without limit, in the name of privatization, of all things.
The motive was a classic bipartisan effort: universal home ownership. The left favored the redistribution. The right favored the supposed moral virtue associated with the nuclear family and its suburban abode.

Thus was born the greatest wealth transfer in American history outside Social Security and the warfare state.
In a free market with sound money, borrowing is connected with the ability to pay. [sorry, folks, that's just the way it is – no one has a "right" to borrow money.] At first, this is only available to the rich. As prosperity spreads, so does credit worthiness. Any government intervention designed to inject steroids in this process is going to end in what Rothbard called a cluster of errors. It is completely disingenuous that so many people are today decrying the banking system's failure to discriminate between those who should and should not be carrying a mortgage. The banking system in a free market handles this just fine. Ferreting out the difference between those who can handle loans and those who cannot is a main job of the competitive system. The market precisely calibrates this. If one lender fails in its assessments of borrowers, another is there to correct the problem.

If you rush the process of prosperity, and insist that everyone who wants a loan should get one, you set up a situation in which there will be problems down the line. That is precisely what the regime has done. It created Freddie and Fannie to subsidize loans. It engaged in a phony privatization that secretly socialized losses. The legal status of these privately owned, publicly traded, and government-protected agencies was always unclear, but the markets had long assumed that they would be bailed out.

There was a moral hazard at the heart of this policy. But the real point is that the free market judgment about who should get what was being over-ridden. Surely, that is not a problem when it comes to promoting the alleged American dream! In fact, we are paying for this mistake a half century after the policy became a national priority. As the evangelical ministers like to say, the wheels of justice grind slowly, but they grind mighty fine.

17 comments:

Aunty Belle said...

Whoops!

Ain't thinkin' youse swallowin' what the Grey rag says..."seized" is their smugglin' of ideology and hatred against Bush into the article.

Din't need no "seizin' " becaue NOBODY wants Fannie and Freddie.

Doan fergit, it is OBAMA's hisself that lined his britches wif money from Freddie and Fannie--and his pals too, since they head the FF MACs, and DEMONCrats who lined they pockets wif MAC contributions.

Ain't defendin' this whole debacle, but most of this will be paid back--like the auto industry bailouts which did repay (wif interest)

The BIGGER problem is that the slimes who run these companies float off on their yachts and eventually the American worker thinks: "If they can steal, so can I" and the poison is loose in the population.

Despite all I say above, I wish they'd let he chips fall---

Aunty Belle said...

Oh, an MOI, check out the BACK porch.

the Dread Pirate Rackham said...

did no one catch the time (ok there were several) when the presidents (and there were a couple who did this) de-regulated the mortgage industry? taking away all the safeguards that have been in place since the New Deal was first put in place?

clinton did it, and I think there were at least 1 or 2 presidents before him, but then bush really did it. at a very, very inopportune time.

google it at will.

K9 said...

i read it. it was a great article. we should just take out lumps as they come instead of postponing the inevitable crash...like mean dovey cooledge says : "let the motherf***er BURN!" and then, rebuild. soundly.
who can make art or even bother to go to work? will somebody come bail out my husbands business now that the clients decided they dont have to pay cause the banks cut them off? millions of americans day in and out do the right thing, with integrity only to find yet another knife in their back. disgusting.

if these golden parachute people get away with this shite ...i dont know what. im speechless.

K9 said...

"our lumps"

Anonymous Boxer said...

I read it, the whole thing, and while it would be scary to think of letting the entire system self correct, it makes sense. I'm personally not happy about paying $2325.00* for the privledge of bailing out anyone but MYSELF.

How long can we contiue printing money?

I'm buying gold.

*700 billion $ divided by 300 million (population of U.S) = $2,235.00

moi said...

Aunty: I will eat a pair of Louboutins and wash it down with a lively Malbec if these jokers actually pay any of this back. Counting . . .

Pirate: We the People are complicit as well. What I'd really like to know is, where and how did we make the philosophical shift from saving into spending willy nilly, regardless of the ability to afford it?

K9: My feelings, exactly.

AB: Yes, and of course children and people on fixed incomes can't pay that amount, so you may as well quadruple it as the burden of every able bodied man and woman between 18 and 65. But, hell, what does it matter? It's fiat currency anyway.

K9 said...

whatever figure they give is the sugar coated version.

K9 said...

its embarrassing too. there was the "greatest generation" and then there is us...the adult version of my super sweet sixteen..expecting everything and being a spoiled brat all the while.

K9 said...

oh and here's what the PUMA's think:

There is evidently talk on all the financial trading boards that some bigtime short-sellers might have deliberately caused the crash this week. Evidently this was NOT the usual players, but some big money moving in a concerted way.
Cramer brings it up, referring to “financial terrorism” to “bring down capitalism”
http://www.youtube.com/watch?v=zj0Vwnt1CLs
An economist article speaks of the SEC looking onto suspicious short-sellers:
“the Securities and Exchange Commission, America’s main markets regulator, brought back curbs on “naked”, or potentially abusive, shorts. It also rushed out a proposal forcing large investors, including hedge funds, to disclose their short positions.”
http://www.economist.com/finance/displayStory.cfm?story_id=12270509&source=features_box1&ref=patr
This stinks of Soros to me. This stinks of a “help Obama” tactic by some of his shadows.

Aunty Belle said...

Moi, AIG will pay it back--theys forced to take a write down on value accordin' to the new accountin' rules based on the Enron situation. It will recover when the short-sell frenzy abates and values rise to normal.

Lehman thang, uh, we'll see.

Reason lotta folks din't save much is interest rates was so low it din't pay to save--fer awhile youse better off buyin' "durable goods" rather than stickin' bucks in savings that din't even equal real inflation, hence,net loss.
( if ya save at bond rates of 3.2 %
while inflation is at 3.8% youse losin' money, not savin')

Fact is, many Americans have their savings in they houses--the equity is their nest egg. Mid and long term, housin' rises again. Pressure comes from growing population an' inner city redevelopment. Hard to think it, but our shelter price (% of annual income)is still lower than Europe's.

I reckon that dawg, K9, is onto somethin'...smells real funny. Them short sellers will be found--an mercy, I hope it is Soros, oh how choice that will be.

The Troll said...

Well said. But you should have added that CLINTON REGIME and the TRAITOR-DEMOCRAT-PARTY-OF-FILTH empowered Fannie and Freddie to do what they did.

Conservatives fought that every step-of-the-way. And were accused of being "racist" when they suggested borrowers should demonstrate some HOPE of paying of their "loans".

K9 said...

that wasnt my idea aunty, its all over the puma sites. these people are the KINGPINS of reporting on obama.

one of my favorites:

http://noquarterusa.net/blog/

sorry i cannot link.

moi said...

Aunty, you hit the nail on the head about savings but those interest rates were kept low by the Fed, which, by the way, I think needs to be investigated if not totally dismantled. We the People didn't flinch when it started happening. As K9 points out, it was party time for all of us who usually had to SAVE to afford what we wanted. So, who exactly are these secretive men of power who manipulate the money supply? Sound like thugs only with better suits, to me.

The Poet Laura-eate said...

You are so totally on the money Moi.

A mockery is being made of democracy here - on both sides of the Atlantic - as our grubberment too is bailing out our banks - at the taxpayer's expense/without our consent.

K9 said...

that is it, isnt it? its taxation without representation. everybody should let their congressmen and senators know we arent going to pony up. can you imagine the power we would have if everyone could get on the same page? no bail out we would say. this raw deal benefits two groups: the architects of this debacle; and people who lived larger than they should and get to skate a way. im really feeling for one of my friends who had to declare bankruptcy this year when some partners defaulted. she didnt get a bailout.

to poet lauraete - i feel for you. cause on top of that you have the introduction of islamic law into your sovereign nation. its not good.

K9 said...

7,000,000,000,000,000,000.