On this site you'll read on a regular basis our views on liberty and government interference in the market. A free market based on two parties mutually agreeing to provide goods and/or services to one another for a mutually agreed upon compensation does not include a third party controlling or artificially setting the conditions for the exchange.
Our current financial crisis was caused by a third party setting artificial conditions in the market place that ultimately weren't in the best interests of either of the original parties. Of course the third party we're talking about here is the federal government and the politicians that set policy based not on the long term financial health of lenders and borrowers, but on their own short term political health.
Thomas Sowell calls it stage one thinking - the concept that politicians generally think no further than their next election. As a result they're reluctant to head-off a crisis that won't occur until well after the next election. The looming social security crisis is a perfect example of an impending catastrophe that elected officials will not act to avert.
The simple explanation of the current situation and how we arrived here is that politicians interfered in the market place through the quasi-private Fannie Mae and Freddie Mac organizations making it profitable to lend money to people who could not afford to repay the loan. The government backed Freddie and Fannie bought loans from lenders that gave loans to people that should not have them. Where there's a guaranteed sale someone will come along with a product to sell.
To make matters worse, interest only loans were being handed out like candy on Halloween. These loans were sold to people as a way to get into a bigger home for a payment that they could afford. The scheme worked fine as long as property values continued to rise. When values leveled off and then fell precipitously, property owners and the financial institutions holding the note were upside down.
Now we have politicians trying to decide whether or not to spend close to a TRILLION of our tax dollars to fix the mess that they created in the first place. The lesson to be learned here is that quasi-government entities run by political appointees with near limitless financial power have no place in a free market.
Political interference created this mess it's insane to believe that increased government involvement will be the long-term solution - mainly because a good portion of the politicians running the government aren't thinking beyond November. Our fear is that we haven't learned anything and that this whole experience will result in a vast expansion of the federal government into a market that is becoming less and less free.
9 comments:
Jesus Eye I know you like to post a lot of your own personal right-wing opinions and pretend they're facts but this is the first time I've seen you completely make something up.
I like how you tried to imply that its the government's fault that financial corporations decided to buy hundreds billions worth of highly risky securities.
The part I really like is how you refused to mention who it was that pushed for these policies (the Bush administration) and who it was who pushed for deregulating what level of interest rates the mortgage lenders could charge (the Bush administration) and which party dominated all three branches of government throughout the time that these decisions were made (the GOP). Funny how Republicans spend most of their time calling their opponents wimps and traitors until GOP policies nearly (and still might) completely destroy the entire economy and then all the sudden the purveyors of those policies aren't "real" Republicans, isn't it?
Um actually in 1998 and 99 this was all set in motion. Among other things that is when the historic push was to increase minority home ownership by changing the rules and allowing stated income loans as well as some really interesting ideas such as allowing people to claim welfare and unemployment income as actual income for qualifying for a loan. The adjustable rates and weird loan packages were often the only way for banks to insure income stream since, with the un-level playing field they knew that there would eventually be more forclosures. Economist Gregory Mankiw predicted this entire mess back then and was shouted down by , among others, Barney Frank. Mankiw was in fact called a racist for his opinion. This isn't all that hard to research just Google Mankiw's name and you find find dozens of articles, oft times where he was being villifed by the Dems. And yes, that entire Freddie - Fannie change was set in motion by the Clinton administration. I work in the field and even the Democrats among my group will admit that we have all been fearing exactly this mess since about mid 1999.
Let's remember that reductions in the rate by the FED were intended to stimulate an already lagging economy. Yes it stimulated/inflated a housing market by creating more demand. Yes it infused the economy with money from refinances/home equity loans but only a fool didn't realize this was all artificial.
The party in control at the time of all this better own up and accept responsibility (and this doesn't mean the Democrats who looked the other way get a pass) or forever be known as hypocrits and cowards.
Both parties have failed the American people. We got what we paid for and will somebody please Free Sarah!
McCain - one of the Keating Five who brought down the S&L Industry. McCain - His Campaign Manager, Davis, received from $15-30,000 per MONTH for the last FIVE YEARS from Freddie Mac for 'access' to McCain up until just last month when it became public knowledge.
McSame is no Maverick. He's a tool of the Republican (he hates that word mentioned) Establishment's Fat Cats.
your kidding right, it was Obama who obtained kickbacks from Freddie and Fannie. Thats a known fact. Google it you moron
Google your grammar retard.
Beautifully written.
Straight forward and right on.
I find it absolutely funny that all the McCain supporters talk about how McCain is a war hero and he is the right man for the job today. Aaaahhhhh is he "More" of a hero today than he was in 00'? No! Republicans picked Bush....? Lets go back to a year ago. John McCain was all but written off by his own party. He was carrying his own bags on the campaign trail and laid off half his staff because he wasn't the Republicans choice then either. It looks to me as if the Republicans have settled for second best and pandered their VP pick for the womens vote just to stay in power and keep the same old party line of politics going. I'm gonna vote for Obama but I don't think he will win. More of the same Republican bullshit for another 4 years.
P.S. What ever happenend to the Illegal Immigration talk/solution from both parties?
Mr Eyeball practices willfull blindness and is way over his head here.
Here's list of some of those responsible:
In addition to Rick Davis (McCain's campaign manager) "McCain’s senior adviser, his campaign’s vice chairman, his Congressional liaison and the reported head of his White House transition team all either made fortunes from recent Freddie-Fannie lobbying or were players in firms that did."
Read more:
http://www.nytimes.com/2008/09/28/opinion/28rich.html?ref=opinion
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