Bailout Bust

Well, it looks like our good friends in Washington have managed to once again take a bad idea and make it much worse. I admit that the bailout bill was probably necessary, and that after having looked at the actual details of the plan, the charges of socialism are a wee bit exagerated. The populist rhetoric about taking money from the taxpayers and giving it to the Wall Street fat-cats is not exactly true.

The plan was necessary to avoid a total collapse of our financial system, or so we were told, and I was okay with it in the end. I didn't like it, but would rather be able to cash my paycheck next week, even if it meant moving wildly to the brink of socialism. Unfortunately, congress couldn't even get that right. From what a lot of folks are now saying, the bill has been passed too late to have its full effect. If that's true, we've just flushed $700 billion down the toilet, and will suffer anyway.

The biggest issue with all of this, however, is that we need leadership in place which will take us back from the edge of socialist policy once this crisis is over. I believe it was necessary for the government to step in and help avert a disaster, but the government must be made to step back once all of this blows over. Folks are now talking about the Fed nationalizing the major financial institutions in the U.S. If this happens, things are even more critical.

Barack Obama is not a free market kind of guy. His instinct is to use government to solve everyone's problems, and he cannot be trusted to lead our nation back to its proven system of captitalism. Combine that with the fact that he plans to increase government spending in virtually every area (besides defense), and this crisis will look like a tea party after 4 to 8 years of his leadership.

Do we really want to put a glorified political activist, with the arrogance and common sense of a college professor, in charge of all of this? Seriously?

SNL Gets it Right

This is just brilliant. I also find it astonishing that NBC, basically a mouthpiece for Democrats in this election season, decided to air something so...truthful.

Let's put a socialist in charge!

It's been difficult to find time to blog lately, but I feel the need to vent. I'm starting to believe that this financial crisis could be the end of McCain's chances for the presidency. The problem, of course, is that we're about to put an avowed socialist in charge of our nation. This socialist will have the responsibility of charting a course out of this economic mess, and I have little faith that such a course will lead anywhere but down the path of more government control and less freedom.

Obama's charge that it was a lack of regulation that led to the current crisis is not only silly, it's insulting to those of us who actually bother to educate ourselves concerning such things. Even Saturday Night Live has a better grasp on the cause of this crisis. Obama's buddies over at ACORN and Fannie/Freddie have run our economy into the ground. Sure, we can say that republicans did too little to stop shady lending practices encouraged by the government, but they at least acknowledged the problem years ago, and made an attempt at regulation.

The simple fact is that this crisis can be laid at the feet of liberal democrat policy, pushed by Clinton, Barney Frank (at the behest of his lover at Fannie Mae), Obama, and every other Democrat who wanted to give everyone a home - regardless of their ability to pay for it. Liberal policy and government regulation created this problem - it is not the solution.

Government is never the antedote to anything...other than prosperity.

Bailout

According to Blackhedd, the TARP plan being pushed by Secretary Paulson and Chairman Bernanke is, in fact, a bailout. He goes into the details here, but the gist of it, as I understand it, is as follows:

The government will set up a new entity (the First National "Bad Bank") that will purchase all of Wall Street's investments in bad loans. This will allow the banks to get their bad debts off of their balance sheets, and hopefully let them start pumping money back into our economy through making loans, etc. The word is that if this doesn't happen, many banks will fail, and others will stop making loans altogether, shaking the foundations of our economy, leading to deflation, loss of jobs, bad things in general...

The problem, and where this plan becomes either a bailout of Wall Street, or a necessary intervention by the government for stability, is in the actual valuation of the mortgage-based assets being purchased. According to Blackhedd, if the government purchases these assets at too low a price, the banks (at least those who made bad loans) will lose too much money, and collapse anyway. If the valuation is too high, the banks make out like bandits, basically being rewarded for bad behavior, and inflation will occur in the general economy.

From the testimony to congress yesterday, it sounds like the current plan is to err on the side of inflation, and overvalue the assets. This is not sitting well with conservatives (myself included) as it is basically proof that the administration wants to "bail out" the Wall Street executives. I don't think that's their underlying motive - as Blackhedd points out, Bernanke is a student of the Great Depression, and knows all about the dangers of deflation - they are most likely ensuring that the economy stays strong overall. But this looks very bad in the eyes of the general public. The Republicans are helping out their rich, evil CEO buddies on Wall Street, at the expense of us poor folks.

Politically, this is very bad for the GOP. If we oppose the plan on principle, we risk a serious depression in the economy, for which Republicans will take the blame. If we support it, we play in to the left's stereotypes of handouts for the rich. Overall, I think this dangerous step towards socialism is going to be a necessary evil. The capitalist in me wants the government to take a hands-off approach to this - allowing those who take foolish risks to reap their just rewards. But the father/husband/employee in me doesn't want to see the overall economy spiral into a depression, with banks unable to make loans, companies unable to expand and grow, and people losing their jobs left and right.

The scariest part of this is that we are delving into the world of socialism, while teetering dangerously close to electing a socialist in Obama, who will have to deal with this in the immediate future. A government with this much influence in the "free market" needs a leader who will work to get us back to where we started before all this happened, not someone whose instincts are to take us further down the road to socialism.

Pointing the Finger

Well, everyone's doing it these days, so I thought I'd dig into some facts and see who really is to blame for this mess in the financial world. CNN is out with a poll showing that most people (a 2-to-1 margin) are blaming Republicans for the current crisis. That doesn't surprise me in the least, as most people don't bother to look for facts when it comes to this kind of thing. It's much easier to look at who's been in charge over the last few years, and lazily assume it's their fault.

And to a certain degree, a great deal of blame can be laid at the feet of the GOP for not working harder to make changes to a system that was sending out clear signs of warning for quite some time. But what exactly is at the heart of this current crisis? What is the underlying cause for so much bloodshed on Wall Street?

Blackhedd, at Redstate, has been a source of reliable inside information on this issue for the last few weeks, and thanks to him I think I've gotten a pretty good idea of what's happened. I'm no financial wizard by any means, but I do know that most people will agree that mortgage back securities are at the root of the current mess. When lots of people default on their mortgages, the companies who have invested in the associated securities lose their arses. So who's fault is it that these mortgage companies gave loans to people who couldn't afford them?

It was Democrat policy that started pressuring banks into "providing affordable housing" to any and everyone. It was Democrat policy that implemented Fannie Mae, Freddie Mac, and the CRA. It was left-wing special interest groups like ACORN who threatened mortgage companies and banks with shutting down their operations if they refused to give risky loans. And it was Democrats in congress who blocked a bill, sponsored by John McCain, that would have reformed Fannie and Freddie back in 2005.

So, considering that the average person is either too apathetic or dimwitted to understand these facts, and the news media is all too willing to ignore them in pursuit of their own agenda, I suppose it makes perfect sense that the GOP is getting the blame. After all, we are all evil rich white guys who care about nothing but making money at the expense of poor people, right?

Pathetic.

That is the only word for Obama's sorry excuse for leadership during this financial crisis. If this is what we can expect from an Obama presidency - waiting for you opponents to come up with a solution, and then criticizing it while offering nothing in the way of a solution yourself - then God help us. Jeff Emanuel gives us the details:

"As always, Barack Obama takes the easiest (and lowest) road. From having his political opponents removed from the ballot so that he could run unopposed (or the next closest thing to it), to repeatedly voting "present" on legislation, to, in this race, waiting for John McCain to take a position on an issue before making up his own mind on it, then coming out firing at McCain (rather than actually talking about his own position on, and proposed solution to, the issues), Obama's career has been marked by cop-outs, relationships of convenience with very disreputable figures, and machine-politics-as-usual attacks.

"This situation is no different. Obama is allowing the President, the rest of the Congress, and his own opponent in the presidential race to take all of the risk and make all of the statements, while he sits up straight on his highest of horses and tells them all that they're going about fixing the problem the wrong way."

This guy is the worst kind of man, let alone politician. He must not be president.

More Bad News

Well, so much for the Fed drawing a line. We, the taxpayers, are now on the hook for yet another company's poor judgement. And what message does this send to other similar institutions throughout our nation? The message is that, if you're a big enough corporation, the government will bail you out of whatever risks you take. So much for capitalism.

Many will argue that this was yet another necessary step to keep our economy stable, but I disagree. Capitalism is all about taking risks and reaping either the rewards or the consequences - take away one and the other will disappear as well. This is very bad news for our nation. The federal government now owns the largest insurance holding company in the country - that is a frightening reality. The U.S. government is not in the insurance, or any other business. Things are getting out of control, and those in charge have to be very careful, considering that this is completely uncharted territory. Read the link above in full for a very good analysis on what actually occured yesterday. As Blackhedd notes at the end of his post, some crucial decisions will have to be made in the coming months,

"There’s one more key thing I want to say, which reflects the fact that the AIG bailout is one of the most unprecedented things the government has ever done in peacetime.

The United States must not remain in the insurance business.

We’ve embarked, on one day’s notice, on precisely the path that free-market advocates consider a nightmare scenario. The largest insurance company in America is now owned and operated by the government, and has nearly unlimited access to cheap capital by virtue of the credit-quality enhancement provided by the Fed line of credit.

If you were one of AIG’s competitors, wouldn’t you be feeling a little bit like Tokyo when Godzilla is in town?

That’s the great hazard faced by the government now.

The only permissible course of action is for the feds to explicitly and openly put AIG on a path to liquidation."

This situation makes the upcoming election all the more important. What kind of president and congress do we want in Washington while the government is in such a dangerous position? Do we want a president who favors even more government involvement in every aspect of society making decisions like this?

More on the Financial Crisis

I'm glad the Fed finally decided to draw the line yesterday, refusing to bail out another big time financial company. The fact that Lehman Bros. was actually larger than Bear Sterns at the time of its bailout shows me that they're serious about letting the system work itself out of this mess. As a believer in capitalism, I'm fully supportive of allowing companies who take foolish risks to reap their rewards. The government is responsible for keeping this economy afloat, but whenever possible it should take a hands-off approach to the "free" market. It's now looking like AIG and Wachovia are in serious trouble as well. I'm afraid we're in for some difficult times ahead.

That brings me to Obama's latest charge that this crisis is a result of Republican economic policies. Apparently, he is unaware of the fact that it was the Democrat's New Deal creation, Fannie Mae, which began the process of loaning money to people who couldn't afford it. It was Democrat policy that produced a sense of entitlement to home ownership (and everything else) among the American public. I realize that it's fashionable to blame George Bush for everything bad that happens these days, but he didn't force any of these banks into irresponsible lending practices.

I lay full blame at the feet of The New Deal, America's first step towards the kind of pseudo-socialism that is bankrupting not only our financial institutions, but our government. Maybe a real disaster is what is necessary to shake us out of our lazy, entitlement mentality. Either way, more government intervention, the very root of the problems we now face, is not the solution. Obama may find it easy to stand and point fingers, but his only "solution" is more of the problem.

Financial Woes

I'm admittedly pretty ignorant of the complex mechanisms within the financial system, but even I can see that something bad is happening on Wall Street. One of the front page posters over at Redstate, Blackhedd, has helped me to understand more about this crisis than anyone else over the last several months, and he has some excellent posts up today concerning the latest problems with Lehman Brothers.

You can get caught up on situation here.