America's Financial Mess

[Zanton]

The main organic and structural solution to the current mortgage and credit crisis -- and subsequent Wall Street panic and government bailout -- is to immediately terminate all those "government sponsored enterprises." This certainly seems to be the root of the problem. These state-backed banks have an unfair advantage over legitimate banks, and thus tend to destroy them -- while conducting business badly. Such GSEs, with their unnaturally low interest rates, significantly distort the mortgage and credit markets, and ultimately hurt pretty much everything they touch. They fundamentally attack economic freedom and capitalism, and have no right to exist.

The main GSEs to get rid of forthwith are Fannie Mae and Freddie Mac. No more government backing for these parasites! And if this means that the two newly-private megabanks instantly go bankrupt, so be it. If they both quickly get broken up, sold off, and go out of existence, so be it.

But another important part of any proper and competent government "rescue" of America's current mess in Big Finance is to also terminate all those coercive, favoritist, loans-to-poor-people laws, such as the 1977 Community Reinvestment Act (and its deadly 1995 strengthening). So too all the regulations, court rulings, and new laws which supplement it. Banks need to be allowed to make loans based on merit and their own judgment, without being accused by Big Brother of "red-lining" against the impoverished and "minorities," and without being tarred and slandered as "racists." The government overlords, in turn, mustn't punish the "redlining," "racist," "classist," etc. credit institutions by denying them regulatory approval to expand, contract, merge, spin off, change to meet market conditions, and otherwise do business to their advantage, and as they freely choose.

And the ultimate solution to this whole evidently limitless mess is to wipe out of existence the completely-unconstitutional Federal Reserve Bank, and all of its government fiat, monopoly, "funny money." The entirety of the banking, loan, credit, and monetary industries should be completely private. Under a laissez-faire capitalist system, there would then be an overwhelming tendency for them to be completely sound, competent, legitimate, honest -- and wildly profitable.

[whitedog57]

Too simplistic.

The banks also had FDIC insurance and have not paid for it for years (until recently). Plus, it was non-GSEs that created the subprime mess (although the banks did some of it and the GSEs bought Alt-As.

So, our entire financial system was distorted, not just the GSEs.

[Dick Bachert]

In a column on the financial melt-down published around 11/30/08, New York Times columnist Thomas “The Earth is Flat” Friedman treated readers to yet more classic MISinformation so typical of the soon-to-be-bankrupt Times. Could their long history of historical revisionism be the reason they’re in trouble? But that’s a topic for another post.

Friedman portrayed the greedy bankers and Wall Streeters as the villains.

Yes, many of them may have gamed “the system,” bundling this “junk” into “derivatives” even PhDs in economics didn’t understand.

But if that “system” hadn’t been created in the first instance, the gaming would not have even been possible. Friedman conveniently failed to mention that the system was a creature of the 1977 Jimmy Carter sponsored “Community Reinvestment Act.”

Allegedly designed to make the American Dream of home ownership available to all, it was expanded in the Clinton years to include even those with virtually no prospect of repaying. Lenders who refused to “get with the program” were threatened with loss of their charters.

Until it unraveled, it was a brilliant Democrat vote-buying scheme.

And as it unraveled, Barney Frank, Chris Dodd, et al stood silently by and watched. These clowns are either too stupid to hold public office or the new poster boys for UNINTENDED CONSEQUENCES.

For all the pain they have caused with their idiocy, these alleged “leaders” should be hauled into a courtroom and tried. If found guilty, I think public hangings are in order.

Bin Laden and his ilk have long sought to bring this country down economically. With that job now done by Frank, Dodd, Reid, Carter, Clinton, et al, the Islamofascists can now devote themselves to full time bomb building.

And for those who think I exaggerate, here is some of the rare wisdom offered by a former President:

“At what point shall we expect the approach of danger? By what means shall we fortify against it? Shall we expect some transatlantic giant to step the ocean and crush us at one blow? Never! All the armies of Europe, Asia and Africa combined with all the treasure of the earth (our own excepted) in their military chest, with a Bonaparte for a commander, could not take a drink from the Ohio or make a track on the Blue Ridge in a trial of a thousand years.
“At what point, then, is the approach of danger to be expected? I answer, if it ever reach us it must spring up amongst us; it cannot come from abroad. If destruction be our lot we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.”
Abraham Lincoln, 1837

[Zanton]

Whitedog57 -- You say that "it was non-GSEs that created the subprime mess" and that "our entire financial system was distorted, not just the GSEs."

As far as I can tell, the majority of the problem was caused by Big Brother. Mainly the GSEs; Community Reinvestment Act and the like; and artificially low interest rates by the Fed. They led the way. Bizarre "financial instruments," greed, and incompetence were fairly minor factors. Big Brother marched the lemmings over the cliff -- as he always does! The perfect political answer always is...LAISSEZ-FAIRE!

(And yes, this article was simple and short. Maybe check out my previous one for more ideas. And FDIC insurance -- if banks actually want it -- needs to be private, not government-backed.)