Posted on 09/22/2008 9:01:38 PM PDT by jazusamo
Who was it who said, "crack-brained meddling by the authorities" can "aggravate an existing crisis"? Ronald Reagan? Milton Friedman? Adam Smith? Not even close. It was Karl Marx. Unlike most leftists today, Marx studied economics.
Is the current financial crisis going to lead to crack-brained meddling or to some rational actions? Predicting what politicians are going to do is risky business. We will have to wait and see.
Saints are no more common on Capitol Hill than they are on Wall Street. We can only hope that the political "solution" does not turn out to be worse than the problem.
There are times when government intervention can make things better. But that is no guarantee that it won't make things worse. As they say, "the devil is in the details"— and we don't know the details yet.
Probably most members of Congress don't know the details yet— and many may still not know the details when the time comes for them to vote on this bailout.
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Taking an optimistic view, this biggest bailout of all time may stop the problems in financial markets from spreading into the general economy— which is currently nothing like the disaster area that the media portray it to be.
Ninety percent of the people on this planet would exchange their economic situation for ours in a minute. The media love hype, and have been dying to use the word "recession" all year but nothing has happened that meets the definition of a recession.
The American economy is growing, not declining. Our unemployment rate is up to 6 percent but there are countries that would be delighted to get their unemployment rate down to 6 percent. Our inflation rate is up a little but many countries would love to get their inflation rate down to where ours is.
Why then is there such a mess in the financial markets? Much of that mess is due to the very people we are now turning to for solutions— members of Congress.
Past Congresses created the hybrid financial institutions known as Fannie Mae and Freddie Mac, private institutions with government backing and political influence. About half of the mortgages in this country are backed by these two institutions.
Such institutions— exempt from laws that apply to other financial institutions and backed by the implicit promise of government support with the taxpayers' money— are an open invitation to risky behavior. When these risks blew up in their faces, Fannie Mae and Freddie Mac were taken over by the government, costing the taxpayers billions of dollars.
For years the Wall Street Journal has been warning that Fannie Mae and Freddie Mac were taking reckless chances but liberal Democrats especially have pooh-poohed the dangers.
Back in 2002, the Wall Street Journal said: "The time for the political system to focus on Fannie and Fred isn't when we have a housing crisis; by then it will be too late." The hybrid public-and-private nature of these financial giants amounts to "privatizing profit and socializing risk," since taxpayers get stuck with the tab when high-risk finances don't work out.
Similar concerns were expressed in 2003 by N. Gregory Mankiw, then Chairman of the Council of Economic Advisers to President Bush. But liberal Democratic Congressman Barney Frank criticized Professor Mankiw, citing "concern for housing" as his reason for supporting Fannie Mae. Barney Frank said that fears about the riskiness of Fannie Mae were "overblown."
Maxine Waters and other members of the Congressional Black Caucus have also been among the liberal Democrats defending Fannie Mae. Just last year, Senator Charles Schumer advocated legislation to allow Fannie Mae and Freddie Mac to increase their already huge role in the mortgage market. Republican Congressman Mike Oxley has also defended these hybrid financial giants.
Both Fannie Mae and Freddie Mac have been generous in their contributions to politicians' political campaigns, so it is perhaps not surprising that politicians have been generous to them.
This is certainly part of "the mess in Washington" that Barack Obama talks about. But don't expect him to clean it up. Franklin Raines, who made mega-millions for himself while mismanaging Fannie Mae into a financial disaster, is one of Obama's advisers.
Pretty soon it will be in triple digits.
Amen!
Bump! Mine too. :)
bump
bump
So Thomas Sowell has no ideas to offer that might begin to address the issues in this current credit crisis. Except to say, the Bush proposal could work. Okay.
I guess handing $700 billion over to Hank Paulson is the answer then. LOL
He didn’t say that he had no ideas- he just implied that it was a screwed up idea to expect the same people that created the problem (Congress, esp. Democrats) to fix it.
Straight out of his book “Vision of the Anointed”.
If you really want to see just how brilliant he is, go and read his book “Knowledge and Decisions”.
The hybrid public-and-private nature of these financial giants amounts to "privatizing profit and socializing risk," since taxpayers get stuck with the tab when high-risk finances don't work out.
And so it was, and if I am tempted to invoke the phrase "made out like bandits" for certain senior members of the debacle that's laying stinking in our collective lap, it's because the phrase is accurate. The rest of us get to pony up. Now, I would personally be willing to lend my money to someone willing to clean up the mess on the understanding that it would be repaid. It won't. And if it isn't the whole thing will happen again.
This is about the lamest piece he's ever written.
Franklin Raines, who made mega-millions for himself while mismanaging Fannie Mae into a financial disaster, is one of Obama’s advisers.
As sad as it is you’re probably right.
He sure is and I wonder how much cash he’s invested in BO?
Very true. That book is the source of most of my economic philosophy; it was the primary text for a class I had in college.
Isn’t that the truth !
I believe it would take them maybe, a week.
I believe that is an excellent idea, I doubt there are two better qualified than them to tackle this mess.
For example, checking accounts could come in two flavors. One backed by T. Bills with a lower interest rate, and one backed by commercial paper with a higher return. With big red letters stating the risk above the line you sign to open the account.
My two cents.
How has T. S. missed being Sec. Treasury?
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