The good folks at News&Notes, with Farai Chideya, had me on their blogger round-table today, along with bloggers from Racialicious (Carmen Van Kerckhove) and BookerRising (Shay Riley). We talked about black folks getting blamed for the mortgage melt-down, the 'Dump Palin' campaign by Republicans, and PBS Gwen Ifill writing a book about Obama (with promotion tied to his winning) while she is set to moderate the upcoming VP debates. The discussion was pretty tame with good input all the way around.Shay was a bit curious when she went off on a rant about 'big government' and the mortgage melt-down. I sensed that we needed to move the dialog along, but it seems to me that Greenspan and his protégé Bernake are way guilty of being too hands off with aggressive bank lending for the past 'umpteen years, while Bernake is now putting his fat-govt-fingers into the taxpayer wallets to clean up the mess. So it looks like instead of 'big' we have 'no' government preceding a good old-fashion shake-down. Maybe she will come on this blog and clue me in from the right. (She has a good radio voice, BTW).
James C. Collier
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4 comments:
Hey Jim,
My argument is that it is too much government intervention, not too little, that inevitably led to the financial meltdown. The real question should be: why is the federal government even in the business of subsidizing housing and helping people with risky credit histories own homes in the first place?
Fannie Mae & Freddie Mac (government-sponsored enterprises that are involved with 40% of all mortgages), because of their political pull, took risks that they otherwise wouldn't have taken in a free market. Same goes for corporations re: their lending practices, which incentivizes risk because of de facto government guarantees to bail them out if things go sour.
Risky investments usually have bigger payoffs. Companies get more profit if the risks pay off. But in a system where political pull and not good business decisions rule things, taxpayers get stuck with the losses via bailouts if the risks fail. In a free market, companies – not taxpayers – shoulder all of the burden for their actions.
In the segment, I mentioned various ways that Big Government is involved in the financial meltdown and how it rewards mediocrity at taxpayers' expense. Bailouts beget more bailouts, as we've seen over and over going back to at least the savings & loan scandals of the 1980s. Yet Democrats and Republicans want to try to solve things with, yep, another bailout.
The problem is with the fundamentals: Big Government rewarding companies for bad business decisions.
About the debate. This should not be about whether Palin was better than what was expected. Or whether Biden did or didn’t wipe her off the table with his knowledge and experience. It’s about who will be the second most powerful person in Washington. People say the VP decision isn’t that important. I beg to differ. The second most powerful person in the US government and not seen as that important? Do you want to run your company with a good CEO but a CFO who knows nothing of how finances work? Or a COO who knows nothing of commerce? Maybe not.
So I looked at the two candidates with two questions in mind:
1. Who would best be able to help a President achieve the change he is promising?
2. Who do you want to make the decisions and represent your country if the President isn’t there?
That should be easy.
http://angryafrican.net/2008/10/03/biden-vs-palin-you-betcha-or-what-i-want-in-a-vice-president/
Here it is in a nutshell:
1. Bank does stupid sup-prime loan with “no income verification for $300,000 house
2. Bank puts loan in pool of loans and sells as marketable security
3. Investors make big money off of the dividends supported by the mortgage rates
4. Buyer pays Mortgage for 12 -24 months, all of a sudden loan adjusts, buyer can’t pay, buyer gets foreclosed on.
5. House now has a balance of $298,000 BUT low and behold house is now worth $330,000
6. Bank does another stupid sub-prime loan with “no income verification”
7. Bank puts loan in pool of loans and sells as marketable security
8. Investors make big money off of the dividends supported by the mortgage rates And it goes on and on UNTIL:
9. Buyer pays Mortgage for 12 -24 months, all of a sudden loan adjusts, buyer can’t pay, buyer gets foreclosed on.
10. House now has a balance of $328,000 BUT low and behold house is now worth $295,000
11. UH OH!!!
See what we have here?
Corporate greed and now, the Chickens have come home to roost. If the borrower has to pay for their stupid choices, why shouldn't the investors and the Lenders?
I'm just saying...
This is the reason:
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
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