Shocking. Anyone still not see how the government causes more problems than it cures? Of course the policies were set in place with the best of intention in mind, that being to help those who were financially borderline for a solid loan to attain one...at high risk. The government took a big gamble with our tax dollar, again, for a purpose that had honorable intentions (that being to help out lower income families), and lost big for us by exposing tax dollars to an unacceptable level of risk that the vast majority of responsible, free market companies wouldn't touch. The result:
The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans.
So to reiterate, the government backed agencies decided to take higher risks with tax payer dollars, seeking to increase their own revenue, and now, not only have we lost the tax dollars used to purchase these loans, subsequently, liberal members of Congress are looking to take even more tax dollars from us to "fix" the problem. You can see where this is going. How are these lessons lost on our so called leaders? Despite the intentions of central planners to assist people, it was greed on the government level and the lack of accountability that lead the vast majorities in the first place, and instead of helping a small percentage of the population, they hurt the vast majority of the population instead.
-Caomhin
Showing posts with label Subprime. Show all posts
Showing posts with label Subprime. Show all posts
07 May 2008
Political Subprime Madness
Unfortunately, as the subprime woes continue to play out across our country, we are faced with an ever growing possibility of the Democratic Congress using this situation as political power play for votes. The Christian Science Monitor has a solid article on how the Democrats are seriously eyeing a plan to have tax powers bail out Fannie Mae and expose citizens tax payers to increased risk that their “investments” may default. This is a terrible idea on many levels. First, we are disallowing the free market to self correct and once the government gets involved, it will not simply walk away in a year or two. Secondly, this violates a general principle of government, and that is, to do what is good for the majority of the citizens while providing the rules and laws that govern the land. In Congress’ minds, they are doing the “majority” a favor, but statistics will show a vast majority of homeowners have been exceedingly responsible and the current situation, in terms of sheer percentage of foreclosures, does not directly impact a vast majority of the nation. To step in and bail out a select few is yet another way the government is looking to choose winners and losers.
Is it really fair to allow this bail out to assist only those who were irresponsible enough to engage in bad loan behavior in the first place while charging responsible entities extra tax dollars to “correct” the problem? Bad decisions were made both on the part of lenders as well as borrowers and the lessons learned will undoubtedly self correct in short order, that is, of course, if the government does interfere. Additionally, as we see ballooning deficit spending, the government would be extremely irresponsible by exposing itself and the tax payers to high risk loans.
If individuals wish to engage in high risk loans they should rightfully be compensated, the higher the risk, the higher the interest paid and this “investment” would be much riskier than junk bonds. It is the not government’s role to fulfill the type of function they are dangerously close to undertaking. As they pour tax dollars into this program they will widen the deficit. An agency as dysfunctional and wasteful as the federal government has become has no logical reason to get involved in this situation without further damaging itself. If this were even a case of a simple shift in tax dollars in one area to another, I would still oppose this measure. Worse, it will create yet expenditure without a corresponding cut in spending. All for votes. Are we left with no statesmen or even rational politicians?
-Caomhin
Is it really fair to allow this bail out to assist only those who were irresponsible enough to engage in bad loan behavior in the first place while charging responsible entities extra tax dollars to “correct” the problem? Bad decisions were made both on the part of lenders as well as borrowers and the lessons learned will undoubtedly self correct in short order, that is, of course, if the government does interfere. Additionally, as we see ballooning deficit spending, the government would be extremely irresponsible by exposing itself and the tax payers to high risk loans.
If individuals wish to engage in high risk loans they should rightfully be compensated, the higher the risk, the higher the interest paid and this “investment” would be much riskier than junk bonds. It is the not government’s role to fulfill the type of function they are dangerously close to undertaking. As they pour tax dollars into this program they will widen the deficit. An agency as dysfunctional and wasteful as the federal government has become has no logical reason to get involved in this situation without further damaging itself. If this were even a case of a simple shift in tax dollars in one area to another, I would still oppose this measure. Worse, it will create yet expenditure without a corresponding cut in spending. All for votes. Are we left with no statesmen or even rational politicians?
-Caomhin
10 March 2008
Vindicated on Inflation Worries
I've gone off on a tangent a few times telling everyone how inflation was the far greater worry for the economy as a whole than the subprime crisis. Indeed, I've had my fair share of intellectual arguments on this subject. I've maintained that the Fed should not be slashing interest rates at a time when the American dollar has been drastically weakened as it would simply lead to an even weaker dollar, increased inflation, and have a far more wide ranging negative impact on the economy. Indeed, this is what is happening. Oil hit another high today, briefly hitting $108 on a "weakened dollar" among other geo-political factors. The irresponsibility of lenders and borrowers with regard to the subprime mess has been appalling, but a government bail out is equally irresponsible as the burden should not shift to the people who responsible enough to do the right thing when acquiring a home.
Well, I was reading some articles on Bloomberg today, and the one headline I came across was a great highlight of some of the things I've been saying with regard to the worries I've expressed on inflation, "TIPS' Yield Shows Fed Has Lost Control of Inflation." One of the most worrisome parts of this article:
The last time investors were so worried about faster inflation amid slowing growth, Paul A. Volcker presided over a Fed that would raise rates as high as 20 percent to end the stagflation crisis of the 1970s, according to Seth Plunkett, a bond fund manager at American Century Investment Management in Mountain View, California. The firm manages $20 billion.
That's scary bad, Jimmy Carter bad. Rapid inflation will harm far more people in far more ways than just the subprime crisis. An editorial by Caroline Baum, also from Bloomberg's website, does a great job of presenting a great deal of how I feel, and probably more effectively, here's the takeaway:
-Caomhin
Well, I was reading some articles on Bloomberg today, and the one headline I came across was a great highlight of some of the things I've been saying with regard to the worries I've expressed on inflation, "TIPS' Yield Shows Fed Has Lost Control of Inflation." One of the most worrisome parts of this article:
The last time investors were so worried about faster inflation amid slowing growth, Paul A. Volcker presided over a Fed that would raise rates as high as 20 percent to end the stagflation crisis of the 1970s, according to Seth Plunkett, a bond fund manager at American Century Investment Management in Mountain View, California. The firm manages $20 billion.
That's scary bad, Jimmy Carter bad. Rapid inflation will harm far more people in far more ways than just the subprime crisis. An editorial by Caroline Baum, also from Bloomberg's website, does a great job of presenting a great deal of how I feel, and probably more effectively, here's the takeaway:
You probably can sense where I'm going. Today's economic and financial crisis would resolve itself more quickly and efficiently if the government got out of the way. Yes, there would be pain. Some banks would fail. Others would clamp down on credit to atone for the years of lax lending standards. Homeowners-in-name-only would become renters. Housing prices would fall until speculators found value.
That's not going to happen. The bigger the mess, the more urgent the calls for a government solution, the more willing government is to oblige.
We want laissez-faire capitalism in good times and a government backstop against losses in bad times. It's a tough way to run an economy.
-Caomhin
04 January 2008
Don't Do It President Bush
News broke today that President George W. Bush is considering an economic stimulus package. It's irresponsible of President Bush to implement such a plan. President Bush has been a far superior President than Clinton ever was, in every way. To do such a thing would tarnish his record. He inherited a recession from Clinton due to tax rates that were too high and over speculations in the market. To date, he has done a pretty solid job of letting the free market reign, and his tax cuts are a major reason why a recession has not started since he took office. It's basic economics that when a tax increase is implemented against what Liberals declare as their enemies, that being corporations and high income earners, the impact is directly passes onto the middle and lower classes as they simply will not absorb a tax increase. This is an inflation tax. As the cost of production rises prices rise. The rich do not feel the impact of this, the middle and lower classes, however, most certainly do feel this impact. This basic logic is lost on the Left.
Among some of the problems with the economy today is the sub-prime market, in which irresponsible lenders, and irresponsible borrowers, have cost the economy dearly. There should be no bail out, there should be no hand-out, the market should be allowed to self correct. By providing these groups with tax funds taken from every individuals' earning, all people are learning is that irresponsible behavior will be rewarded. That's not to say some hardworking, honest people are getting beaten down, but the great majority of those in this market knew exactly what they were getting into. Another reason given is that of rising gas prices. See my previous post for my take on that.
On Wednesday, the Club for Growth release a study that proves that the market under performs when Congress is in session. A so called "stimulus" package that President Bush would put forth would do far more damage than good. First, our deficit is entirely too high, a "stimulus" package would result in a larger deficit. President Bush has done a good job of shrinking the deficit since our government began to run one due to discretionary spending due to the War on Terror. Second, government spending has a very, very, very poor record on actually being effective on what it is used for. Third, Americans need more empowerment to control their own destinies rather than less.
Unless this "stimulus" package would be a drastic reduction in government spending, coupled with a slash in tax rates, it will do far more harm than good. By reducing government spending and cutting taxes, two positives will be achieved. The first positive will be a reduction in deficit spending which will strengthen our dollar. The second positive, by cutting taxes, will be positive for the American tax payer, who is grossly overburdened, and who will have more disposable income and help offset the increase in gas prices. By restoring American citizens to a higher level of income, reducing the inflation tax, and strengthening our dollar, every one will be better off. It is completely mind boggling that President Bush would even consider for a microcosm of a second to follow a plan that would pursue the exact opposite positions and more than likely plunge us into a recession, one the media, and of course, the Liberals have been hoping for just as much as they have been hoping for Iraq to be a failure (old article, as it has long been their sick hope). Hopefully, with the same resolve that President Bush resisted the Liberal love-fest for defeat in Iraq, the Economic lunacy they are seeking will be avoided and turned into a great victory for America.
-Caomhin
Among some of the problems with the economy today is the sub-prime market, in which irresponsible lenders, and irresponsible borrowers, have cost the economy dearly. There should be no bail out, there should be no hand-out, the market should be allowed to self correct. By providing these groups with tax funds taken from every individuals' earning, all people are learning is that irresponsible behavior will be rewarded. That's not to say some hardworking, honest people are getting beaten down, but the great majority of those in this market knew exactly what they were getting into. Another reason given is that of rising gas prices. See my previous post for my take on that.
On Wednesday, the Club for Growth release a study that proves that the market under performs when Congress is in session. A so called "stimulus" package that President Bush would put forth would do far more damage than good. First, our deficit is entirely too high, a "stimulus" package would result in a larger deficit. President Bush has done a good job of shrinking the deficit since our government began to run one due to discretionary spending due to the War on Terror. Second, government spending has a very, very, very poor record on actually being effective on what it is used for. Third, Americans need more empowerment to control their own destinies rather than less.
Unless this "stimulus" package would be a drastic reduction in government spending, coupled with a slash in tax rates, it will do far more harm than good. By reducing government spending and cutting taxes, two positives will be achieved. The first positive will be a reduction in deficit spending which will strengthen our dollar. The second positive, by cutting taxes, will be positive for the American tax payer, who is grossly overburdened, and who will have more disposable income and help offset the increase in gas prices. By restoring American citizens to a higher level of income, reducing the inflation tax, and strengthening our dollar, every one will be better off. It is completely mind boggling that President Bush would even consider for a microcosm of a second to follow a plan that would pursue the exact opposite positions and more than likely plunge us into a recession, one the media, and of course, the Liberals have been hoping for just as much as they have been hoping for Iraq to be a failure (old article, as it has long been their sick hope). Hopefully, with the same resolve that President Bush resisted the Liberal love-fest for defeat in Iraq, the Economic lunacy they are seeking will be avoided and turned into a great victory for America.
-Caomhin
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