September 30, 2008
Remind me why the bailout bill was important
Posted by Joseph Coletti at 9:33 PM
According to McCain this morning, Treasury and the FDIC already have the authority to do most of what the bailout would have allowed them to do. Now it seems the SEC has shelved mark-to-market rules in some cases (pretty much most of them that matter). Even before the vote yesterday, the Fed pumped $630 billion into markets, plus more from other central banks.
So the question seems to be whether we pay for the bailout with taxes (via Congress) or inflation (via the Fed).
The real genius of the Edwards family
Posted by Dr. Roy Cordato at 9:08 PM
This from WPTF:
"John McCain's health care plan is radical. It is rooted in free market economics but in reality it isn't free. It cost people for their health care at every turn."--Elizabeth Edwards
Yep, Lizzy's got us free marketeers there. We keep using that word "free" when in fact we actually want people to pay for what they get. What hypocrites we are.
The End Is Only Another Chapter
Posted by Chad Adams at 4:52 PM
Without a doubt, there is great hysteria and fear being generated about the Wall Street situation and potential fallout. Opinions abound and there are literally hundreds of national voices decrying it, seeking blame, making prognostications and claiming answers. Truth is, we have not faced such a crisis in our nation's history, it did not come upon us suddenly and we will not solve it easily.
What is important, or should be, is the underlying philosophy that our nation embraces moving forward. Do we embrace the notion that our government can solve this problem? Is there a reason to believe that a more socialistic approach is healthy for the long term financial stability of our nation?
Or do we believe that capitalism and the free-market work? Do we understand that capitalism isn't perfect, but that with fits and starts, successes and failures, that it works? Such a system will find a way, it won't be pretty or easy, but it will preserve the integrity of our free-market (well, somewhat free.) Can we reconcile our "gotta have it now" mentality with a slow, painful correction produced by enterprising individuals with a thousand ideas?
It is a critical juncture and one that unfortunately will be dominated by rhetoric due to its timing in proximity to our national elections. But maybe, though our Republic is imperfect, the Public will err on the side of freedom and allow us to correct our own errors of lax credit, speculative loans, and bad governmental policies. We didn't get here overnight. The debate is critical and how we eventually move forward will have great import over our national philosophy over the next two decades!
RE: the end is near—not
Posted by Dr. Karen Y. Palasek at 4:41 PM
Good sense and the good sensible aren't that hard to find.
This editorial from the Pittsburgh Tribune-Review argues that the sky is, in fact, not falling.
The end is near--run for the hills
Posted by Dr. Roy Cordato at 4:10 PM
The Dow is up 490 points, the price of oil is down below $100, and the dollar is strengthening. Yep, things sure are falling apart. The amazing thing is that the performance on the stock market today is being attributed to talk of a new bailout deal. Gee, it couldn't possibly be that on sober reflection there's some relief that the old deal failed, could it? Or maybe a sense that the Bush/Paulson scare mongering is just that? Time is on the side of freedom. The politicians know that they have to "fix" this thing before it fixes itself and they end up with egg on their face.
Know your scams
Posted by Jon Sanders at 3:58 PMThe federal bailout omigodwebetterpassitnoworelsegreatdepressionii! has a familiar sound to me, which I explore in my new Townhall column:
I am TOP OFFICIAL IN FEDERAL GOVERNMENT who have confidence in your ability and reliability to prosecute a TRANSACTION REQUIRING YOUR IMMEDIATE ATTENTION.
We in federal government are interested in PURCHASE OF TROUBLED ASSETS with VALUE WHICH ARE PRESENTLY TRAPPED in housing market crash. In order to commence this business we solicit your assistance to enable us to transfer into YOUR PUBLIC REVENUE ACCOUNT in Washington District of Columbia the said trapped assets. ...
PLEASE NOTE THAT THIS TRANSACTION IS 100% SAFE and we hope to commence the transaction AS SOON AS POSSIBLE. We must ACT NOW to take advantage of this ONCE-IN-LIFETIME OPPORTUNITY for MAKE MONEY NOW.
We are looking forward to doing business with you and solicit your confidence in this transaction. Please acknowledge receipt of this email by DOING NOTHING. Please DO NOT CALL us in Washington any more. We will send you detailed information of this pending project when we STOP HEARING FROM YOU.
GEORGE PRESIDENT BUSH
State auditor might look at F&R fraud
Posted by David N. Bass at 3:23 PM
The state auditor’s office has indicated it might take a look at school lunch fraud in North Carolina.
As previously discussed, Charlotte-Mecklenburg Schools is weighing the idea of doing a more extensive audit of its free and reduced-lunch program. State officials have threatened to take away CMS’ school lunch subsidy if local leaders attempt to do a thorough audit.
This entry in The Rhino Times blog quotes correspondence between Larry Gauvreau, a school board member in CMS, and Tim Hoegemeyer, general counsel for the state auditor. In his note, Hoegemeyer said that an F&R lunch audit would “most likely be on a larger scale than just the Charlotte Mecklenburg School System.” He added:
However, I must stress that as serious as this issue appears to be and as much as Mr. Merritt believes some concerns related to this issue are very real, he can not promise that an audit will be conducted on this matter at this time. Again, this is not because of a belief that it is an unimportant subject but rather it is because the Auditor's Office, while having a tremendously capable and skilled staff, none-the-less has limited resources.
This is certainly not to say that we will not be auditing the FRL but only meant to convey the fact we are looking at the possibility of conducting such an audit and any decision one way or another will have to take into account our resources and current priorities.
The USDA and state and local school officials say that a district can only audit 3 percent of applicants, as required by law, and that any amount above that is impermissible. That’s not good enough for some school board members, like Gauvreau, who are pushing for a comprehensive audit.
Positives in falling market values?
Posted by Dr. Karen Y. Palasek at 1:33 PM
Are falling market values and capital flight ever a useful or even a positive sign? Sure. Bad investments need to be cleared out and avoided. When it comes to policy, the market is fully capable of sending appropriate signals to regulators and the government about what looks too risky or financially unattractive. Consider recent experiences in the Russian stock market, for example.
By some accounts, part of what is happening in Russia is market feedback in response to the Russian government's recent military actions in Georgia. Total capital flight from Russia's financial markets is now in the tens of billions of dollars. Trading has been suspended at some points, and may be again.
Some analysts believe that the precipitous loss of investment and stock values on the Russian market shortened Russia's military excursion into Georgia. If so, more power to the influence of the market. It would be an example of how fighting fire with equal fire may not be necessary--if there are other weapons that can inflict the kind of pain that powers that be must pay attention to.
The purpose of pain (physical, financial, or other) is to get you to stop doing the wrong thing. The purpose of the brain is to help you correctly figure out what that wrong thing is. So thank goodness for negative market feedback; it can be an extremely valuable part of that rethinking process when it's really, really required.
Margaret Atwood on Canada and debt
Posted by Joseph Coletti at 1:02 PM
Atwood's new book is about debt in myths, religion, and literature. She sums up one difference between her country and its southern neighbor:
The typical Canadian story is some genius invents a new thing, can't get any money for it, and takes it to the States.
Steve Horwitz tries to explain things to the Left
Posted by George Leef at 12:50 AM
Economics professor Steven Horwitz has written an open letter to our friends on the Left, explaining patiently that the financial crisis is due to federal meddling and not, as the scapegoating has it, deregulation and capitalistic greed.
We free market advocates are constantly saying that government intervention is counter-productive. This case really shows that we're not just yakking away about theoretical notions. Right now, there are unsophisticated poor people who have lost some of their small wealth because they got into real estate deals that would never have been considered in the days before the federal government pressured banks to make more loans in "underserved areas." The well-intentioned and supposedly progressive, socially-just vision of politicians like Bill Clinton has boomeranged on its intended beneficiaries. Is it not perfectly clear, at least in this instance, that laissez-faire would have been better than political intervention?
Armey on the bailout bill
Posted by George Leef at 11:50 AM
Former House leader Dick Armey here gives a sound rationale for opposing the bailout bill.
Thomas Sowell blows the whistle on Frank and Dodd
Posted by George Leef at 11:36 AM
Barney Frank and Chris Dodd are desperate to get people to believe that the crisis is not in the least their fault. Thomas Sowell here observes that they have played the role of Professor Moriarty in this disaster.
If either of them had any decency, he'd apologize to the people for having pushed the foolish vision of home ownership for everyone and resign.
Fox and Friends goes elitist
Posted by Dr. Roy Cordato at 11:30 AM
I usually watch the Fox News Chanel's morning show, Fox and Friends, before coming to work each morning. In general I am a huge fan. But the hosts' attitude toward popular opinion regarding the bailout have shifted from their typically populist attitudes to one that is decidedly elitist. It is quite clear that Steve, Gretchen, and Brian are disappointed that the bailout went down to defeat yesterday, and they are clearly hopeful that something new will emerge. Like most of the media they are parroting all of Paulson's alarmist lines. But worst of all they are condescending toward the two-thirds of the American public who hate this (raw) deal. First Steve lamented that maybe the American people just haven't had the problem explained to them well enough, implying that he gets it but it just hasn't been dumbed down enough for the rest of us. And then Brian, the usually very funny sports guy who knows absolutely no economics, explained it by saying that it's like the sunny blue skies right before a hurricane hits. He was clearly implying that we are all too stupid to see what's coming and head for higher ground-of course he isn't.
Excellent Mona Charen column on ACORN
Posted by George Leef at 11:24 AM
In this column today, Mona Charen writes about the effort by congressional Democrats to use the bailout bill as a means to funnel public funds into the coffers of the socialist radicals in ACORN.
She says that this is extremely revealing. It sure is.
I'm certainly not whitewashing the GOP, but the Democrats are especially adept at the business of routing tax money into overtly political allies, knowing that the money will redound to their benefit.
The people outrun the socialists--for now
Posted by Dr. Karen Y. Palasek at 11:10 AM
The question is, with recommended promises of further 'help' from legislators looming immediately after the Jewish holidays, how long will the American people be able to stave off their socialist representatives in Congress, the White House, the Fed, and the Treasury? The media, including FoxNews, are nearly 100 percent bad on this as well. And do we really believe that the taxpayers who will foot this socialist bill will individually be recompensed? Come on.
The Federal Reserve, responsible for all of the 'injection effects' that caused the economic and mortgage boom in the first place (and by the way masked any real gains from productivity and technology in the tidal wave of money they have flooded into the American and international markets), is first and foremost responsible for the mess.
The Fed does not create prosperity by creating money and credit. Money and credit, as the author of the above linked Wall Street Journal article correctly notes, stand in the center, as an intermediary good in every exchange, but they are not neutral intermediaries. New credit goes to particular individuals and enterprises—the injection analogy—and when they are withdrawn or even tapered off, especially when they have been too risky and unwarranted in the first place, are necessarily painful and unpleasant.
No addict can withdraw without suffering during withdrawal; the Fed has allowed, and Congress has insisted, that credit markets extend and expand their reach to risky credit consumers (mostly in the form of home mortgage loans), with the certainty that there must be a stopping point. The longer the credit addiction, the larger the number of banks and the bigger the volume of bad debt.
One might reasonably ask why, if it's a certainty that excessive credit creation precipitates the severe contraction needed to clear out the bad debt and unwise investments, we don't simply outsmart the process and not get suckered in. Riding the up-wave can be fabulous, as long as you gauge the turning point. What the Fed has done—in full concert with the socialist and economic engineers in Congress—has been to create the tidal wave and urge everyone to get aboard. They've 'done their job' of promoting employment and home ownership, and can claim plausible deniability for the devastation once that wave crests and starts crashing into reality.
So, thanks to the freedom-loving sense of the American taxpayers, who flooded their representatives with a rejection of socialist proposals, we haven't yet crippled the economy for the future. Markets will rebound as long as Congress and the Fed don't get hold of them.
Freedom is on the run--from the very institutions and representatives that claim to be their guardians and champions, unfortunately.
A refutation of the Big Lie
Posted by George Leef at 10:57 AM
Three cheers for the person who put together this You Tube piece on the financial debacle. It thoroughly refutes the Big Lie that Obama and his allies are peddling that the crisis is due to laissez-faire philosophy and deregulation.
There is always a danger when you try to lie your way out of trouble that you'll get caught in it and then the consequences turn out to be much worse.
I wonder if there were people in Democratic inner circles who said, "Would it be better if we admitted that legislation we pushed and institutions we dominate were at fault and now that we see the bad results we'll make the necessary changes?" Even if so, people with the "best defense is a good offense" mindset won out.
Politics and the Pulpit
Posted by Becki Gray at 10:30 AM
There undoubtedly are lots of prayers being offered today – many for Rosh Hashanah, the Jewish New Year, many for a wise and reasonable solution to the financial crisis and surely some for a steady supply of gasoline. Hood also touched on the later two today here. Many prayers around the Locke Foundation are that government will just get out of the way!
Cal Thomas talks about political advice offered from the pulpit in his column today.
“Whether the law is repealed, or not, churches and ministers would do better to keep their attention focused on the things above, rather than the things below, because politics can be the ultimate temptation and pollute a far superior and life-changing message.”
JLF is hosting Cal Thomas at a headliner luncheon on October 22 in Asheville. Sign up here to join us and hear more from Cal Thomas.
Should McCain be worried?
Posted by David N. Bass at 10:28 AM
I took some heat for a column I wrote last month discussing Barack Obama’s campaign in North Carolina. Some readers thought that pointing out Obama’s targeting of the Tar Heel State, and its northern neighbor Virginia, was tantamount to handing both states over to him. Contrary to that, my goal was to point out that Obama is taking this state seriously and that the McCain/Palin combo hasn’t even set foot here.
I was again reminded of this by a story in the News & Observer covering Obama’s speech in Greensboro on Saturday. From the N&O article:
The post-debate trip to North Carolina -- followed by a stop later in the day in Virginia -- underscored the importance that Obama is placing on two traditionally red-leaning Southern states.
This was the fourth general election appearance by Obama in North Carolina, where he continues to draw immense crowds not seen here since the 1980 campaign of Ronald Reagan. It was Biden's second visit. By comparison, McCain and his running mate, Sarah Palin, have yet to campaign here, and McCain officials could not say when they might.
Polls continue to show the race a dead heat, and some even give Obama a slight edge. The possibility of an economic implosion hasn’t helped McCain’s position, either. So, a warning: we can bloviate about how Obama has no chance here, but that doesn’t change the electoral facts. McCain would be wise to send some resources this way.
Why let the market process work when you can act as if you're important?
Posted by Mitch Kokai at 09:50 AM
Absent government interference with basic economic laws, North Carolinians would not be facing gas lines and shortages. In the wake of Ike, prices would have skyrocketed — forcing people to think twice before making panic purchases of gasoline. Pre-Ike supplies would have lasted longer.
In addition to limiting purchases, the higher prices (acting as an "invisible hand") would have steered more gasoline supply to North Carolina. Customers would have grumbled about the high prices, but I suspect they would be grumbling less than they're grumbling about empty gas pumps now.
Instead of allowing the market process to work, state officials activated a price-gouging law that forces gas station owners either to ignore the need for higher prices or to hire a legal team that can justify higher prices to skeptical politicians.
Seeing the negative consequences of the price-gouging law, the politicians could say, "You know what. It just didn't work. We're out of gas. Let's scrap this thing." Instead, we get this:
Gov. Mike Easley says gasoline
distributors in Charlotte can get more fuel for stations they serve if
they haul their trucks to the coast.
Easley said Monday gas at port terminals in Wilmington and two other
states should help reduce supply problems in North Carolina -
particularly in Charlotte. Some outlets have been empty for days.
The governor said his office is trying to connect needy distributors to the oil companies with port supplies.
What's sad about this mess is that Gov. Easley likely believes he's helping people by inserting himself into a process that works just fine without him. Had he never activated the price-gouging law in the first place, he wouldn't feel the need to try to micromanage gas supplies now.
Remember this incident the next time you think government offers the best solution to a problem.
Is she recruiting the bear?
Posted by Mitch Kokai at 09:32 AM
Critics of First Lady Mary Easley's recent pay hike might have been surprised Monday to see video of her accompanying her husband on a jaunt to Grandfather Mountain.
Why surprised? University officials have said the 88-percent pay raise for Mrs. Easley's N.C. State University job was tied to a status change from part-time to full-time employment. Unless Mrs. Easley took a day off from work, one must assume she was trying to recruit a speaker for the university's Millennium Series.
Maybe the Grandfather Mountain bear is her target.
Latest dispatches from the political trail
Posted by John Hood at 09:30 AM
• Pat McCrory inserts himself into the Citibank/Wachovia story, seeking assurances from Citi officials that Charlotte will retain a significant managerial and employment presence for the combined bank. McCrory also warns that the city's gas shortage will persist for another week or two. The campaign cancels scheduled events as he heads back to Charlotte.
• Beverly Perdue's presence in the governor's race draws attention to the job of lieutenant governor, and to the candidates trying to replace her. Walter Dalton and Robert Pittenger trade jabs on recent Senate votes and controversies.
• While the Kay Hagan and Elizabeth Dole campaigns spin the bailout vote, Carl Mumpower praises his congressional opponent, Rep. Heath Shuler, for voting against the bill and for the taxpayers. B.J. Lawson criticizes his opponent, David Price, for casting a yes vote. Price says that the bill's defeat will deepen and lengthen the nation's economic woes.
Today's Carolina Journal Online features
Posted by Mitch Kokai at 06:38 AM
Today's Carolina Journal Online exclusive features Don Carrington's report about a questionable real-estate transaction involving North Carolina's state cultural resources secretary.
John Hood's Daily Journal focuses on the role government leaders played in contributing to gas shortages and the shaky U.S. financial sector.
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