American Elephants

Andrew Klavan Explains the Financial Crisis, And Gets it Exactly Right! by The Elephant's Child
May 7, 2010, 4:01 pm
Filed under: Capitalism, Economy, Law, Taxes | Tags: , ,

Andrew Klavan tackles the financial crisis, and explains the connections.  He also explains, with brief humor, why the Dodd Financial Reform bill is such a disaster.  Under the guise of “protecting consumers” they encourage risk on Wall Street, offer taxpayer bailouts, and don’t reform any of the things that need reforming.

The Financial Crisis was caused by government, not Wall Street.  It was not caused by deregulation, but by bad regulation.  Fannie and Freddie, the Government Sponsored Enterprises, are in desperately bad shape.

Freddie Mac just posted another staggering quarterly loss — $8 billion in just the first quarter.  That’s after taxpayers have supplied $60 billion in bailouts.  The Republican alternative to the Dodd bill aims to wind down and break up Fannie and Freddie on a 15 year timeline, and to limit taxpayer exposure in the meantime.  The Democrats want to kick that problem down the road, and they are still encouraging home loans to buyers who cannot meet prudent banking standards.

Economist Alan Reynolds points out Obama’s tendency to cram bills through by picking a business to demonize.  Anthem Blue Cross Blue Shield was the victim in the Health Care Bill when they were accused of raising premiums “by anywhere from 35-39 percent” except no one could find anyone who paid 39% more.  For the Dodd Bill, the demon is Goldman Sachs, with a suspiciously timed civil suit as a flimsy excuse.  And of course the bill is favored by Goldman, which tells you how straightforward this is.

So there’s a lot of reading if you want to bone up on the Dodd Bill, but Andrew Klavan has it pretty much exactly right.

%d bloggers like this: