American Elephants

Did You Enjoy The Housing Bubble’s Collapse? Obama Wants To Do It Again! by The Elephant's Child

Barack Obama has claimed that the financial crisis was caused by all the money George W. Bush spent on “a dumb war” and the tax-breaks he gave only to the rich, or something like that. But most people, I think, recognize the collapse of the housing bubble.  It began with liberals’ conviction that banks wouldn’t lend to blacks and Hispanics because they were racist. They called it “Redlining.” Studies showed that the denial of loans was related to the inability of customers to pay the loans back, but everybody thought that encouraging more Americans to own their own homes was a very good thing. Home ownership meant that people would be more involved in good communities, and good schools.

They passed the Community Reinvestment Act so that banks were forced to reduce down payments and lend to a lot of people that would not get loans under normal prudent rules of banking. And when not enough minorities were owning their own homes, they pushed a little harder on the banks. Fannie Mae and Freddie Mac bundled those mortgages and sold them to Wall Street Investment houses who sold them to investors around the world, and when it became clear that people weren’t going to be able to pay their mortgages, banks everywhere were left holding the bag, and the Wall Street investment houses either went under of had to be bailed out by the federal government.

This cost the taxpayers close to a trillion dollars and put the economy in a hole, in which we remain, because the administration was more interested in “transforming America” than in doing the things necessary to heal the economy. Liberals said it was all the banks’ fault for “deceiving” all those poor people into thinking they could afford to buy homes, and the banks should be punished and those poor people should be allowed to keep their homes anyway. Big lesson for us all to learn.

Except they didn’t learn anything, and they are about to do it all over again.

The federal government is beginning another initiative to force banks to lend mortgage money to low-credit-rated blacks and Hispanics — specifically blacks and Hispanics — and is threatening and already imposing punitive fines if they don’t. This time they are going even farther, and are going to take over the credit rating agencies and force them to change their standards to accommodate blacks and Hispanics so that nobody will be able to tell who is a bad credit risk and who is not. The federal government is going to impose its will on the home-loan industry and force another round of bad loans, because they believe everything is about race.

This time the program comes from the brand-new Consumer Finance Protection Bureau, headed by the illegally appointed Richard Cordray, [without Senate approval when the President claimed the Senate was in recess because he said so, but it wasn’t]. Authorized by the disastrous Dodd-Frank bill, it has suddenly acquired 900 employees. The CFPB has just announced that it is adopting a 20-page “Policy Statement on Discrimination in Lending.”

Two weeks ago, Wells Fargo gave in to a Justice Department offensive and paid $175 million for “alleged past discriminating against minority borrowers.” The bank had received an “outstanding” grade in its most recent Community Reinvestment Act exam. The government did not bother to prove discrimination in a single instance but relied instead on statistics showing lower rates of homeownership in minority neighborhoods. The Justice Department ‘s Thomas Perez, who heads the campaign, says banks discriminate “with a smile” and “fine print” and are “every bit as destructive as the cross burned in a neighborhood.” Interesting language.

There are some simple rules for escaping poverty in America. Graduate from high school, don’t get married until after you graduate, don’t have babies until after you get married, and stay off drugs. Works most every time.

Combine this exciting new program with the president’ new budget that aims to spend $46.2 trillion over the next ten years. Add in the fact that this is a 57 percent increase over today’s spending levels and the budget proposes to have debt remaining permanently above 100 percent of GDP. And some people actually propose to vote for this man because he is “likeable.” Have we reached such a point?


There is Nothing New in the Obama Administration, Just More of the Same Old Tired Ideas. by The Elephant's Child

President Obama seems to have much the same view of money as some of his most ardent supporters.  The government has money, and he gets to spend it, with the help of Congress.  And where does the government get the money?  The government takes the money from undeserving rich people, and it needs to be spread around to people who need it more.

The White House is finally beginning to realize that in spite of their well-intentioned Stimulus Plan, somehow it isn’t working.  The jobless rate keeps going up.  Teenage unemployment is over 50% (we told you that would happen if you insisted on raising the minimum wage).  California’s great Central Valley has unemployment rates reaching 40% in some areas.  Michigan has double-digit rates of joblessness. Christina Romer and Jared Bernstein, White House Economists, estimated that the spending of the Stimulus plan would keep the jobless rate below 8%, but that was then and this is now.

Alarmed by the rising rates, Democrats are rushing to “do something;” after all, there are elections next year.  The White House solution seems to be to bribe employers to hire new workers — only for a couple of years.  The current rate is 9.8% and may well continue to rise or at least stay high well into the election campaign of 2010.

Few things so concentrate the minds of politicians as the threat of very angry voters.  The Wall Street Journal reports:

The tax credit would also inevitably go to some employers already planning to hire, or reward companies that lay off some workers only to hire others to take advantage of the tax credit. And it would reward parts of the country that are growing, such as Texas, at the expense of those that aren’t, such as Michigan. In other words, it is a very inefficient business subsidy.

We know all this because a new jobs tax credit has already been tried—in the Carter Administration. In 1977 as he entered the White House, Jimmy Carter proposed a jobs credit and a Democratic Congress passed it. Its unfortunate history was recounted in 1980 by then-Treasury official Emil Sunley in a chapter of “The Economics of Taxation,” a book edited by Henry Aaron and Michael Boskin for the Brookings Institution.

The lack of job creation is a huge problem.  The misconceptions of the White House about America’s small business job-engine are really quite astounding.  When you keep imposing financial burdens on hiring, you are not going to get very much of it.  When government is imposing new taxes, raising health care costs, raising energy costs and at the same time demonstrating government’s interest in controlling business, taking over companies, imposing new mandates and regulations that limit what a businessman may do; any desire to expand, hire, take new risks is dampened down by cold hard fear.

A small temporary bribe is really not going to help.  Don’t Democrats ever learn from history?

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