Tag Archives: Bailout

Walter Williams advocates a return to federalism

Walter Williams

A popular editorial from Investors Business Daily.

Here is the question he wants to answer:

If one group of people prefers government control and management of people’s lives and another prefers liberty and a desire to be left alone, should they be required to fight, antagonize one another, risk bloodshed and loss of life in order to impose their preferences or should they be able to peaceably part company and go their separate ways?

The problem is that the federal government is not supposed to tell the states what to do. Every state is supposed to decide how much to tax and what government programs to spend on for themselves.

He continues:

Article I, Section 8 of our Constitution lists the activities for which Congress is authorized to tax and spend. Nowhere on that list is authority for Congress to tax and spend for: prescription drugs, Social Security, public education, farm subsidies, bank and business bailouts, food stamps and other activities that represent roughly two-thirds of the federal budget.

[…]James Madison, the acknowledged father of the Constitution, explained in Federalist Paper No. 45: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce.

Williams ends by hoping for a restoration of respect for the Constitution. That would mean that the Democrats, (the party that advocates top-down control of other people’s lives), would have to be voted out of power.

Walter Williams is my second favorite living economist. Thomas Sowell is still number one, and he has the most popular post on National Review right now.

Canada’s finance minister proposes changes to mortgage lending laws

From the National Post.

Excerpt:

On Tuesday, the Department of Finance announced three changes to the standards governing government-backed mortgages, that come into force April 19. Here are a summary of the changes.

QUALIFYING FOR A FIVE-YEAR RATE

The adjustments to the mortgage framework will require mortgage insurers to ensure that new borrowers qualify for a five-year fixed rate mortgage when calculating the gross debt service and total debt service ratios. The measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.

LIMIT THE MAXIMUM REFINANCING

Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95% of the value of the property. The adjustment will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high-ratio mortgage loan to 90% of the value of the property, consistent with the principle that home ownership is a tool for savings.

DISCOURAGING SPECULATION

This measure will require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. At present, borrowers may purchase a residential property with a 5% down payment. The change will require a 20% down payment for small non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (such as a duplex) will still be able to access government-backed mortgage insurance with a 5% down payment.

But the CEI reports that the Democrat mortgage bailouts encourage fiscal irresponsibility.

Excerpt:

Economists and real estate experts are saying that a $75 billion mortgage bailout program designed by the Obama administration has backfired and harmed the housing market…

[…]Earlier, the government pushed through billions more in other mortgage bailouts, to bail out even reckless high-income borrowers, and forced financial institutions the government took over in the name of fiscal responsibility, like Freddie Mac, to run up billions in losses bailing out irresponsible borrowers.

Banks will now be pressured to make even more risky loans. The House has approved Obama’s proposal to create the so-called Consumer Financial Protection Agency. Government pressure on banks to make loans in economically-depressed neighborhoods was a key reason for the mortgage meltdown and the financial crisis. Yet Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.  The Community Reinvestment Act was a key contributor to the financial crisis.

The mortgage crisis was also caused by the reckless government-sponsored mortgage giants Fannie Mae and Freddie Mac, and by federal affordable-housing mandates. But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

Worse, the Obama Administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation.

Obama’s financial-regulation plan is “largely the product of extensive conversations” with two lawmakers responsible for the corrupt status quo, Chris Dodd and Barney Frank, and it expands the reach of regulations that have been used by left-wing groups to extort pay-offs from banks.

This is why we should have elected an economist like Stephen Harper.

George Will explains how Democrats favor increasing dependency on government

Article here in the Boston Herald. (H/T Dad)

Excerpt:

For congressional Democrats, expanding dependency on government is an end in itself. They began the Obama administration by expanding the State Children’s Health Insurance Program. It was created for children of the working poor, but the expansion made millions of middle-class children eligible – some in households earning $125,000. The aim was to swell the number of people who grow up dependent on government health care.

Many Democrats favor – as Barack Obama did in 2003 – a “single-payer” health insurance system, which means universal dependency on government. The “public option” insurance proposal was to be a step toward that. So was the proposed “alternative” of making 55- to 64-year-olds eligible for Medicare. Both of these dependency multipliers will be revived.

The government used TARP funds not for their stipulated purpose of buying banks’ “toxic assets,” but to pull auto companies and other economic entities into the spreading web of dependency. Servile – because dependent – banks were pliable during the farce of Chrysler’s bankruptcy, but secured creditors resisted when settled law was disregarded. Nevertheless, those creditors received less per dollar than did an unsecured creditor, the United Auto Workers, which relishes dependency on government as an alternative to economic realism.

Democrats’ financial “reforms” may aim to reduce financial institutions to dependent appendages of the government. By reducing banks to public utilities, credit, which is the lifeblood of capitalism, could be priced and allocated by government.

Many Democrats, opposing the Supreme Court, advocate new campaign finance “reforms” that will further empower government to regulate the quantity, timing and content of speech about government. Otherwise voters will hear more such speech than government considers good for them. Such paternalism is American progressivism’s oldest tradition.

The Democrats aren’t the party of making the little guy bigger, they’re the part of making the little guy even smaller than he is right now.

Bigger government means smaller individuals

Consider this article about food stamps from the New York Times. (H/T Protein Wisdom via ECM)

Excerpt:

A decade ago, New York City officials were so reluctant to give out food stamps, they made people register one day and return the next just to get an application. The welfare commissioner said the program caused dependency and the poor were “better off” without it.

Now the city urges the needy to seek aid (in languages from Albanian to Yiddish). Neighborhood groups recruit clients at churches and grocery stores, with materials that all but proclaim a civic duty to apply — to “help New York farmers, grocers, and businesses.” [note who is missing from that list … ed.] There is even a program on Rikers Island to enroll inmates leaving the jail.

“Applying for food stamps is easier than ever,” city posters say.

[…]The drive to enroll the needy can be seen in the case of Monica Bostick-Thomas, 45, a Harlem widow who works part-time as a school crossing guard. Since her husband died three years ago, she has scraped by on an annual income of about $15,000.

But she did not seek help until she got a call from the Food Bank of New York City, one of the city’s outreach partners. Last year, she balked, doubting she qualified. This year, when the group called again, she agreed to apply. A big woman with a broad smile, Ms. Bostick-Thomas swept into the group’s office a few days later, talking up her daughters’ college degrees and bemoaning the cost of oxtail meat.

“I’m not saying I go hungry,” Ms. Bostick-Thomas said. “But I can’t always eat what I want.”

It is not good for people to depend on the government. It turns adults into children. People need to live with the results of their own decisions and not expect to be bailed out by their neighbors. For those of us who are concerned about poverty, we should solve the problem ourselves by private charity. Just taking an interest in your neighbor is a good thing.