Rep. John Shadegg on the "Bailout"

Looking at the stock market Tuesday it appears the world hasn't come to an end - yesterday's Dow Jones close was -777, today's is +485, so we're 292 points closer to last Friday's close. I expect it will be very up & down for the next few weeks.

Newsmax.com – Ariz. Rep. John Shadegg Takes on Henry Paulson:
"“The sky is not falling,” declares Rep. John Shadegg, and Congress will act to deal with the economic crisis without giving Treasury Secretary Henry Paulson a “blank check.”

The Arizona Republican writes in Monday’s USA Today: “Every Republican who voted against the Emergency Economic Stabilization Act on Monday believes that Congress must address this crisis. They take it seriously and stand ready to vote for reasonable legislation…

“Paulson’s $700 billion plan was fundamentally flawed. The bill asked for a blank check. It did not specify which assets could be purchased or the procedure by which they would be purchased…

“Secretary Paulson is getting a lesson in civics. The world he has entered is different than the wheeling-and-dealing Goldman Sachs world where he made his fortune.”

Shadegg called for the suspension of the “mark to market” accounting rule that requires mortgage-backed securities to be valued at “fire-sale prices.” That would help prevent the current crisis from reoccurring, but Shadegg said it is “incomprehensible” that Paulson and Congressional Democrats refused to include such a provision in the bill.

He also called for an increase in the Federal Deposit Insurance Corp.’s $100,000 limit on coverage to alleviate the concerns of millions of Americans, and said “it’s hard to imagine why anyone would oppose such a change.”"

Blame Fannie Mae, Freddie Mac, and Congress

We should get the government out of the mortgage business - this experiment has failed. Of course, this probably won't happen because we've created another big bureaucracy that exists primarily to feed, grow, and defend itself.

The federal government's efforts to create affordable housing by manipulating the mortgage market actually resulted in artificial inflation of home prices. The rule of unintended consequences strikes again, although this mess was pretty obviously coming if you remembered the law of supply and demand. Congress makes more money available and prices go up ... until the bubble bursts - they should get out of this business.

Note that the "total exposure" mentioned below is practically the same number as the proposed bailout - taxpayers now get to pay for bad loans purchased in an effort to appease Congress after they got caught with their fingers in the till (or at least sleeping at their posts).

Also note that elections have consequences - in 2005 the Republican minority was unable to pass reform legislation due to to the Democrat majority's resistance.

Blame Fannie Mae and Congress For the Credit Mess - WSJ.com:
"Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess.

How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of 'affordable housing.' They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.

It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates.
. . .
The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.

In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo.
. . .
In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.

Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm."

The Fallacy of 'Green Jobs'

Excellent comments from John Stossel -

RealClearPolitics - Articles - The Fallacy of 'Green Jobs':
"Politicians always promise that their programs will create jobs. It's used to justify building palatial sports stadiums for wealthy team owners. Alaska Rep. Don Young claimed the infamous 'bridge to nowhere' would create jobs (link). The fallacy is the same in every case: Even if the program creates jobs building bridges or windmills, it necessarily prevents other jobs from being created. This is because government spending merely diverts money from private projects to government projects.

Governments create no wealth. They only move it around while taking a cut for their trouble. So any jobs created over here come at the expense of jobs that would have been created over there. Overlooking this fact is known as the broken-window fallacy (link). The French economist Frederic Bastiat pointed out that a broken shop window will create work for a glassmaker, but that work comes only at the expense of the cook or tailor the shopkeeper would have patronized if he didn't have to replace the window.

Creating jobs is not difficult for government officials. Pharaohs created thousands of jobs by building pyramids. Our government could create jobs by paying people to dig holes and then fill them up. Would actual wealth be created? Of course not. It would be destroyed. It's like arguing the hurricanes create jobs. After all, the destruction is followed by rebuilding. But does anyone seriously believe that replacing destroyed buildings creates wealth?
. . .
Politicians have a lousy record trying to make "strategic investments." President Jimmy Carter's Synthetic Fuels Corporation cost taxpayers at least $19 billion but failed to give us alternative fuels (link). In the 1950s Japan's supposedly omniscient Ministry of International Trade and Investment rebuffed Sony and was sure the country should have just one car producer (link).

Neither Gore nor Obama can know how the money should best be invested. Investing is about predicting the future, and the future is always uncertain. We know from experience that people who have their own money at risk -- who face a profit-and-loss test and possible bankruptcy -- are much better predictors than people who play with other people's money. Just compare North and South Korea.
. . .
If "green jobs" make so much sense, the market will create them. They will be created by private entrepreneurs and venture capitalists who are eager to profit from winning investments. The best ideas will rise to the top, and green energy will gradually replace coal and oil.

If politicians were serious about creating jobs and cleaner technologies, they would step aside and let the free market go to work."

Outreach, Empowerment, Funding, & Networking don't work if their leaders preach hate

Another reason for energy independence - the people selling us oil are using our money to spread hatred - of us. Desipte the apparent objectives of our own "Hate America" crowd, we don't really want our grandchildren to end up broke & powerless in a world that hates them.

Islam's Advance: PostGlobal on washingtonpost.com:
"Why have many Muslims in the UK resisted full integration into British society?

The British government has been trying to address this issue for the last decade, mostly by using the discourse of 'multiculturalism.' According to that line of thinking, solutions to alienation among Muslims include community outreach and empowerment programs, funding for youth groups and social networking sites, and large inter-faith conferences.

British Muslim leaders have largely supported these initiatives and helped generate the impression, at least in government circles, that everyone is working together to separate rogue extremists from the religious establishment. But Monday night, the Dispatches documentary series revealed a very different picture of what goes on in some of the UK's flagship Muslim institutions. Why have many Muslims in the UK resisted full integration into British society?

The filmmakers went undercover at the London Central Mosque in Regent's Park, one of the most prestigious in the country, to show the discord between what imams preached outwardly to the public and what they preached to their faithful in private. Many exalted interfaith dialogue to the government and mainstream media, but turned to teaching radical and isolationist doctrines once behind closed doors.

According to the documentary, they teach the faithful that God orders them to kill homosexuals and apostates; that they should curtail the freedom of women; and that they should view non-Muslims in a derogatory manner and limit contact with them. Many of these leaders are trained in Saudi Arabian Wahhabi philosophy, and use Saudi-approved textbooks and pedagogical materials to teach young students.
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Saudi Arabia's education and religious outreach programs, whether in the form of textbooks, library endowments or madrassah construction, constitute one of the largest aid programs in the world - roughly $4 billion a year - and introduces hundreds of millions of schoolchildren to radical Wahhabi doctrine via Saudi Embassy-run schools and educational programs in mosques."

Is Your Media Biased or Objective?

Anyone who looks at the coverage objectively will see that Sarah Palin & Joe Biden are being treated differently. Is this sexism? Sometimes, yes, but mostly it is media bias against conservatives.

It amazes me that professional journalists have abandoned their ethics to impugn anyone who has slight differences of opinion regarding how government should operate. When I was growing up, journalists kept their opinions to the editorial pages - now they blatantly hype Obama and fiercely attack any who oppose him.

Republican or Democrat, their solution to any problem is more of our money, and more power for the government - the differences between them are usually in the percentage of the increase, not in the fundamental philosophy.

If differences of opinion can't be discussed in public without all this emotion & skulduggery, why bother having elections at all? Feudalism worked well for the elites in the middle ages - perhaps we should go back to that? Or maybe we could agree that honorable people can have different opinions and that's OK ...

Striking Back at Critics, One by One - washingtonpost.com:
"From the moment she was introduced Friday, Palin has been on the receiving end of an almost unprecedented barrage of criticism. On Wednesday night, she took the opportunity to answer back, and she put her critics -- Democrats, the media and the Washington political establishment -- on notice that she is ready for a fight.
Palin knew her targets and went after them one by one. It was an us-vs.-them attack, designed to attach Obama and the Democrats to the cultural elite and to tie herself and McCain to the values of the hardworking, God-fearing, patriotic middle of America. But while her speech seemed aimed at energizing the Republicans' conservative base, Palin also sought to introduce herself as a fellow reformer with a maverick's spirit to match the message that McCain hopes to send from here on Thursday night and through the rest of the general-election campaign."