So, as I’ve discussed in a previous blog (and as others can testify to) one of the primary catalysts for our current economic woes was the sub-prime housing market. A government forced program whereby banks were at first forced to give loans to people they knew could not pay them back because the federal government threatened to sue and prosecute/persecute them if they did not make these loans (and once it was clear the banks couldn’t win, the bankers took on an attitude of “well, if we’re going to be forced to lose money, I’ll get mine while I can”; Not exactly ethical behavior, but certainly predictable human behavior). Was the subprime housing market the only cause? Hell no. You had an entire economic system ruined by government welfare, subsidies, lack of regulation in the right places, over regulation in the wrong places, and truly idiotic interest rate and monetary policy from the Federal Reserve.
Among other things, this led to an inflated economy on a whole, and an obscene bubble in the housing market. Now when that bubble burst for the first time, we had our current little woes. The problem housing prices are still in a bubble and we have at least one more bubble burst and massive drop in housing prices left (and I will support this claim in a minute). Now there are two ways to handle this. The first way would be the socialist way of using the government to throw money and subsidies and regulation at the problem trying to stop the problem. The flaw with that system is that you can’t stop the problem, and trying to stop it only makes the eventual bubble burst even worse. (If Greenspan hadn’t fiddled so much with interest rates back in the 90’s and just let the dot com bubble hit America full force we might have still had a housing market crash, but it wouldn’t have been so bad…and if the government hadn’t done a thousand other things we would have had minor little quarter long recessions in this or that sector over the last couple of decades, but not the system wide failure we have going on right now). The other ways to deal with this is the capitalist model—do nothing; take the hit from the bubble burst, tighten our belts one more notch for a while, but come out still on our feet. The capitalist model will have the hit coming sooner, but it will be like getting sprayed with a lawn hose in the face; annoying but tolerable. If we go with the socialist model, it won’t hit as soon but it will feel like being hit with a fire house at close range…and whether we will get up after that is anyone’s guess.
So which way is the Obama administration going? Is it really that hard to guess?
Well let’s look at a few facts.
Fannie Mae, you know the people who in cahoots with Freddie Mac, helped engineer the entire sham that was the secondary loan market for sub-prime loans which was a chief cause of the housing bubble and its ultimate demise, is asking for more money from the government. $ 8.5 billion in fact. Now, sadly we’ve reached a point where billion is not a large number. But that doesn’t mean it’s still not a problem. What do they need billions of dollars of tax payer money for? Why, to help bailout people who can’t pay their mortgages. This brings up two points in itself. If people are still defaulting on their housing payments anyone with a few working synapses and basic understanding of economics (i.e. not anyone in or around anyone in D.C.) would tell you this means that housing prices are still higher than what the market will bear. Add in a couple more synapses and you will see that if prices are higher than what the market will bear, then prices are about to drop, ergo another bubble is about to burst. If it’s going to burst then throwing more money at it isn’t going to solve the problem. But it appears that the Obama administration is more than willing to throw your money away (after all it’s not his money). Throwing more money at it will only allow the problem to grow, meaning that more people will be hurt when the bubble bursts again. But what did you expect from the loser-in-chief? Sound economic policy?
But it gets better.
One of the other problems that led to the market crash was the suing of banks under the Community Reinvestment Act. This was suing banks by claiming they weren’t making enough loans to people in low income areas. Now an intelligent person would look at that statement and think, “They’re probably not making loans in low income areas because, low and behold, people in low income areas have low incomes and can’t afford the payments even on a cheap house. Why should they shell out the banks money (i.e. the money of bank’s customers) to a person who can’t pay them back.”? And I’m not talking about people who may not have large amounts of credit or can leave a huge down payment; I’m talking about people who would be turned away for a loan from the Bailey Building and Loan. You and I would call not making these loans common sense. Liberals like Barrack Obama call it racist (No I really can say that Obama did this because he was one of the lawyers who sued Citibank on grounds that they were being racist for not giving enough loans to minorities).
Now, as economist Thomas Sowell points out, if the banks were being racist you would be able to see it really easily. If they were racist then they would only be giving loans to minorities who have twice as good credit and a higher down payment than they would to white people…which in turn means that the minorities should have a lower rate of default on their loans. But low and behold the default rates of whites and minorities was statistically the same before the banks started getting sued under the provisions of the CRA. So what that really means is that the banks were judging people only on their credit scores and incomes (the closest thing a banker has to judge the content of one’s character). But facts and logic have never stopped liberals from suing people for being racists. They sued. The banks seeing they couldn’t win just gave in, and decided if they can’t make money long term for the bank and the investors, then they’ll make money for themselves in the short run and screw the investors. And we have a bank collapse.
So knowing this it would take a level of idiocy beyond the acting abilities of Cliff Robertson to want to repeat suing banks under the CRA to give more subprime loans, three guesses what the Obama Administration has started doing? If you said they’re suing banks to force them to give subprime loans, you’re a winner (only, not really, because this is likely going to destroy whatever wealth you still had left over from the last bubble bursting)!
Either the Obama Administration is very, very stupid or they are sociopaths out to intentionally destroy the U.S. economy. And since I don’t give Barrack the skill to be a Bond super villain it must be that these people are idiots beyond comprehension. God help us all.