My Take On The Financial Crisis

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." ~ Laurence J. Peter

In a previous post, ER questioned why my posters and I were wasting our time commenting on meaningless polls when the Government is about to go bankrupt. Obviously, he was referring to the current economic crisis.

The short answer to his question is this:

I don't know a lot about economics. So, I try not to comment very often.

ER knows this. ER also knows far more about finances, economics, and mortgages etc, than I do, so, if I try to comment on it with any authority, he will no doubt excoriate me with extreme prejudice.

That said, I will offer my own uneducated opinion on the crisis, with the disclaimer that I admit I am not an expert:

It would seem to me that the cause of this situation is a logical progression stemming from Liberal "do-gooder" ideologies. It began with the Liberal-based philosophy of leveling the playing field.

In my humble opinion, leveling the playing field is a worthy goal, but why does leveling the playing field require that we bring the "haves" down to the level of the "have-nots? Wouldn't it be more practical to try to bring the "have-nots" up to the level of the "haves? Every person with any heart at all would like to insure that every American has a car in every garage and two chickens in every pot, but that, like it or not, is an idealistic pipe dream.

It's never going to happen. There are just too many variables among the people in this country. Some people are ambitious while others are lazy. Some people live very frugal lives while others are extravagant. If we took all the money from every person, pooled it, divided it equally, then gave every man, woman, and child in America an equal amount of starter money, within the first year there would again be wealthy people and poor people. That's just the way things work when we leave such a diverse population to their own devices.

But I digress.

This "fairness" philosophy, alluded to above, resulted in legislation that outlawed the common sense practice of what Democrats call "redlining", which was a fanciful line that Democrats claimed mortgage companies drew on maps (in red) tacked to the walls of their backrooms. That line is believed to outline neighborhoods (usually predominately black neighborhoods) in which the mortgage companies, as a matter of policy, would reject any applications for mortgages regardless of credit.

The idea behind that practice was, if anyone in those neighborhoods had good credit, they wouldn't live in those neighborhoods.

Acting upon the idealistic principle of fairness to all people, the Liberal Democrats pressured Fannie Mae and Freddie Mac to guarantee loans to "poor people" which is code for people who can't afford to make the payments. This was, as I mentioned, another way of leveling the proverbial playing field. The Liberal Democrats, as usual, used the proverbial "race card" to guilt these two institutions into defying common sense and sensible, sound, business practices by implying there was racism involved in the final decision to reject mortgage applications applied for by high risk applicants. They used the stereotype that most poor people are black (which isn't necessarily true) to advance their agenda.

Counter intuitively, this stereotyping, in fact, is the epitome of racism itself because it implies black people do not have the intellect or ambition to use their own resources to achieve their goals.

That, of course, is ridiculous. The fact is, blacks have achieved racial equality since the Civil Rights act of 1964. (an act, I might add, that was opposed by the majority of Democrats in the legislature, and only got President Johnson's signature because of pressure from the Republicans)

It's the Democrats that insist they haven't acheived equality. While racism still exists in the persistent, ignorant attitudes of a relatively few Americans, incidents that demonstrate that attitude are not nearly as prevalent as the Democrats would have us believe. Nevertheless, as long as some Americans blindly accept these charges, the Democrats will continue to use this lie that blacks are still an oppressed minority.

As long as it works to their nefarious advantage.

In legislating this "affirmative action" type policy in guaranteeing mortgages, the Lawmakers either inadvertently or purposely created a situation in which money was lent out to people who could ill afford to pay it back. So many people defaulted on these mortgages that eventually, the outflow was greater than the incoming.

Anytime that happens in any kind of business, failure of that business or institution is inevitable unless some major miracle comes along to stave it off.

Now. I may be dead wrong on my assessment, but I can't see how Fannie Mae and Freddie Mac could possibly run out of money unless the money was mishandled in some very egregious way.

We know that Mortgage companies were forced to approve applications for mortgages to high risk applicants in spite of no evidence of any means to make the payments. We know that. It is a matter of record.

It seems logical to me that if more money is going out than coming in, that creates a deficit.

It works that way at my house.

We also know managers of the two institutions were "cooking the books" in order to increase the amount of their bonus. We know that, too. That is also a matter of record.

I don't really understand the meaning of the term, "cooking the books", but taking it from context it appears to mean someone did some imaginative accounting, creating profits from thin air and making debits magically disappear.

That means someone deliberately broke the rules. Someone had to knowingly break the law. Someone should pay. Will someone?

Who are these someones?

Well, we already know who some of them are. Raines, Gorelick, Johnson, etc, were the ones who cooked the books. Democrats all. But who else is culpable? Which legislators are we to blame for this mess?

To determine that, we have to look at the motive. What's the motive? Well, on the surface, the motive appears to be an altruistic attempt to offer a hand up to the disadvantaged in our society. Most people would agree that is a wonderful, empathetic gesture, and in my opinion, it is. But there are problems inherent in this action. These, I've already enumerated.

One can't blame the mortgagees who defaulted because they couldn't make the payments. One cannot blame them because they allowed themselves to be lured, by overzealous real estate agents and mortgage firms, into making a bad decision. Would a starving man turn down a free sandwich?

Conservative Republicans want to help the poor, but they also understand you can't rob Peter to pay Paul indefinitely. Eventually, that strategy ends up costing both Peter and Paul, so naturally, Republicans are called insensitive, mean, and greedy, because they don't happen to think that kind of money management is sensible.

Democrats are never shy about their desire to help the poor by taking from the rich and handing it over to the less fortunate. They call this "Patriotic". Democrats are called sensitive and friends to the poor, because of these outward demonstrations of generosity.

So, logically, who is more likely to introduce legislation that effectively takes one man's hard earned money and gives it to a man who hasn't earned the same amount?

Now. I said, "on the surface". But what of the underlying motive? Is there one? If so, what is it?

I don't know.

It would be unthinkable that someone might start the ball rolling downhill on purpose. Could there be some Representatives and Senators who would knowingly and intentionally put this country in financial crisis?

It's hard to imagine anyone would be that sinister.

On the other hand, it's equally hard to believe that any Senator or Congressman would be so ignorant and totally lacking in common sense that they would not know their actions would create such a consequence.

As I write this, the Senate has passed the revised "Bail-out" bill. I, personally don't think our government should bail out anyone that got themselves into financial straits by making such colossal blunders either on purpose or by accident.

Listen: The Government giving money to institutions who have already demonstrated an inability to be a good steward of the funds is akin to a doctor treating the symptons of a disease but not the disease itself. The symptons will go away or at least lessen, but eventually they come back over and over again until the disease kills the patient.

It is a temporary fix at best. It is economic suicide at worst.

I suddenly find myself screaming into deaf ears, "NO BAIL-OUT!!! To no avail.