Hurricane Bruiser
09-30-2008, 12:38 PM
Say NO to any Bailout
After spending time writing and calling Congressman Mollohan urging him to vote against any Bailout proposal, I was very disappointed that he ended up voting for this immoral and economically foolish bailout legislation. On September 29, 2008, Harvard University economist Jeffrey Miron wrote an article for CNN arguing that “The current mess would never have occurred in the absence of ill-conceived federal policies.” Congress together with bad Federal Reserve policies bear complete responsibility for creating this mess and I am sick of hearing the free market being blamed for this problem. The federal government gave implicit guarantees to Freddie Mac and Fannie Mae which caused them to engage in lending practices that would not be tolerated if that government guarantee had not been there. Congress also has pressured lending institutions through legislation such as the Community Reinvestment Act to make loans available to people who normally would not qualify. One other big reason for the housing bubble is the Federal Reserve practice of setting interest rates artificially low, and thus through the availability of cheap money, incentivizing risky lending and mal-investment. As Mr. Miron notes, “The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.”
Absolutely nothing in this bailout proposal tackles the causes of where we are at today. In fact, it sets up an “oversight committee” made up of the very people who promoted the bad government policies which led to this financial market mess. This bailout proposal grants the Secretary of the Treasury virtually unlimited powers that I am positive are unconstitutional. This bailout also has the treasury buying up assets at greater than market value with some grand hope of selling the assets later on. This is insane! The taxpayer should not be stuck with propping up and buying worthless assets. If the assets were actually worth something, a private company would buy them. I cannot understand why anyone would vote for such a bailout, especially in light of previous “bailouts” which did nothing but add to our federal debt and set bad precedent.
The solution to this problem is to let these failing firms declare bankruptcy, eliminate Freddie and Fannie, have the government abandon the goal of home ownership independent of ability to pay, and get rid of policies such as the Community Reinvestment Act. The markets are frozen in part because bankers are unwilling to sell assets for 20 cents on the dollar when the US government might buy those same assets for 75 cents on the dollar. The sooner the federal government makes clear that absolutely no bailout is coming, the sooner the markets will begin to act more rational. I would urge everyone to pressure Congressman Mollohan to vote against any other bailout proposal that is similar to the one he just voted for.
After spending time writing and calling Congressman Mollohan urging him to vote against any Bailout proposal, I was very disappointed that he ended up voting for this immoral and economically foolish bailout legislation. On September 29, 2008, Harvard University economist Jeffrey Miron wrote an article for CNN arguing that “The current mess would never have occurred in the absence of ill-conceived federal policies.” Congress together with bad Federal Reserve policies bear complete responsibility for creating this mess and I am sick of hearing the free market being blamed for this problem. The federal government gave implicit guarantees to Freddie Mac and Fannie Mae which caused them to engage in lending practices that would not be tolerated if that government guarantee had not been there. Congress also has pressured lending institutions through legislation such as the Community Reinvestment Act to make loans available to people who normally would not qualify. One other big reason for the housing bubble is the Federal Reserve practice of setting interest rates artificially low, and thus through the availability of cheap money, incentivizing risky lending and mal-investment. As Mr. Miron notes, “The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.”
Absolutely nothing in this bailout proposal tackles the causes of where we are at today. In fact, it sets up an “oversight committee” made up of the very people who promoted the bad government policies which led to this financial market mess. This bailout proposal grants the Secretary of the Treasury virtually unlimited powers that I am positive are unconstitutional. This bailout also has the treasury buying up assets at greater than market value with some grand hope of selling the assets later on. This is insane! The taxpayer should not be stuck with propping up and buying worthless assets. If the assets were actually worth something, a private company would buy them. I cannot understand why anyone would vote for such a bailout, especially in light of previous “bailouts” which did nothing but add to our federal debt and set bad precedent.
The solution to this problem is to let these failing firms declare bankruptcy, eliminate Freddie and Fannie, have the government abandon the goal of home ownership independent of ability to pay, and get rid of policies such as the Community Reinvestment Act. The markets are frozen in part because bankers are unwilling to sell assets for 20 cents on the dollar when the US government might buy those same assets for 75 cents on the dollar. The sooner the federal government makes clear that absolutely no bailout is coming, the sooner the markets will begin to act more rational. I would urge everyone to pressure Congressman Mollohan to vote against any other bailout proposal that is similar to the one he just voted for.