[Ministry of Truth] Republicans re-writing history of financial crisis

This may be very obvious for others, but what is the legal rationale for allowing the banning of words from a report?

 

The Community Reinvestment act is such a silly red herring. It had no affect on the investment banks whatsoever. To blame minorities is idiotic and its like blaming the mice for eating the cheese someone leaves out.

Leverage and socializing risk through ratings and insurance caused this crisis. This provides little to no margin for error during a natural recession.

I think Keynes summed it up nicely when he stated regarding leverage that "The markets can remain irrational longer than you can remain solvent."

 

They were appointed, sadly, as a bipartisan commission, to get A report from both sides of the aisle about what happened. No one can tell them what to include or not to include. They are all just so used to not having any accountability they think they can say whatever they want, or not say whatever they want, regardless of truth or implications. They're not interested in truth, only politics.

 

dumb thread

and HuffPo has no cred

I'm a rhyming machine

 

People are mostly ignorant of this issue that they're likely able to pull it off.

 

Does Brooksley E. Born have "cred"?

 

Donny! No feeding the trolls!

 

On the other hand, most Americans don't care one iota what these commissions conclude.

 

Not always. The 9/11 commission report was a best seller and did carry some weight.

 

Yes, but the conclusions reached are ignored as needed by certain segments of the population. E.g., the 9/11 report concluded Saddam had no involvement in 9/11.

The point is that, similar to the 9/11-Saddam connection, for those folks already convinced it was the feds and minorities that caused the 2008 market crash, no report will ever convince them otherwise.

 

wow, never thought we'd agree on something like this.

 

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Congressman Ron Paul
U.S. House of Representatives
July 16, 2002

“Mr. Speaker, I rise to introduce the Free Housing Market Enhancement Act. This legislation restores a free market in housing by repealing special privileges for housing-related government sponsored enterprises (GSEs). These entities are the Federal National Mortgage Association (Fannie), the Federal Home Loan Mortgage Corporation (Freddie), and the National Home Loan Bank Board (HLBB). According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone.

One of the major government privileges granted these GSEs is a line of credit to the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out these GSEs in times of economic difficulty helps them attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a massive unconstitutional and immoral income transfer from working Americans to holders of GSE debt.

The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase the debt of housing-related GSEs. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

However, despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to the GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.

Mr. Speaker, it is time for Congress to act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors misled by foolish government interference in the market. I therefore hope my colleagues will stand up for American taxpayers and investors by cosponsoring the Free Housing Market Enhancement Act.”

The Moral Hazard of Regulation

by Ron Paul

Since the bailout bill passed, I have been frequently disturbed to hear “experts” wrongly blaming the free market for our recent economic problems and calling for more regulation. In fact, further regulation can only make things worse.

It is important to understand that regulators are not omniscient. It is not feasible for them to anticipate every possible thing that could go wrong with whatever industry or activity they are regulating. They are making their best guesses when formulating rules. It is often difficult for those being regulated to understand the many complex rules they are expected to follow. Very wealthy corporations hire attorneys who may discover a myriad of loopholes to exploit and render the spirit of the regulations null and void. For this reason, heavy regulation favors big business against those small businesses who cannot afford high-priced attorneys.

The other problem is the trust that people blindly put in regulations, and the moral hazard this creates. Too many people trust government regulators so completely that they abdicate their own common sense to these government bureaucrats. They trust that if something violates no law, it must be safe. How many scams have “It’s perfectly legal” as a hypnotic selling point, luring in the gullible?

Many people did not understand the financial house of cards that are derivatives, but since they were legal and promised a great return, people invested. It is much the same in any area rife with government involvement. Many feel that just because their children are getting good grades at a government school, they are getting a good education. After all, they are passing the government-mandated litmus test. But, this does not guarantee educational excellence. Neither is it always the case that a child who does NOT achieve good marks in school is going to be unsuccessful in life.

Is your drinking water safe, just because the government says it is? Is the internet going to magically become safer for your children if the government approves regulations on it? I would caution any parent against believing this would be the case. Nothing should take the place of your own common sense and due diligence.

These principles explain why the free market works so much better than a centrally planned economy. With central planning, everything shifts from one’s own judgment about safety, wisdom and relative benefits of a behavior, to the discretion of government bureaucrats. The question then becomes “what can I get away with,” and there will always be advantages for those who can afford lawyers to find the loopholes. The result then is that bad behavior, that would quickly fail under the free market, is propped up, protected and perpetuated, and sometimes good behavior is actually discouraged.

Regulation can actually benefit big business and corporate greed, while simultaneously killing small businesses that are the backbone of our now faltering economy. This is why I get so upset every time someone claims regulation can resolve the crisis that we are in. Rather, it will only exacerbate it.

 

Ron Paul is right, as usual.

It isn't just Republicans, SamFisher. Revisionism abounds on both sides of the isle. It is a product of politics.

 

The truth is the truth, deal with it.

 

I agree with you -- it isn't possible. To me, it is just silly to fall into the whole 'left versus right', 'Republican versus Democrat' nonsense. There are probably three or four good politicians in Congress. They're good politicians because they're willing to work together to overcome their idealogical difference rather than to be constrained by them.

 

When did basso leave? :grin:

(By the way, I think you mean his pasted/read ratio is the highest on the BBS, i.e. he only pastes stuff without reading.)

 

fixed