It was just a couple of years ago. The housing market wasn’t doing so hot, and these things called derivatives were supposedly making things very difficult for the banks. President Bush stood behind a podium and addressed the American people. He told us that the government needed to buy these derivatives because it would help the banks, and then when the value went up, the government could sell them. It sounded fine.
What we got was something else entirely as various banks began to fail. Then auto companies were barely limping. There was panic in Washington, and they said we simply had to do something. But did we?
Economic matters are always tricky, and there’s always another point of view that will disagree with whatever you think. However, the biggest mistake we made was believing in the idea of “to big to fail”.
Take a hypothetical bank called Bank of Tom (BoT). BoT starts out as a small community bank, but grows and grows. Thanks to government assistance, it becomes one of the largest banks in the United States. It buys up smaller competitors with loans from the government, as well as lobbies Congress for laws that are favorable to it while hurting smaller competitors. It’s massive, employing thousands and controlling a huge part of the market.
Then the economy goes to crap and BoT is in serious trouble. If it’s going to stay, it needs help from the government. This is where we found ourselves just a couple of years ago. We already know what can happen if BoT gets the help. The economy stagnates for at least a couple of years and the company continues doing business as it always had, confident that they’re “to big to fail”. But what if we had taken the other road? What if BoT had been allowed to fail?
Despite the assertions of most MSM outlets, the Tax Day Tea Parties were not Republican love-fests. Most who attended are just as angry at the ridiculous expanse of the federal government under the Bush administration as we are at Obama’s clear intent to continue what W started. This video is a clear example.
However, sources indicate that this may be just the beginning. Are you ready to attend meetings and rallies for your local RINO legislator and let him or her know how you feel about their voting record? Sounds like it’s time to turn up the heat.
A top adviser to President Barack Obama takes a dim view of last week’s anti-tax “tea parties,” promoted by organizers in the spirit of the Boston Tea Party.
“The thing that bewilders me is this president just cut taxes for 95 percent of the American people. So I think the tea bags should be directed elsewhere because he certainly understands the burden that people face,” David Axelrod said Sunday.
The rallies coincided with the deadline to file income taxes, and gave people a chance also to voice frustrations about government spending and corporate bailouts.
Axelrod was asked on CBS’ “Face the Nation” for his opinion on what the show’s host described as “this spreading and very public disaffection with not only the government, but especially the Obama administration.”
My list of examples of the unintended consequences of government intervention in the marketplace gets longer and longer. This time, I’m going to point out the latest irony: Investment banking’s profitable last quarter.
This would be wonderful news if it were genuine, but looking a little deeper reveals the truth. First, in one of Barron’s feature articles by Andrew Bary, we learn about a little-discussed fact: Goldman Sachs has only been able to issue low-cost debt due to the backing of the FDIC through a program called the TLGP, or Temporary Liquidity Guarantee Program.
When President Obama arrives in London this week he will meet with the leader of Germany, a nation where his election has brought newfound goodwill towards America; but will the goodwill be enough to force the hands of Germany to conform to Washington’s desires for additional stimulus and bailouts? If the latest media reports, which point towards an Administration attempting to dial down expectations, are any indication, then the answer is most likely a soft no.
The NYT is reporting that little ground is expected to be made in regards to additional German stimulus, with Chancellor Angela Merkel expected to cite fiscal discipline as a reason for German non-cooperation with President Obama’s Administration on the issue-
Dr. Paul discusses further developments with the disbursement of the bailout funds and the resolution supporting Israel over Palestine.
Thursday evening I posted on my Facebook profile the speech that Congressman Ron Paul gave on the House floor, opposing the auto industry bailout (the so-called “bridge loan”), along with the following comment:
“This speech on the auto bailout speaks for itself. Congressman Paul really puts it all into perspective. Were that there were more in Congress like him.”
As Henry Paulson recently stated, an economic crisis of this magnitude only comes around once or twice a century. I’m not exactly sure what the basis for such an argument might be other than looking at a sample size of… about one century. Whether there is merit in this assumption or not, we certainly are facing an economic crisis. In times like these, our government leaders look to policy experts and lessons of history - and possibly listen to them more than usual. This doesn’t mean they stop looking to lobbyists and the next election.
Meet my new parents: the U.S. Government. The parallels are astonishing when you think about it. (Forgive my generalities… they are for illustration!)
1. Parents want their kids to be the best: Just like proud moms and dads show up at little league games and fight with other parents, help (or take over) fundraising activities so their kids will “win” by raising the most money, or argue with teachers about grades… we see the U.S. Government assert its authority all over the world - both economically and militarily - so that we can be the “greatest nation on earth”.
One of the biggest, most crucial tests facing the Republican Party are its ties to big business and unwillingness to, for example, end taxpayer-funded subsidies to favored industries. After all, most GOP politicians say, “it’s good for business,” all while cashing checks from lobbyists for their campaigns.
These policies, part of a $1.2 trillion corporate welfare culture, distort the market, allowing the government pick winners and losers. It gives Republicans the unfortunate, though not undeserved image of being in the tank for rich special interests. Sorry, but the “Democrats do it, too!” line doesn’t work, though it is very true.
In an editorial yesterday at National Review, Sen. Mike Lee (R-UT) explained that Republicans have an opportunity to take a step toward shedding this image when the reauthorization for the Export-Import Bank comes up for a vote.
“The Ex-Im Bank exists to dole out taxpayer-backed loan guarantees to help American exporters,” Lee wrote. “Most of the benefits go to large corporations that are perfectly capable of securing private financing anywhere in the world.”
“Whether the beneficiaries of particular Ex-Im Bank loan guarantees are respected, successful companies like Boeing or crony basket cases like Solyndra is irrelevant,” he explained. “Twisting policy to benefit any business at the expense of others is unfair and anti-growth.”