Bankrolling Fannie & Freddie will add $5 trillion to the national debt (which stands at $9.5 trillion). So says the brilliant Jim Rogers. (And you wondered why the dollar’s dying and our assets are devaluing by the day? Still, the band of fools, with Obama and McCain in the lead, plays on.)
Rogers also tells a CNBC anchor that if she doesn’t understand that taxpayers must not be defrauded to prop-up these fraudsters in perpetuity—she should get another job. Let these fascistic entities fail.
Bankrolling Fannie & Freddie will add $5 trillion to the national debt (which stands at $9.5 trillion). So says the brilliant Jim Rogers. (And you wondered why the dollar’s dying and our assets are devaluing by the day? Still, the band of fools, with Obama and McCain in the lead, plays on.)
Rogers also tells a CNBC anchor that if she doesn’t understand that taxpayers must not be defrauded to prop-up these fraudsters in perpetuity—she should get another job. Let these fascistic entities fail.
BAB's A List, Individualism Vs. Collectivism, Private Property, Socialism
Update I (June 29): I’m please to bring you a piece by BAB A-Lister, Tibor Machan. Tibor holds the R. C. Hoiles Chair in Business Ethics and Free Enterprise at Chapman University and is research fellow at the Hoover Institution, Stanford, CA. He is editorial advisor for Freedom Communications, Inc., which includes the errant Orange County Register. Well, at least our Tibor still features on the editorial page. Tibor has also recommended my column, for which I am grateful (www.Tibormachan.com).
Update II: Tibor is on hand to answer your questions. Make the most of the opportunity.
MARX WAS PARTLY RIGHT
By Tibor Machan
Most literate people know that first on the list in Karl Marx & Frederick Engels’ Communist Manifesto of what needed changing to achieve socialism is the abolition of the right to private property. This follows, of course, from the very idea of socialism, which sees humanity or society as an organic body, akin to a termite colony. Individuals no longer exist in such a system, so privacy and private property must go, too.
Marx also made a prediction that in modern democracies there wouldn’t be a need for violent revolutions because the citizenry will get rid of the legal protection of private property through the electoral process. Too many people will get fed up with the volatility of freedom, including the free market place, and gradually achieve socialism by voting in politicians who will eliminate the obstacle of legally protected private property rights to central planning.
Marx thought that central planning would serve society well but he based this idea on his confidence that human nature will change. Instead of people wanting to achieve various goals of their own, they will in time come to aim only for the public good. He believed that once matured, “the human essence is the true collectivity of man.” The new man, then, will not be like you and me or anyone today.
This is an important element of socialism and central planning because only if it is true will the theory of public choice, which completely undermines confidence in central planning, be avoided. Public choice theory addresses human being as they are now, not as they would turn out to be in Marx’s vision of a socialist society. If Marx is wrong and human nature will not change, then public choice theory shows that central planners will make a mess of things, not help out at all. Central planners, being ordinary humans, will aim at fulfilling their own agendas, not some vague public purpose.
A unified, one-size-fits-all public purpose makes sense within the context of the Marxian idea of the new man, one who cares nothing for himself or herself, only for the whole society. This is like people in a team or orchestra who are not focused on their own private agendas but that of the group. It works fine in small organizations which human beings join voluntarily because they do in fact promise to fulfill their own goals, only with the aid of other people. But in Karl Marx’s picture no need for voluntary joining exists. People will be born as socialists, by their very nature.
Because the Marxian idea is myth—history is not driving us toward socialism and the new man—the socialism aimed for by Marx and his followers has to be brought about coercively, by brute force–see Stalin or Hugo Chavez, as examples. This is even so when people elect politicians whom they entrust with public service because those people, of course, haven’t a clue how to achieve some mythical comprehensive public good. So even when elected by majorities, as Max thought they would be in democracies, promoters of socialism will be thoroughly stymied by their own unavoidable ignorance of what really benefits us. We are not all the same; indeed humanity as it actually is consists of a huge variety of individuals with an equally huge variety of different ways of attaining their best interests. No central planners can achieve this, ever.
But Marx did have it right that in their impatience and frustration with the free market, people will attempt the impossible. (Marx, of course, didn’t think socialism was impossible.) Consider, for example, environmental issues. Many are panicked about how well protected private property rights leave much of the environment uncared for–e. g., rain forests, the polar bear, etc., etc. So they then wish to entrust the care to politicians and planners. They envision some kind of supreme plan that will bring about a healthy ecosystem. But no one really knows what that is and planners are just as prone to mismanage it all as individuals, only the scope of their mismanagement is far greater, so the damage they do is huge. (In fact most of the current environmental mess is due to government central planners who built ridiculously huge projects using government’s power to violate private property rights, as in the case of the TVA and the many humongous dams around the globe.)
Impatience is what produces all this. It is true that with a regime of legally protected private property rights no grand scheme is in the offing. Yet that impossible dream motivates too many people, however futile it is from the start. The only real prospect is the piecemeal, strict private property approach and that is what encourages—though it does not guarantee—the responsible use of the environment.
Just as the perfect is the enemy of the good, so the myth of guaranteed environmental health is the enemy of a reasonably healthy one. Too bad, but Marx did have a point about people’s impatience. Yet certainly it isn’t going to lead to any socialist utopia.
Affirmative Action, Economy, Government, Hillary Clinton, Law, Multiculturalism, Private Property, Socialism, The State
THE REAL SCANDAL
By STAN LIEBOWITZ, New York Post
February 5, 2008 — PERHAPS the greatest scandal of the mortgage crisis is that it is a direct result of an intentional loosening of underwriting standards – done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.
At the crisis’ core are loans that were made with virtually nonexistent underwriting standards -no verification of income or assets; little consideration of the applicant’s ability to make payments; no down payment.
Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness?
From the current hand-wringing, you’d think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards – at the behest of community groups and “progressive” political forces.
In the 1980s, groups such as the activists at ACORN began pushing charges of “redlining” – claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation.
In fact, minority mortgage applications were rejected more frequently than other applications – but the overwhelming reason wasn’t racial discrimination, but simply that minorities tend to have weaker finances.
Yet a “landmark” 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.
That study was tremendously flawed – a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.
Yet the political agenda triumphed – with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.
No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.”
Some of these “outdated” criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant’s ability to manage debt.
Sound crazy? You bet. Those “outdated” standards existed to limit defaults. But bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.
Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.
Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with “100 percent financing . . . no credit scores . . . undocumented income . . . even if you don’t report it on your tax returns.” Credit counseling is required, of course.
Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed “the most flexible underwriting criteria permitted.” That lender’s $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.
Who was that virtuous lender? Why – Countrywide, the nation’s largest mortgage lender, recently in the headlines as it hurtled toward bankruptcy.
In an earlier newspaper story extolling the virtues of relaxed underwriting standards, Countrywide’s chief executive bragged that, to approve minority applications that would otherwise be rejected “lenders have had to stretch the rules a bit.” He’s not bragging now.
For years, rising house prices hid the default problems since quick refinances were possible. But now that house prices have stopped rising, we can clearly see the damage caused by relaxed lending standards.
This damage was quite predictable: “After the warm and fuzzy glow of ‘flexible underwriting standards’ has worn off, we may discover that they are nothing more than standards that lead to bad loans . . . these policies will have done a disservice to their putative beneficiaries if . . . they are dispossessed from their homes.” I wrote that, with Ted Day, in a 1998 academic article.
Sadly, we were spitting into the wind.
These days, everyone claims to favor strong lending standards. What about all those self-righteous newspapers, politicians and regulators who were intent on loosening lending standards?
As you might expect, they are now self-righteously blaming those, such as Countrywide, who did what they were told
Stan Liebowitz is the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas
Related: Hillary, as I’ve noted, will help “Level The Lending Industry.” Barrack, no doubt, will be behind her all the way.
Updated: Here’s the Liebowitz-Day study, “Mortgage lending to Minorities: Where’s the Bias?” The idea that all groups must own homes, or be represented in the professions proportionate to their numbers in the general population, is a political construct. Science usually has to be manipulated and massaged to support such politically driven constructs.
Notice too that the study is not new. It is, rather, kept under wraps by the familiar culprits who prefer to speak of—and act upon—corrupt concepts such as “endemic racism” and the need to step in and correct so-called systemic wrongs.