The Practical Philosopher's Blog

Using the practical application of timeless wisdom to address modern issues

Obama’s Big Government Administration Learns Painful Lessons about the Real World

After many disingenuous statements from the Administration on how Wall Street ‘caused’ the housing market collapse, the real world has once again stepped in to squash their flawed collectivist world view with reality. 

The free market works when it is free and populated with private businesses working with, and responding to, rational market incentives.

Whenever the Government interferes (whatever its ‘good’ intentions) in the private marketplace, it always causes more damage than good as an outcome. Why? Because the Government does not work on the same principals as private business. Private businesses have to adapt to economic conditions or risk going out of business. The Government only makes and responds to political conditions. Given that, how does any think it would EVER it would or should act outside its sphere in the economic realm? The Government never has to worry about ‘going out of business’, so it does NOT act rationally in a free market environment. It’s that simple. 

As I’ve said in the past, politicians of primarily Democrat party orientation have pushed the flawed concept that you had a right to a house. This was especially true if you were of a preferred ethnic minority background or were of a lower economic strata. Through Government interference of Fannie Mae and Freddy Mac and the Community Reinvestment Act (CRA), Democrats have tried to buy votes through ‘buying’ people houses they couldn’t afford. This financially irrational behavior was done through political pressue on banks to make bad loans to politically favored groups (CRA) or using fake, Government ‘business’ entities (Fannie and Freddie) to buy bad loans with our tax dollars.

What they didn’t realize is that this would, over the course of 10-15 years, create a multi-trillion dollar housing bubble that would severely injure the US economy and ripple through out the world economy as well. 

Wall Street did NOT create this financial melt down. The Government and Democrats did by politically interfereing in the US economic market. Now, like with all their collectivist or utopian worldviews, we all have to pay when reality comes crashing down.

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Filed under: Business, Economy, Politics, , , , , , , ,

Socialist Siblings: The Government-driven Disaster of Fannie Mae and Freddie Mac

 Those politicians and liberal media that are intent on obscuring the root-causes of the current economic downturn blame it on Bush, Republicans, and free-market capitalism- anything but themselves. The plain truth is that government meddling in the private sector has led to the current economic crisis.

 

The prime culprits of the crisis are Fannie Mae and Freddie Mac. But what are these entities? Are they greedy, profiteering businesses? In a Business and Media Institute article on this Enron-like fiasco, we find out these entities are a bizarre attempt by the government to pass itself off as a ‘regular’ business: 

    Today, both Fannie and Freddie are government-sponsored enterprises (GSEs). They were created by government charters with the purpose of increasing home ownership and access to lower interest rates, with the implicit backing of the U.S. Treasury Department.

 

     According to a 2002 publication about GSEs from the American Enterprise Institute, “GSEs are hybrids that combine the characteristics of public and private organizations. Their ownership and their control are private, but the government provides them significant subsidies, including tax and regulatory advantages, and permits them to fund their activities almost as if they were part of the government.”

 So here we have, like a hostile foreign intelligence operation, a business front that pretends to be a legitimate company while pushing a distinct political agenda. On top of that, it has the unfair advantage of implicit government underwriting of what ever good or bad behavior it exercises in the open market. It would seem evident that any ‘business’ that has the financial reserves of the entire US Treasury behind it could soon become a monopolistic beast. Not surprisingly, the Business and Media Institute article noted that: 

 Together Fannie and Freddie “control 90 percent of the secondary mortgage market, and nearly 50 percent of the total mortgage market,” according to Investor’s Business Daily (IBD).

So after dumping more than 5 trillion dollars of sub-standard, but high-profit mortgages into the US and world markets, we have the claim that free-market capitalism has ‘failed’ and that like irresponsible children, businesses need government regulation to avoid causing further ‘damage’ to the economy. Again, this is either a statement by those ignorant of the facts, or those that are anxious to obscure the failure of their politically socialist policies- policies that emotionally declare that the ‘downtrodden masses’ have a ‘right’ to a house, but completely ignore the reality that these same people must first have the financial ability and reliability to assume a large responsibility like a home mortgage. The inherent socialist-nature of this approach was noted by the press as well: 

     But this [the economic downturn] isn’t an example of market failure according to IBD [Investors Business Daily] and The Wall Street Journal. The Journal said both GSEs are examples of socialism in disguise.

 

     “We haven’t suddenly become socialists. What taxpayers need to understand is that Fannie and Freddie already practice socialism, albeit of the dishonest kind. Their profit is privatized but their risk is socialized,” said the July 12 editorial.

Read the rest of this article here: 19 Times Bigger than Enron, and the Networks Didn’t See It Coming”

Filed under: Economy, , , , , , ,

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