I went in search of funny quotes, like the one at the start of this posting, but instead found mostly sensible ones, like this (via here):
The fact that insurance companies refused to insure property located on storm-wracked coasts is not an instance of market failure. A market failure supposedly occurs when the price of goods and services do not reflect the true costs of producing and consuming those goods and services. That’s clearly not what happened here. The market is practically shouting at people, “Don’t build something you can’t afford to lose where hurricanes periodically crash ashore.”
Instead the state “insurance” scheme is an example of government failure which occurs when a government intervention causes a more inefficient allocation of goods and resources than would occur without that intervention. In this case, it’s the government that’s telling people that it’s OK to build in dangerous areas and then not charging them enough for the “insurance.”
The CRA …
That’s Community Reinvestment Act.
… forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?
According to one enforcement agency, “discrimination exists when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.” Note that these “arbitrary or outdated criteria” include most of the essentials of responsible lending: income level, income verification, credit history and savings history – the very factors lenders are now being criticized for ignoring.
If we really wanted advance warning (and a chance to mitigate) the next financial crisis, we wouldn’t be banning short-selling; we’d be legalizing insider trading.
Now there’s a thought. All those quotes are from Americans, about America. But it is at least as bad here. Today, on my wanderings in London, I came across a headline in a free newspaper that went Darling declares war on City’s risk culture.
What new horrors of intervention will be inflicted upon the British economy by this dying government of ours, in its dying months, as they forget about the country as a whole and concentrate on trying to keep the loyalty of their core vote?
Let’s be frank. A market failure is when the market fails to do something that Leftists would like for it to do. Nothing else.
What next? “Browne declares war on Army’s military culture”? “Benn declares war on farmers’ agriculture”?
I’d better stop. The more I try and think these up, the more I scare myself. They all sound frighteningly close to the truth.
“Balls declares war on schools’ education culture”.
The public expects accommodation at reasonable prices! You are not here to argue, but to give them what they want! And the unions want double the normal wages.
What’s all this talk about ‘reality’? Let’s repeal it! Laws of any sort are there to be repealed! That’s what govmints are for!
The biggest way “the state screws with the market” is the vast flow of credit money from the Federal Reserve system (or, in Britain, the Bank of England) – this leads to a boom/bust.
Alan Greenspan did this on a massive scale – and the present gang (B.B. at the Fed and Goldman’s Henry Poulson at the Treasury) are no better. Indeed ON TOP of the funny money the Fed is still pushing out, they have ordered 300 billion Dollars of bailouts already – and are pushing for 700 billion Dollars more in Corporate Welfare. All in order to save a “financial system” that can not be saved.
However, the interventions that Brian attacks are also bad (although they are tiny in comparison with the harm the credit money expansion does).
For example ACORN (a Communist group dedicated to the destruction of the United States – almost needless to say Barack Obama worked with them for many years) uses the Community Reinvestment Act to threaten to sue companies that do not lend money to people who are not going to pay them back – i.e. “sub prime” areas.
President Bush recently signed a Housing Bill that gave another 500 million Dollars to ACORN, which it will use for its normal activities of signing up people on voting rolls – people who do not exist. And so on.
Some time ago I upset people by calling President Bush a “moron”, would anyone like to argue now that he is not a moron?
After all the alternative is that he knowingly gave another five hundred million taxpayer Dollars to a Communist group dedicated to the destruction of the United States.
Paul Marks –
Let’s see now, did Congress have anything at all to do with the “housing Bill” you refer to? Do we have 545 “Morons?” (Possibly ! One of them – a Senator younger than I – was in my Law Class of 1953).
Who (initials B.F. ?) actually inserted that community action give away into the legislation? Moron; or skillful politician setting up a slush fund for the future?
Rather than complain about the Executive Branch, lets all join Bismarck down at the sausage plant, instead of watching the current process of legislation on the financial community.
“Darling declares war on City’s risk culture”
So, he overseas a situation where:
The government guarantees bank deposits to a certain level.
The government tells some institutions that they are too big to fail and backs it up by bailing them out.
The government sets the Bank of England up as the lender of last resort, so sound liquidity management becomes less of an issue for lenders.
The government gives the regulator the objective of “maintaining confidence in the financial system” irrespective of whether or not the system is something we should have any confidence in.
Then he complains about the risk taking that the government’s interventions have created the perfect conditions for.
What an idiot.
RRS you miss my point.
I fully understand that Congressman Barney Frank and Senator Christopher Dodd put these things in the Housing Bill.
They represent the enemy – it is their job to do such things.
But why did President Bush go along with it all?
Because he is a moron. Or “utterly out of his depth” if you prefer.
Years ago the Democrats (Barney Frank, Chris Dodd, and of course Barack Obama) were up to their necks in the effort to get Fannie Mae and Freddie Mac to go along with the homes for the poor plan.
Vast sums were backed by Fannie and Freddie (managed by Democrats who were committing vast FRAUD to get high bonus payments) and these home loans were turned into securities (that everyone was told were de facto backed by the United States governent) and sold on in the financial system.
And what did President Bush do?
He went along with all of it.
“Skillful politician” – how?
How does wreaking the financial system benefit him or his party?
It beneifts the Marxists (such as Senator Obama – and ACORN) and those who go along with them (the “fellow travellers”). But it does not benefit Bush or the Republicans.
He goes along with it because he does not understand what is going on.
And people who do not understand the obvious, even after years and years, are “morons”.
Bush is still not fighting back – even now.
Instead he is trying to get another 700 billion in Corporate Welfare to “save the financial system”. So that banks can “lend again” so that people can “buy cars” and “send their children to college” (make no mistake that is also consumption).
Bush is still the man whose economic response to 9/11 was to tell people to “go shopping”.
He does not have a clue. He is not some cunning fiend who pretends not to understand – he really does not understand.
John McCain faces a choice today.
He is no economist – but he knows in his gut that “go shopping” and endless bailout are wrong.
He must break with Bush – or lose the election.
If he comes out of today’s meeting supporting the Bush/Poulson plan the election is lost to the Marxists. And dissenting media (the people who, for example, are attacking the bailout on talk radio as I type this) will be eliminated within a year of “President Obama” taking office.
By the way I know the financial system would still have been smashed up, due to Alan Greenspan’s credit money bubble, but the above made the whole thing even worse.
A depressing fact about this proposed bailout is how many supposedly ‘free-market’ economists and economic journalists support this bailout.
Can’t give a link I’m afraid, but read recently that the CRA was instituted under Carter’s administration, and strengthened under Clinton.
Gives the game away really.
I agree with Paul Marks. Bush has lost the plot (if he ever had it), and it’s make or break now for McCain. He has flirted with the liberals, and only regained his own ground by picking Palin. If he goes with the bailout, he’s a goner.
I’m sorry to say this, but if you really think the American market collapse is due to banks being forced to lend to “poor communities” — well, you are simply daft or monumentally unaware of the true situation.
Seriously, that is probably, at most, one percent of the mortgage market. Quite honestly, they could have all defaulted, and it would equate to petty cash.
You may not like to acknowledge it, but you are witnessing a gross corruption in action — by everyone, at every level, including (you may never admit) the lack of regulation on the financial industry, the failure of ethics, the lack of morals, and unrestrained greed by all parties.
Quite simply, it takes a universal corruption to effect such a universal collapse.
Ah, now, will we learn from it? That is the question.