Let's Party Like It's 2006

Editors note: The following post is republished here with the express permission of the author, Dan Mitchell, who blogs at the excellent site "International Liberty" and who is featured here on a regular basis. People who do not follow his blog on a regular basis are missing out.

Apparently Learning Nothing from the Fannie Mae-Freddie Mac Disaster, the Obama Administration Wants to Subsidize Banks to Make More Dodgy Loans

“Let’s party like it’s 2006!”

 by Dan Mitchell

Let’s assume you didn’t understand how a garbage disposal worked and, for whatever reason, you decided to stick your arm in one and turn it on. You would do some serious injury to your hand.

The rest of us would wonder what motivated you to stick your arm down the drain in the first place, but we would feel sympathy because you didn’t realize bad things would happen. But if you then told us that you were planning to do the same thing tomorrow, we would think you were crazy. Didn’t you learn anything, we would ask?

Seems like a preposterous scenario, but something very similar is now happening in Washington. The Obama Administration is proposing to once again put the economy at risk by subsidizing banks to give mortgages to people with poor credit.

Even though we’re still dealing with the economic and fiscal damage caused by the last episode of government housing subsidies!

Here are some of the unbelievable details from a report in the Washington Post.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit…officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Brings to mind the famous saying from George Santayana that, “Those who cannot remember the past are condemned to repeat it.”

But what’s especially amazing – and distressing – about this latest scheme is that “the past” was only a couple of years ago. Or, to recall my odd analogy, one of our hands is still mangled and bleeding and we’re thinking about putting our other hand in the disposal.

Some people understand this is a nutty idea.

…critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars. “If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute.

What’s also discouraging is that the government already is deeply involved in the housing market – even though this is an area where there is no legitimate role for the federal intervention.

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

So I guess the goal is to have taxpayers on the hook for 100 percent of loans. “Don’t worry, it’s not our money”
Anybody want to guess whether this will end well?

By the way, this is bad policy even if we somehow avoid a new bubble and big taxpayer losses. Even in a”best case” scenario, the federal government will be distorting the allocation of capital by discouraging business investment and subsidizing residential real estate.

And as shown in this powerful chart, that will have adverse consequences for wages and living standards.
The part of the article that most nauseated me was a quote from the head bureaucrat at the Federal Housing Administration.

“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”

Gee, isn’t that nice that Ms. Galante thinks there are lots of borrowers with good “totality” measures? But here’s an interesting concept. Why doesn’t she put her money at risk instead of making me the involuntary guarantor on these dodgy loans?

I’ve already said on TV that we should dump Fannie Mae and Freddie Mac in the Potomac River. And I’ve argued that the entire Department of Housing and Urban Development should be razed to the ground. But perhaps this cartoon best shows the consequences of the Obama Administration’s new subsidy scheme.

P.S. We also should get rid of housing preference in the tax code. Our economy should cater to the underlying preferences of consumers, not the electoral interests of politicians.

Rand Paul Interview

Many of you have may have missed the Fox News Sunday interview with Sen. Rand Paul. (As I did.) Watching it may answer some questions that are being asked about this (now) national figure.

I'm happy to say that this blog has been informing it's readers about Rand Paul since long before most of the country had even heard of him.

In fact, I have had some friends more or less telling me that I should familiarize myself with him. They seem to have forgotten that when I introduced his name to them they had never heard of him themselves. Please don't take that as a complaint or an "I told you so." (Okay, maybe a slight "I told you so.")

It's a good thing, and I sincerely hope that all of you distribute these videos widely to your friends and colleagues, particularly your friends who are Democrats or Independents.

It is my observation that if you are saying or doing something that draws fire from both establishment Republicans and Democrats, like Rand Paul is, you are doing something right.

Concealed Carry Marine Saves a Life in Wisconsin

Gun grabbers are fond of saying that "guns in the possession of private citizens never make a bad situation better."

Putting aside the obvious conclusion that the statement is inane, let's look at one case that refutes it and makes an even bigger point about how many people in our armed forces often continue to serve America even after their active duty has concluded.

The following video tells the story of what happened in Milwaukee two days ago when an ex-marine with a concealed carry permit stopped a man from stomping a girl to death on the street. Although all the details were not yet known when this news report aired, it seems likely that the perpetrator was an ex-boyfriend who had been stalking his victim on her way to work.

If the ex-marine, Charlie Blackmore, had called 911 before he made a citizens arrest on this murderous thug, rather than after he stopped him from kicking the victim to death, there would be one less innocent person alive today. Fast thinking combined with confident action saved the girl and even spared the perpetrator. This event is just one more reason to thank a vet for their service.

From now on, maybe when you hear a "progressive" thinker utter the phrase, "If we save just one life, it will be worth it", you will think about this case.

The term Semper Fi, describes Charlie Blackmore better than anything I could think up to say about him.

Courage and Cowardice

I didn't vote for John McCain. I have never regretted that decision.

Today, I feel even more satisfied that my opposition to Barack Obama and his "progressive" agenda did not blind me to recognizing McCain for what he was and is.

Rand Paul took to the Senate floor to filibuster against the nomination of a thug named John Brennan as the new director of the CIA. He did so because Brennan refused to rule out assassinating US citizens on US soil, without an accusation, an arrest, an arraignment, access to a lawyer, a trial, or a conviction on any charge.

Rand Paul stood up for the US Constitution, not against Obama. He did it the right way, by actually speaking, on topic, for over 12 hours in defense of our 5th amendment rights. He defended the right of Habeas Corpus and the rule of law.

A small number of Senators supported him, mostly Republicans (of the libertarian variety) and one Democrat. But senators John McCain, and Lindsey Graham excoriated him. McCain even resorted to name calling, saying he and his supporters, were "Wackos."

You can decide for yourself who has courage and who is a wacko. My opinion is obvious.



One more question. It's the same one ultra liberal John Cusack and liberal TV pundit Jon Stewart are asking as they support Rand Paul on the issue: "Where are the Democats on Drones?" 

All you Democrats should be asking the same question. It seems you might be blinded by your love of Obama if you can't hold your leaders accountable when they do the things that make you howl bloody murder when Republicans do them.

If water-boarding is terrible when performed on actual terrorists, what is assassinating US citizens from a drone? Is is courage or cowardice?

 

Contemplating Our Conclusions

This short post first appeared on the excellent blog, "Our Dinner Table" on February 27, 2013. It was written by Seth, a regular contributor to this site.

Short on words, long on potential for provoking thought about the conclusions we regularly accept because of the regularity of their repetition.



Signals Rather Than Causes

Being a homeowner makes one responsible.
More likely:
Responsible people become homeowners.

Going to preschool improves ones chances of success.
More likely:
Having parents that do a lot of things, including sending kids to preschool, improves ones chances of success.

A college degree increases your earnings.
More likely:
Ambitious folks find ways to make more money. I’ve heard of studies that look at non-college graduates that have similar ambition and work ethic as college graduates that show that they have about the same earnings as college graduates.

Countries with government health care have better health, as measured by life expectancy and infant mortality, than the U.S.
More likely:
Other factors like health habits, diet choices, demographics, lifestyle choices and differences in the way these health stats are tracked from country to country have bigger impact than whether the health care system is provided by government or not.

Can you think of any?