Bush: Free market is best – under government control, that is
By Donald Hank
President Bush’s speech of 9/05/08 gave various reasons for the recent financial crash involving, among others, Bear Stearns, Lehman Brothers, AIG, Fanny Mae and Freddy Mac. But he overlooked one reason – the underlying one.
He attributed the crash to a large influx of money to US banks and financial institutions, which in turn made it easy for people to get credit, leading them to borrow for cars, college tuition, homes and so on. He said “Easy credit combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions.”
Ok, let’s stop right there and analyze this. The last sentence indicates all this was your fault, you irresponsible borrower.
But was it?
American realtors had seen a crisis on the horizon as early as July 15, 2004, when the National Association of Realtors sent a letter to HUD expressing their concerns that a proposed rule to increase the percentage of mortgages to “underserved” populations (minorities) could create precisely the kind of market destabilization that led to the recent meltdown.
What was this rule? Under Clinton, Fanny Mae and Freddy Mac were obligated to serve at least 21% of the “underserved” communities with mortgages. Under Bush, the percentage more than doubled. In reality this translated into providing mortgages to a significant number of families who simply could not afford them, at sub-prime rates and often with no down payment required. For many, foreclosure was a foregone conclusion at the outset. It was affirmative action for borrowers and worked just as well as the affirmative action in colleges, where minorities were assured of admission under diluted requirements, and almost equally assured of failing after the first year. Like welfare, which harmed the inner cities by making out of wedlock births a lucrative business, leading inevitably to an astronomical incarceration rate for blacks, it ensured failure for minority home-owners, making ownership a revolving door. For many in the “underserved” community, it was: “welcome homeowner,” followed immediately by “get out, deadbeat”!
This is really the essence of “compassionate conservatism,” which is a euphemism for a planned economy. Thus the people blaming the crisis on lack of regulation had actually made and enforced regulations that brought down the financial markets. Regulation was in fact the disease pathogen, not the remedy.
Bush goes on: “I’m a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business.”
He then explains that this current crisis is an exception and describes the “distressing scenario” that must be avoided at all expense — your expense, that is:
More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.
But the banks that would fail would be the ones most heavily invested in the “compassionate conservatism” that you promoted through your HUD rules, Mr. Bush. That would be a very good thing. They should fail. They embraced the false utopian ideal of “social justice” at the expense of self-regulation of markets.
“And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.”
Farmers and small businesses running thriftily will be the ones to survive. That too would be good, if only because it would enable the market to punish the foolish investors and reward the wise ones. And that in turn would serve as a useful example to the next generation of business people. If people became unemployed, they would be reminded that politicians who push snake-oil schemes with names like “compassionate conservatism” (or for that matter, who excuse illegal immigrants by saying things like “they are good people looking for a better way of life”) ultimately result in lost jobs.
“Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.”
Mr. Bush, it should be difficult to get loans. They aren’t for everyone. They are for people with good credit, regardless of race, color or creed. Period. But even so, how is the taxpayers experiencing an unwieldly debt any better than Americans experiencing a “long and painful recession”?
David Walker, the ex US Controller General, predicted that over the next 75 years the gap between what has been promised for entitlement programs like social security and Medicare and how much in dedicated revenue is likely to be received (e.g., through payroll taxes and premiums) is $38.8 trillion. Walker calls these “implicit exposures,” and says they represent the money we would need today, invested at Treasury rates, to pay for future entitlements. This gap represents over $128,000 for every man, woman, and child in the United States.
Peter Sims writes:
According to the GAO, the total fiscal burden over the next 75 years represents $400,000 for every full-time worker in the United States and $440,000 per household.
The bipartisan bailout plan is typical Bush double-talk. While paying lip service to the free market at the beginning of his speech, Bush sounds like a true leftwing revolutionary when his alter ego chimes in:
“Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability.”
In other words, the free market is fine, as long as it is under government control. That is why both parties can reach across the aisle so easily and into your pocketbook.
If McCain signs on to this plan and manages to somehow get elected, look for 4 more years of disastrous Bushonomics posing as free market principles.
If Obama gets elected, look for the same, but called by its real name: socialism.
If you agree that America deserves better than this devil’s bargain, contact your lawmaker at the site linked below and tell them to vote AGAINST the bailout:
PS: For those who think I am making this up, here is the Bush Administration’s HUD site and a quote from that site promoting the “zero downpayment” initiative:
PS: McCain on illegal immigration. He’s for it (no one knows where Palin stands):