Calling John Galt

Moral Hazards

Much of the furor over the housing/lending/banking/bailout “crises” was a lack of general understanding about what was to blame. Politicians seized the moment of confusion, and set about their predictable path of demagoguery and power acquisition, “for our own good.”

I’m glad to see others (like the Center for Freedom and Prosperity Foundation) are using simple language to explain what used to be common sense.

FHA is the New Fannie

So it looks like the FHA, which guarantees lots and lots of home loans, is well on its way to needing a huge, Fannie-style bailout.  From the WSJ:

…Federal Housing Administration, the nation’s insurer of nearly $750 billion in outstanding mortgages. The agency acknowledged this month that a new but still undisclosed HUD audit has found that FHA’s cash reserve fund is rapidly depleting and may drop below its Congressionally mandated 2% of insurance liabilities by the end of the year.

At a 50 to 1 leverage ratio, the FHA will soon have a smaller capital cushion than did investment bank Bear Stearns on the eve of its crash.

The basic problem is that the FHA guarantees every dollar of a loan, leaving neither the borrower nor the originator at risk in case of a default.  Combine that with incredibly low down payment requirements for these loans and it’s a(nother) disaster waiting to happen.

One simple fix would be for the FHA guarantee to cover only 90% of the loan, in which case the lender would still have to care about the creditworthiness and default likelihood of the borrower, rather than dishing it all off to the taxpayers.

Thumbs down to a handout

Will the last free-market enthusiast in the media turn off the light on the way out?

Wait!  Not so fast!  There is hope!

From Slate:

When President Barack Obama told the Toledo Blade last week that he hoped that the faltering newspaper industry would recover because “fact-based” and “investigative reporting” are “absolutely critical to the health of our democracy,” even some of the cynical bastards who staff the nation’s dailies swooned.

Of course, the president didn’t pay anything more than lip service to the newspapers. He remained, in the Blade’s words, “noncommittal” about the bills, including one by Sen. Benjamin L. Cardin, D-Md., introduced early this year that would allow newspapers to reorganize themselves as nonprofits. “I haven’t seen detailed proposals yet, but I’ll be happy to look at them,” Obama said.

The good news is there are journalists, like Jack Shafer (author of the Slate piece), who see this as a threat:

Here’s hoping that the White House’s detailed-proposals czar keeps the Cardin bill out of Obama’s hands. The last thing newspapers need is the sort of help from the government that turns them into NPR, endlessly begging for contributions, pursuing wealthy philanthropists, and standing in line for government handouts.

Shafer also quotes from Donald Kimelman from the Boston Globe:

Why should the tax laws give an advantage to newspapers over other kinds of media? How will the recipients of philanthropic dollars avoid having their news agendas distorted by donor preferences? Would the crutch of donor support hinder the search for new commercial revenue necessary for news organizations’ long-term viability?

Of particular interest is the recognition that the newspaper industry has already suffered from the Unintended Consequences of other interventions.

I haven’t done this piece justice… so please click through and read it for yourself.

Here’s to the hope that journalists can turn use these same notions to be just as critical of other bailout and spending plans, that have their own Unintended Consequences.

Does it have cupholders?

Fast, Convenient and there for You

I can’t wait to have the Government service my car.

The Audacity of Nope

We need a leader with the guts to turn to the corporate welfare recipients, and give them the answer that will finally lead to economic growth.

It’s not bailouts.

It’s not stimulus.

It’s the notion that unmade beds remain the way they were slept in.

It’s the only way investors and consumers will proceed with confidence, knowing that financial activities have consequences that are predictable and visible.

Every act of propping up failed practices and businesses only prolongs the damage, passing it along to further generations. You can’t replace a bubble with another bubble, without getting a louder and bigger implosion down the road.

We don’t need a government that says the right things, we need a government that says nothing. Then does it.

We need a government that believes in the Audacity of Nope.

Life Imitates SNL

Via New York Times: GM says it needs another $4.6 billion loan within weeks and an additional $12 billion in financial support to stave off bankruptcy.

Now, watch this from November, and pay attention around the 2:15 mark.

Bailout bonanza

The only industries helped by the bailouts so far are lobbyists, out-of-work Keynesians, and AIG’s meeting planners.