Apparently the American public has been convinced by the fork-tongued leading lizards of the New American Socialists (a.k.a. the former Democratic Party) and their propagandists in the press that capitalism in general and George Bush in particular are totally responsible for the financial meltdown that has brought our country to its knees in the fall of 2008. I beg to differ, at the risk of confusing the American public with the facts.
Capitalism had very little to do with the current financial crisis, and its not really hard to identify what did -
1. Growing government interference in America's economy and financial markets. Beginning with the Community Re-investment Act (CRA) of 1977, Congress required lenders to loosen credit standards in order to encourage home ownership. In 1995 the rules were relaxed further, with the quasi-government agencies Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) becoming the repository of the loans the original lenders knew could not be paid back. As a result of the incestuous and sordid relationship between these agencies and their assumed overseers in Congress, specifically Barney Frank (Chairman of the House Financial Services Committee) and Chris Dodd (Chairman of the Senate Banking Committee), both Democrats who received substantial campaign contributions from the two agencies (along with Barack Obama and Rahm Emanuel), Fannie Mae and Freddie Mac grew to dominate the mortgage industry with massive amounts of unpayable sub-prime home loans on their books.
Four Republicans (Charles Hagel, John McCain, Elizabeth Dole and John Sununu) sponsored the Federal Housing Enterprise Regulatory Act of 2005 to address the potential financial disaster that was building at Fannie and Fred, but the Democrats killed the bill. Meanwhile, Barney Frank and Chris Dodd were denying that any problems existed at these agencies right up until their portfolios imploded. Yet George Bush and the Republicans are held responsible by the Democrats and the media.
2. Irresponsible monetary policy by the Federal Reserve. Fed Chairman Alan Greenspan and his successor, Ben Bernanke, kept interest rates too low too long, encouraging and facilitating the massive expansion of credit throughout the economy. The Federal Reserve is the central bank of the United States, and is an independent agency whose decisions are not mandated or ratified by the president or anyone else in the executive branch. The chairman is appointed by the President, subject to confirmation by the senate. The Federal Reserve is subject to oversight and reports to Congress, not the President. Yet George Bush and the Republicans are held responsible by the Democrats and the media.
3. Creative financial instruments that had nothing to do with the functioning of industry and commerce. Wall Street created complex, esoteric, incomprehensible investment vehicles traded among themselves and sold to institutional investors that did not represent the ownership of corporations and private businesses, and therefore were not representative of the true definition of capitalism. Credit Default Swaps, Exchange Traded Notes, Toggle Bonds, hundreds of specially designed securities based on derivatives of other securities, all leveraged up with debt to multiply the returns on invested capital - none of these were necessary for the functioning of a capitalist economy. But you can't legislate against greed. Yet George Bush and the Republicans are held responsible by the Democrats and the media.
And last but not least, capitalism has nothing to do with bailing out businesses and investors who make unwise, high risk mistakes. In fact, capitalism can only work efficiently if those who do make bad investments suffer the consequences. There is no bailing out in capitalism.
Capitalism has everything to do with private enterprise, where individuals rather than the government own the means of production and distribution. This ownership is evidenced by shares of stock in public companies and proprietary or partnership interest in private ones. It is not evidenced by purchasing contrived securities that represent nothing tangible.
Yet today the government is bailing out those wealthy financiers and traders on Wall Street who created the useless financial snake oil. Meanwhile, the Main Street investors in real assets that generate economic growth through the production of goods and services are obliged to pay for it. That is not capitalism. And it is not all George Bush's fault.
No comments:
Post a Comment