Detractors of my columns continuously chide me a free-market zealot lunatic inebriated by capitalist ideology, unable to recognize criminals subjugating poor suckers, even when we catch them red handed. Some of my Democrat friends (I actually have a couple) admonish my laissez-faire ideals and ask, Jim, don’t you root for the underdog?
I thought I was the underdog.
No college degree, no rich parents, no connections to wealthy influential businessmen or politicians who might aid my rise. Only if I was a black woman lesbian, then I would have the whole package!
All this talk about the failure of the free-market, and I’m scratching my head, what free-market?
In the old days you needed twenty percent down to buy a house. Reason was, if you didn’t pay, the bank could take back the house and resell it without getting screwed. Pretty simple. This is how banks stayed in business and protected depositor funds. The policy also made sure home buyers had a little skin in the game.
Good business practices, however, gave way to irresponsible altruistic endeavor promoted not by home buyers at the bottom, or bank executives in the middle, but by politicians at the top.
The Community Reinvestment Act was passed in 1977 under President Jimmy Carter. The act was designed to prevent lending institutions from redlining A policy banks used to steer clear of neighborhoods more likely to default on loans. While the policy penalized some minorities capable of meeting mortgage commitments, in its usual broad swath approach the government encouraged and guaranteed irresponsible and risky behavior.
In debate, the bill’s detractors lamented the legislation would create unnecessary regulations and burden banks, and ultimately lead to unsound lending. Imagine that!
In 1989 the Bill was modified to give lending institutions ratings and publicly disclose them, allowing community groups to influence bank actions with political pressure.
In 1992, 1994, 1995, and 1997 further legislative changes snared Fannie Mae, Freddy Mac, and ultimately the big investment houses, Bear-Stearns, Goldman, Lehman, etc.
May 25, 2006, John McCain co-sponsored the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 which was killed by irresponsible politicians in Congress. In his support of the Act, McCain highlighted, Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were illusions deliberately and systematically created by the company’s senior management, which resulted in a $10.6 billion accounting scandal.
The Act failed to pass.
Our financial meltdown has not resulted from too little regulation or a free-market run amok, it has resulted from criminal behavior cloaked by irresponsible altruism ignoring simple business realities that keep the free-market normally on track. Politicians demanding bad regulations are at the nucleus of this meltdown.
If borrowers took on more house than they could afford, they need to lose them. Crazy programs to buy down bad mortgages will just prolong the correction which will take place. Everything has intrinsic value and no amount of government intervention can maintain housing prices above that level indefinitely. Arrogant politicians will now cover their butts by increasing America’s debt to indenture our children.
While our country flails under the weight of this financial catastrophe, the same politicians who created the policies which have destroyed us are hauling rotten CEO’s into inquisitions demanding answers.
The English language doesn’t possess words adequate to describe these proceedings, preposterous and ridiculous don’t cut it.
It’s like Charles Manson was summoned to preside over the trial of Leslie Van Houten, Susan Atkins, and Patricia Krenwinkle.
I asked my good Democrat buddies, How is all this going to help the underdog?
If the underdog is a guy who’s busting his butt trying to raise himself and improve his station giving it all he’s got, then you bet I’m rooting for him, and guess what? That guy will do just fine without bad government regulations.
If the underdog is some crack smoking loser, three kids out of wedlock and not taking care of any of them, then no, I’m not rooting for him, and I don’t want the government forcing bad regulation down upon banks to give the jackass a house to live in.
That guy will sleep just fine in an old refrigerator box.
American opportunity exists to insure everybody access to success, not guarantee it. By providing reward instead of demanding it be presented upon achievement, our politicians have perverted American business and encumbered free-enterprise a dubious distinction it had no hand in creating.
Copyright 2008 Jim Pontillo