Don't mess with other people's money

What have we learned from the financial crisis? The mainstream media are talking about the greed of Wall Street and wild capitalism as the root cause of the financial mess we are in. Very few of them acknowledge the role of politicians and collectivist government intervention. "Beware of trying to do good with other people's moeny." says Russell Robert economic professor at George Mason University in this Wall Street Journal article.

This time the politicians have been eve smarter. They didn't spend the money themselves but since 1992 Congress pressed the biggest national morgage lender Fannie Mae and Freddie Mac to increase the percentage of mortgages going to low–income borrowers:

In 1996 the Department of Houseing and Urban Development (HUD) gave Fannie and Freddie an explicit target — 42 percent of their mortgage financing had to go to borrowers with income below the median in the their area; the target increased to 50 percent in 2000 and 52 percent in 2005.

Also in 1996, HUD required that 12 percent of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60 percent of their area's median income.

Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable–rate loans, and made to borrowers who bought houses with less than 10 percent down.

That is why the same people that brought us this mess, the US Congress, have had to bail us out. We need to ensure that there is no "next time" by insuring that they can never again play around with other people's money!

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written by dave, October 07, 2008

Sounds very similar to insisting 50% of the population should go to university!!!!!!!!!!!

The Perfect Financial Storm
written by Tony Hollick, October 08, 2008

There's plenty of blame to go around.

However, we can be quite sure of two facts:

[1] The Co-Operative Bank in Britain, mutually-owned by its members and customers (like myself) are NOT the cause or part of the problem. Neither are the Building Societies that escaped the carpet-baggers.

[2] The Mondragon Bank of the Mondragon Co-Operatives in Spain are NOT part of the problem. Incidentally, the CoOperatives themselves show TWICE the audited return on capital employed.(8% p.a.) of investor-owned Spanish businesses. Just imagine the cumulative effect of twice the return on capital on annual economic growth rates.

Mondragon Co-ops are market compatible; they're better to work in; they have a better record of innovation. Their workers own the businesses they work in. They choose the management. They reap the rewards.

http://www.mcc.es

I think we can be very sure that Adam Smith would have approved. He had no time for Crony-Capitalism.

Cordially,

Tony Hollick

PS: I've seen estimates of the "toxic overhang" as high as $42 trillion, with about $13 trillion in base assets.

I'd like to see a good range of estimates --TH

A Motto For "De-Regulators"
written by Tony Hollick, October 08, 2008

"Before dismantling a fence, be very sure to find out why it was put there."

Cordially,

Tony Hollick