Why the Credit Crisis Is the Government's Fault

Over at Reason TV American Enterprise Institute Fellow Peter Wallison lays out the genesis of our current financial crisis. It's about 25 minutes long but a very methodical presentation of the facts.

Some like to blame Wall Street greed for the meltdown. I'm not saying that there isn't blame to be assessed there too, but I can't help but observe that Wall Street's reaction is somewhat like the HAL 9000 computer in 2001: A Space Odyssey. It became irrational because it was instructed to do something fundamentally at odds with its programming. Banks were made to lend to borrowers whom their normal underwritng standards said they should not or be fined for doing so. They were placed in a no-win situation and the ways they tried to reconcile the two competing goals of prudent lending and complying with the Community Redeveloment Act (CRA) caused them to do increasingly irrational things. It's just one more example of how political interference in free markets, well intentioned or not, produces undesireable results.

Update: History of the HAL 9000. HAL was constructed for "the accurate processing of information without distortion or concealment". However, he was asked to conceal information from the Discovery crew and the only way he could reconcile the contradictory instruction was to kill the crew, therefore leaving no one to conceal anything from.

Mark Steyn Takes on Bailouts.....

... in his unerringly to the point but humorous style.

"General Motors now has a market valuation about a third of Bed, Bath & Beyond, and no one says your Swash 700 Elongated Biscuit Toilet Seat Bidet is too big to fail. GM has a market capitalization of about $2.4 billion. For purposes of comparison, Toyota's
market cap is $100 billion and change (the change being bigger than the whole of GM). General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people."

President Bush seems to think that it would be a mistake to let the Big 3 file for Chapter 11. His decision to go ahead and bail them out anyway, despite it failing in the Congress, will probably prove to be a bigger one and will not actually bail them out at all. Go read it all of course.

Hey, Big 3, If You Let Government Get Into Bed With You, You'll Never Get It Out Again.

I'm holding back a little in the title of this post. I'm addressing it to the Big 3 automakers, now seeking alms from the taxpayer. What I mean to say is that if you let the government in your bed, you will get screwed (still a little more polite than the word I'm actually thinking of). Todd Zywycki has an op-ed in today's Wall Street Journal in which he get it exactly right about why the automakers should prefer Chapter 11 not government "help".

Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, [my emphasis] thus explaining their desperation to avoid a bankruptcy.

I agree with this, except that I don't think it's going to be a bribe. It's going to be naked coercion. Once you get Harry and Nancy dictating the kinds of cars they'll build, Maxine Waters dictating which dealers they may or may not close, etc., it's only a matter of time before the Big 3 really do collapse entirely. The Big 3, at least GM and Chrysler, should file now, before they completely lose control of their destinies. Chapter 11 gives the companies the opportunity to come up with a reorganization plan first and if management is smart (not demonstrated thus far) they'll take this opportunity before it's too late.

The Republicans Can't Just Play the Game, They Need to Change the Game

I just received a phone call from the Republican National Committee, asking me for a donation of $300 so "we don't just hand the Whitehouse keys over to the Democrats." It seems to me the Republican Party has already done just that. It has proven itself to be just as corruptible and every bit as spend-thrift as the Democrats and I'm not giving them a dime until I am convinced that they've done the soul-searching necessary to re-learn what it is Republicans are supposed to be about and what the Republican rank and file want from them and then they've got to start acting like Republicans again.

We want you to get Government out of our lives wherever possible. The economic mess we are in now, whether it is the housing crisis, the credit crisis, the auto industry crisis, the health insurance crisis or the energy crisis, every single one of these has its roots in government (political) interference in free markets. Every regulation, every little tweak to the tax code designed to bring about some perceived social good, distorts the markets and causes people and businesses alike to make decisions that make no sense otherwise.

The problem I see with the way the Republicans operate is that they are trying to play a game with rules that someone else has set but are not obeying themselves. The Republicans are fighting according to Marquis of Queensbury rules while the Democrats are fighting with brass knuckles and knives. This has to stop. The Republicans need to stop letting the other side frame the debate and start standing up for what it knows to be right, unapologetically and ignoring the howls of feigned outrage from the other side. Stop backing down every time someone calls you names. Recognize that you're being played and don't engage with that tactic.

The Republicans can't win under the current rules of the game because the other side is controlling the rules. Therefore, it is necessary to change the game. For example, stop quibbling about the tax code and what is just the right marginal income tax rate and talking about who is "paying their fair share". To do that is to buy into the corrosive class warfare/wealth envy rhetoric the other side likes to use to keep the voters divided against one another. The income tax is basically immoral and should be scrapped altoghether. It is also large part of why we have such a hard time competing globally. Our corporate tax burden is the highest or second highest in the world. Quibbling about the details loses sight of the basic fact that the income tax is wrong and Republicans shouldn't be afraid to say so. Yes, I'm talking about enacting the FairTax. Taxing consumption rather than income is the only truly fair way to raise tax revenues and the boost it would give to our economy is definitely something we need right now and it furthers the aim of getting government out of our lives.

A Wake-Up Call on Job Losses

The American Thinker has an article up, penned by a small business owner who is about to permanently shutter his business and "go John Galt", and he's not shy about telling us why.

"Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren't getting out are scaling back.......

Most of the kind of people who start and run businesses are by definition trying to opt out of depending on anyone else -- be it a large corporation or government -- for their welfare. We take on tremendous risks and responsibilities. We do so expecting a better than average return. Since we require nothing from government, most of us deeply resent and resist being pestered by government.

For nearly 30 years, I have been one of these business people. It was an amazing journey and literally involved blood, sweat and tears. But now I am done. This election screams that we are going to see a deterioration of the risk-reward equation and the ability to be left alone. Apparently, any appreciation of our crucial place in the economy is lost on over 50% of the voters as well as those they elected."

Read the whole thing.
(via Instapundit)

Vodkapundit Big 3 Bailout Ad

This ad poster says all that needs to be said. The best bailout package the big 3 automakers could have is a trip through Chapter 11. Tell your Senators and Congressional rep NO!

Market Meltdowns and the Wisdom of the Crowd

Instapundit ran across an interesting set of graphs from Intrade.com, the political futures market, the other day. They track the market's fall as Obama's politcal fortunes rose. It's an interesting analysis, wich concludes as follows:

"Call it a crisis of confidence. Call it a Fannie-inspired meltdown. Call it what you will, but the markets appear to have reacted to Obama's promises of economic "fairness", "spreading the wealth" and raising taxes on the job creators of society.

This thinly disguised form of class warfare, the policies of which many have termed socialism (fairly or unfairly), has had a definite impact on the markets.

The markets represent the ultimate collective intelligence engine on the planet.

The markets have spoken on the stated policies of Barack Obama.

Sorry, folks, there are no do-overs."

Thanksgiving Is Almost Here - It's Chestnut Soup Time

I posted the recipe for Chestnut Soup a couple of years back. It is my favorite soup. I always make this for Thanksgiving and often for Christmas dinner too. Well, it's that time of year again, so it's time to roast some chestnuts!

Evidence That "Gun-Free" Zones Actually Attract Killers

Cincinnati station WCPO reporter Brendan Keefe ran this story about gun free zones and their attractiveness to "active killers," e.g., the kind of killers that go into a place like a school or a post office and kill a number of people before ultimately turning their weapons on themselves. It seems they actually seek out these designated gun-free zones for their crimes because they are pretty much assured their victims will be defenseless.

The other statistic that emerged from a study of active killers is that they almost exclusively seek out "gun free" zones for their attacks.

In most states, concealed handguns are prohibited at schools and on college campuses even for those with permits.

Many malls and workplaces also place signs at their entrances prohibiting firearms on the premises.

Now tacticians believe the signs themselves may be an invitation to the active killers. The psychological profile of a mass murderer indicates he is looking to inflict the most casualties as quickly as possible.

Also, the data show most active killers have no intention of surviving the event.

They may select schools and shopping malls because of the large number of defenseless victims and the virtual guarantee no on the scene one is armed.

As soon as they're confronted by any [my emphasis] armed resistance, the shooters typically turn the gun on themselves.

Trying to protect people by designating a place as gun-free makes sure that the only people who don't have guns are the people who are law-abiding/rules following in the first place and is no deterrent at all to someone bent on mayhem.

A couple of the commenters chided the reporter for referring to his sources in generalities. In the comments he responds by naming his experts and providing links to his data sources.

(via Instapundit and Arms & the Law)

No Bailout for the Big 3

Powerline has a post this morning arguing against the bailout of the Big 3 auto makers that puts the issue in perspective. Giving them $25 billion would be throwing good money after bad. It's time for Chapter 11. Only if the auto makers can get rid of their crushing legacy costs will they have a chance to recover. A bailout will just delay the inevitable.

The Case for Global Warming Looks Shakier All the Time

Via Tim Blair we have this latest screw-up by NASA's James Hansen.

"This was startling. Across the world there were reports of unseasonal snow and plummeting temperatures last month, from the American Great Plains to China, and from the Alps to New Zealand. China's official news agency reported that Tibet had suffered its "worst snowstorm ever". In the US, the National Oceanic and Atmospheric Administration registered 63 local snowfall records and 115 lowest-ever temperatures for the month, and ranked it as only the 70th-warmest October in 114 years.

So what explained the anomaly? GISS's computerised temperature maps seemed to show readings across a large part of Russia had been up to 10 degrees higher than normal. But when expert readers of the two leading warming-sceptic blogs, Watts Up With That and Climate Audit, began detailed analysis of the GISS data they made an astonishing discovery. The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.

The error was so glaring that when it was reported on the two blogs - run by the US meteorologist Anthony Watts and Steve McIntyre, the Canadian computer analyst who won fame for his expert debunking of the notorious "hockey stick" graph - GISS began hastily revising its figures. This only made the confusion worse because, to compensate for the lowered temperatures in Russia, GISS claimed to have discovered a new "hotspot" in the Arctic - in a month when satellite images were showing Arctic sea-ice recovering so fast from its summer melt that three weeks ago it was 30 per cent more extensive than at the same time last year."

Mark Steyn Is Back

Mark Steyn had been on hiatus for a while but now appears to be back with his regular weekly column in the Orange County Register. This one is about the election, of course.

"While few electorates consciously choose to leap left, a couple more steps every election, and eventually societies reach a tipping point. In much of the West, it's government health care. It changes the relationship between state and citizen into something closer to pusher and junkie."

Need I say it? Read the whole thing.

Obama is the Wrong Choice

How much more evidence does anyone need?

This guy does not have America's interests at heart.

Why Incentives Matter

The Instapundit posted a link yesterday to an article in the Wall Street Journal about younger Japanese workers refusing promotions. It's a good article but the second update to Glenn's original post is what I find most interesting. A reader wrote:

"It's not just Japan. I work for one of the big 3 aerospace/defense companies at a Los Angeles area location, and though I wouldn't say it's nearly as evident as in Japan, young workers in our industry are asking the same questions. We have no hope of achieving the same standard of living as the droves of retiring Boomers and Silents, and the 2% raise differential afforded by a promotion simply isn't enough of an incentive to work 20-30% more hours a week.

If the industry paid overtime, or offered significant bonuses to rank and file employees (bonuses are only available to upper management), a lot of young engineers would respond enthusiastically. In fact, we've asked the company to do these things in recent employee forums. We'd all like to buy homes in the area and raise families here, but the older workers own all the real estate, and most of us assume that we'll give things a few years, but get out of the area once we need to settle down. It's simply too expensive to live in a metro area like L.A. Since the incentive structure doesn't offer us hope of achieving the same lifestyle as the older employees, we don't see much reason to devote our lives to these companies. As I said, the 2% differential doesn't make a whole lot of difference, so why bother with the extra stress?"

Having once lived in LA and later the San Francisco Bay area, I know exactly what he means. I could never have hoped to buy property in either of those areas for pretty much the same reason and when the time came to leave the area, I did so with mixed feelings. I was sad about leaving behind the friends my wife and I had made but also enormously relieved by the significant decrease in the cost of living, tax burden and all the other ways California has of nickel-and-diming one to death (and don't get me started on the rampant nanny-statist tendencies).

The other point the reader/commenter made was about the reasons for lack of loyalty to the company. I have only made significant improvements to my income by being willing to change employers (and to move where the jobs are). It's not that I disliked working for some of them but a matter of pragmatism. They were looking out primarily for their own self interest. I had to be responsible for looking out for mine. That's the way it should be. Waiting for the company, or the government to notice your income isn't keeping up with the cost of living, and then actually be willing to do something about it, is a recipe for a stagnant standard of living. You make your own "luck."

Fred Thompson Summarizes the Stakes in this Election

Fred was my first choice for the Republican nomination. Alas, it was not to be but he still has something to say about it:


I hope the rumors that he will be tapped to chair the RNC are true.

(Via Little Green Footballs)