Obama and the Seuss-quester
by Amy Payne with original
artwork by Glenn Foden On Pennsylvania Avenue, right near the end, there lived a President who wanted to spend.
He knew spending meant power, so hour by hour, he thought up more spends from his Washington tower.
“I’ll spend without limits; I’ll spend without blame! Raising taxes to pay—that’s the name of the game.”
Down the street, though, a House filled with thriftier folk had a budget to pass, or the country’d go broke. “We can’t spend all day; we’ve got bills to pay! Let’s keep deficits and higher taxes away.”
The Senate next door to the House just refused. “We don’t like your budget. We’ve got some bad news: The President says we can spend all we want, and we’ll simply raise taxes whenever we choose.”
So they spent and they spent and they borrowed some more. And when all that was spent, they spent same as before.
But not everyone thought the spending was nice. In the House and the Senate, some spenders thought twice. “We’ll cut down on spending. We have a bad feeling…” then—SMACK!—right on schedule, they hit the debt ceiling.
Then the President’s office, confronted with debt: “If it’s cuts they want now, then it’s cuts they shall get. We’ll threaten such cuts that NO one would take, and show them that cuts are not smart to make.”
“This will make Congress move. We’ll just float out a tester… broad, haphazard cuts that we’ll call the sequester.”
The Senate and even the House said, “Okay! That will motivate us to find a good way. We’ll figure this out and stave off those cuts—to allow them to happen, we’d have to be nuts.”
So the deadline was set, but the spending went on. A year and a half had soon come and gone. The House passed a budget; the Senate said no; the President very much enjoyed the show.
“Spend higher! Spend faster! Grow the welfare rolls! Soon, love for the spending will show up in the polls.” He even raised taxes, but it wasn’t enough—the levels of spending grew too fast to keep up.
“Don’t you mind the sequester,” he told Capitol Hill. “You said you would fix it, and I’m sure you will.”
But they could not agree on ways to cut spending, and before they knew it, the sequester was pending.
“Oh no!” they all cried. “We can’t let these cuts stand!”
And the President said, “WHO thought of this terrible plan?”
They didn’t remember his plan all along. He distracted them with his spending-cut song. Now he returned to save them from harm, and to keep them forgetting all but his charm.
So the President said with a glint in his eye, “You tried to cut spending. I saw how you tried. But it’s just too painful—I’m sure you can see. From the beginning, you should have listened to me.”
“I’ll save you all from the spend-cutters’ axes. You see, the solution is just to raise taxes.”
***
We don’t know yet how this story will end. Will Congress raise taxes and continue to spend? We need a balanced budget with smarter cuts—reforming entitlements will take guts.
Let the President know that we’re onto his plan. Share this story with as many people as you can.
http://blog.heritage.org/2013/02/22/obama-sequester-plan-tax-and-spend-dr-seuss/?roi=echo3-14651763098-11532800-4a9728950f3998768e4ff76279344248&utm_source=Newsletter&utm_medium=Email&utm_campaign=Morning%2BBell
http://www.youtube.com/watch?v=GZMNfP_HCUA
Obama's "Pay to Play"
According to Common Cause, the President is considering a plan to hold in-person meetings four times yearly with those who raise $500,000 or more for his lobbying group, Organizing for America.It doesn't take a genius to understand that this is simply a pay-to-play plan. If you are willing to pony up half a million or more, you, too, can have a sit-down with the world's most powerful man every three months (presumably, the President will make time for you between vacations, rounds of golf, and scaring the country).
Of course, this step -- if taken -- would merely formalize a comfortable little arrangement that's already in place:
Among donors [to the Obama 2008 campaign effort] who gave $30,000 or less, about 20 percent visited the White House, according to a New York Times analysis that matched names in the visitor logs with donor records. But among those who donated $100,000 or more, the figure rises to about 75 percent. Approximately two-thirds of the president’s top fund-raisers in the 2008 campaign visited the White House at least once, some of them numerous times.
. . .
Some of the donors had no previous record of giving to the president or his party, or of making donations of such magnitude, so their gifts, sometimes given in close proximity to meetings, raise questions about whether they came with expectations of access or were expressions of gratitude.
Really? They "raise questions"? I think not -- the answer is clear.
http://townhall.com/tipsheet/carolplattliebau/2013/02/22/obamas-pay-to-play-n1518157
Update: Parents protest Black Panthers school celebration
On Monday, I posted this story
about a Minnesota high school commemorating Black History Month with a
flowery presentation on the Black Panthers, a revolutionary Marxist
group notorious for violent protests and involvement in the Black Power
movement during the 1960s and 1970s. Predictably, many parents weren’t
too thrilled that propaganda from a Marxist website was being used to
“educate” their children about history.
Many people took interest in the story, so I wanted to update you on the latest.
The Twin Cities Pioneer Press reports that parents in Woodbury are organizing a protest and presentation for the South Washington County school:
“The objection is not that the Panthers were black but that they were violent,” said Andrea Mayer-Bruestle of Woodbury. “If you commemorated al-Qaida, the Ku Klux Klan or a Hitler youth group, how many parents would be freaking out?”
Since the story first ran, the school has spoken up in its own defense:
“The facts relate to either people or
events that are a part of our country’s history focusing on those
influencing black history,” school principal Aaron Harper said in a
statement. “Whether
people believe in the Panthers’ ideals or not, they are part of our
history, and we are sharing these facts with our students.”
But parents objected to the fact that
the presentation didn’t present a complete picture of the Panthers,
including the convictions of its leaders for violent crimes and murder.
At the height of their power, the FBI considered the Panthers to be a
terrorist group and a threat to the country. Students should learn
about the Panthers, but in a classroom setting, Woodbury resident Steve Ellenwood argues.
“At
a minimum, parents would like an apology,” adds Mayer-Bruestle. “Martin
Luther King Jr. would be rolling in his grave. He was intolerant of
groups like the Black Panthers.”
http://www.theblaze.com/blog/2013/02/22/update-parents-protest-black-panthers-school-celebration/
Oh my: NYC 4th graders learn math using slavery
A public school teacher in New York is facing disciplinary action
after sending her students home with assignments that used killing and
whipping slaves to teach subtraction and multiplication. Not
surprisingly, some people were offended.
One question focused on a ship loaded with 3,799 slaves. “One day, the slaves took over the ship. 1,897 are dead. How many slaves are alive?” the question read.Another word problem used the example of a slave who “got whipped five times a day,” then asked students to calculate the number of whippings he received in a month.
Naturally, it wasn’t the teacher’s fault:
Education officials said that fourth-graders at the midtown school wrote the questions themselves after [teacher Jane] Youn told them to blend lessons they learned in social studies class with their math assignments. Youn gave them to students as homework.
Ridiculously bizarre and offensive
political incorrectness aside, what sort of teacher lets her students
write their own homework questions? How… progressive.
Unfortunately for Youn, she’s now
pretty much guaranteed to be the least popular faculty member at PS59.
Because of her “appalling” homework assignment, Principal Adele
Schroeter has ordered “sensitivity training” for the school’s entire staff. Fun times.
http://www.theblaze.com/blog/2013/02/22/oh-my-nyc-4th-graders-learn-math-using-slavery/
Why your boss is dumping your wife
Companies are dropping health coverage for spouses to cut costs
By denying coverage to spouses, employers not only save the annual
premiums, but also the new fees that went into effect as part of the
Affordable Care Act. This year, companies have to pay $1 or $2 “per
life” covered on their plans, a sum that jumps to $65 in 2014. And
health law guidelines proposed recently mandate coverage of employees’
dependent children (up to age 26), but husbands and wives are optional.
“The question about whether it’s obligatory to cover the family of the
employee is being thought through more than ever before,” says Helen
Darling, president of the National Business Group on Health.
While surcharges for spousal coverage are more common, last year, 6% of
large employers excluded spouses, up from 5% in 2010, as did 4% of huge
companies with at least 20,000 employees, twice as many as in 2010,
according to human resources firm Mercer. These “spousal carve-outs,” or
“working spouse provisions,” generally prohibit only people who could
get coverage through their own job from enrolling in their spouse’s
plan.
Such exclusions barely existed three years ago, but experts expect an
increasing number of employers to adopt them: “That’s the next step,”
Darling says. HMS, a company that audits plans for employers, estimates
that nearly a third of companies might have such policies now. Holdouts
say they feel under pressure to follow suit. “We’re the last domino,”
says Duke Bennett, mayor of Terre Haute, Ind., which is instituting a
spousal carve-out for the city’s health plan, effective July 2013, after
nearly all major employers in the area dropped spouses.
But when employers drop spouses, they often lose more than just the one
individual, when couples choose instead to seek coverage together under
the other partner’s employer. Terre Haute, which pays $6 million
annually to insure nearly 1,200 people including employees and their
family members, received more than 20 new plan members when a local
university, bank and county government stopped insuring spouses,
according to Bennett. “We have a great plan, so they want to be on ours.
All we’re trying to do is level the playing field here,” he says.
While couples generally prefer to be on the same health plan, companies
often find that spouses are more expensive to insure than their own
employees. That’s because, say benefits experts, covered spouses tend to
be women, who as a group not only spend more on health care, but also
have more free time to go to the doctor if they don’t work. Indeed,
JetBlue’s covered spouses cost 50% more than crewmembers themselves,
according to the airline’s online Q&A about its health plan, which
this year extended wellness incentives to spouses for the first time.
About a fifth of companies had policies to discourage spouses from
joining their health plan in 2012, according to Mercer, though most just
charged extra—$100 a month, on average—to cover spouses who could get
insurance elsewhere, rather than deny coverage entirely. Indeed, large
firms including generics maker Teva and supply chain manager Intermec
have spousal surcharges costing $100 a month, or $1,200 annually, while
Xerox charges $1,000 for the year.
But experts say more firms are likely to drop spouses altogether,
whether they work or not—especially when the new federal health-care
exchanges open in 2014, providing an alternative for spouses left out in
the cold. “When there’s a place for people to go, employers won’t feel
as beholden or compelled to cover the spouse,” says Joan Smyth, an
employee benefits consultant with Mercer.
Firms that recently decided to drop spouses from their plans range from
private insurance agencies to school systems and universities like Ball
State, as well as large companies like pump and valve manufacturer
Flowserve. Wisconsin-based furniture company KI carved out spouses this
year when couples flocked to its plan for the first time during open
enrollment. “Now, each employer is responsible for its own employee,”
says Timothy Van Severen, corporate risk manager for KI, which insures
about 1,700 employees in its health plan. “We were going to see a higher
claim cost if we didn’t do that, because of the migration coming back
to us.”
Some companies drive spouses away using other tactics, such as making
spousal coverage prohibitively expensive through higher surcharges or by
making reimbursement rates so low that spouses can’t afford the plans.
The share of employers who allow spouses in their plan but don’t pay for
any part of it rose from zero to 3% this year, according to human
resources consulting firm Towers Watson. Northrop Grumman, the large
security firm, will cover spouses who can get insurance through their
own employers, but only if they first enroll in their own plan, and use
Northrop’s as secondary coverage. (Some companies actually pay spouses
an incentive if they enroll in their own plan, though insurance experts
say the incentive is a waste of money—and that employers would do better
by just cutting spouses off.) “You’re making it kind of a no-brainer
for the other adult dependent to get on his or her own plan,” says Helen
Darling, president of the National Business Group on Health. “No one
wants to be just a dependent magnet.”
But like any breakup, the separation of spouses into different health
plans can be traumatic for families. Greg Fischer, a vice president in
the employer solutions division at HMS, says demand has increased for
the company’s dependent audits, which have revealed that 3% of spouses
are ineligible for the health plans, either because of plan rules or
divorce and legal marriage issues. The news can be upsetting to couples
when one partner is forced to pay more for coverage or accept lesser
benefits: One spouse may even have to stop seeing the family doctor if
his or her new plan stipulates a different set of providers. “I think
that’s where the pain point comes in for the employee—that their spouse
may have to be covered under a different plan, or their benefits might
be reduced,” Fischer says.
Couples then have to decide whether to stick together, even if it means
losing benefits, or to split up so at least one spouse maintains
coverage. If they separate, they may also have to choose which plan to
insure the kids under, or whether to use different plans for each. “It
certainly makes the family unit have to do some real soul-searching and
figure out what works best for them,” says Karen McLeese, vice president
of employee regulatory affairs for CBIZ Benefits & Insurance
Services. The decision, she adds, will likely come down to dollars and
cents.
For their part, employers say they try to educate employees on their
options well in advance of the change, and health plans or insurance
brokers sometimes step in to guide people through the transition and
help them find doctors in their new network. In announcing its spousal
carve-out, Ball State University, for one, warned employees to prepare
“since this is a potentially life-changing event.” The university
employee benefits staff worked with spouses and their employers to guide
them through the transition onto their own plan, and have even allowed
some spouses with “uncooperative” companies to stay on “until the
conflict is resolved,” says Joan Todd, a spokeswoman for the university.
“We wanted to be very careful that no spouse would lose coverage before
they could be placed on their own employer’s plan.”
http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22
PK'S NOTE: This is a lot of reading but important
The Feds Want Your Retirement Accounts
Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported "[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency's first foray into consumer investments." That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon published by American Thinker.
Days later On January 24th President Obama renominated Cordray as CFPB director even though his recess appointment was not due to expire until the end of 2013.
One day later, in the first significant resistance to President Obama's concentration of presidential power, a three judge panel of the U.S. Court of Appeals in Washington DC unanimously said that Obama's Recess Appointments to the National Labor Relations Board are unconstitutional. Similar litigation testing the Cordray appointment to the CFPB is in the pipeline.
The Consumer Financial Protection Bureau (CFPB) created by the 2,319 page Dodd-Frank legislation is a new and little known bureau with wide-ranging powers. Placed within the Federal Reserve, a corporation privately owned by member banks, the CFPB is insulated from oversight by either the President or Congress, its budget not subject to legislative control. It is not even clear that a new President can replace the CFPB director on taking office.
Unusual legal and political environments have a significant impact on the CFPB. With Cordray's recess appointment in doubt several questions remain unanswered.
1) What will become of the CFPB when Cordray's appointment is found invalid? An indicator comes from the NRLB, which operated unconstitutionally for years without a quorum. In 2007 the Senate threatened no NLRB nominations reported out of committee.
The NLRB continued operating with two members. Then a Supreme Court ruling in June of 2010 invalidated the NLRB decisions for lack of a quorum. Fisher & Phillips give the details about what was done next.
But recovery from the Supreme Court's sting was quick, with Liebman and Schaumber still on the Board and with two new Members confirmed, ... the suddenly full-strength Board simply added a new Member to the "rump panel" of the original decisions and managed to rubber-stamp many of the disputed Orders - at a record-setting pace - with the same result...This may explain why President Obama renominated Cordray a year early. Once confirmed Cordray can rubber-stamp decisions made while he was unconstitutionally appointed. Otherwise those decisions will be invalidated.
2) What will the CFPB do with your money? The CFPB incursion into individual personal savings, in order to control how you invest your money, isn't a new idea. Current proposals grew from a policy analysis as disclosed by Roger Hedgecock.
On Nov. 20, 2007, Theresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, presented a paper proposing that the feds eliminate the tax deferral for private retirement accounts, confiscate the balance of those accounts, give each worker a $600 annual "contribution," assess a mandatory savings tax on every worker and guarantee a 3 percent rate of return on the newly titled "Guaranteed Retirement Accounts," or GRAs.How would that be accomplished? The Carolina Journal reported Ghilarducci's 2008 testimony to Nancy Pelosi's House.
Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers' personal retirement accounts "including 401(k)s and IRAs" and convert them to accounts managed by the Social Security Administration.Your Government universal GRA investment savings account is an annuity managed by Social Security. Hedgecock noted '[m]ake no mistake here: Obama is after your retirement money. The "annuities" will "invest" not in the familiar packages of bond and stock mutual funds but in the Treasury debt!'
By 2010 Bloomberg published an article titled "US Government Takes Two More Steps Toward Nationalization of Private Retirement Account Assets." In that article Patrick Heller observed that, with Democrat control of Congress and the Presidency:
[I]n mid-September 2010 the Departments of Labor and Treasury held hearings on the next step toward achieving Ghilarducci's goals. The stated purpose was to require all private plans to offer retirees an option to elect an annuity. The "behind-the-scenes" purpose for this step was to get people used to the idea that the retirement assets they had accumulated would no longer be part of their estate when they died.So the Government would get the money, not the estate or family of the people who saved the money during a lifetime of work. That's a one hundred percent death tax on savings. Worse, the most responsible and poorest families will be penalized.
Democrats had a blueprint for diverting people's savings from private investment to government debt. Then in 2010 the Tea Party won the house...
3) Why should the Government intervene in people's savings decisions? The justifications for Government intervention in private financial decisions are varied. Panic over the economy, Wall Street, mandating savings equity, eliminating investment risk, financial crisis losses, retirement security, much-needed oversight, your 401K becomes a 201K, shoddy financial products, and predatory investment bankers are just a few.
If the financial industry is so predatory, how is it possible that savers keep any money? More importantly, we have all those government agencies, FDIC, FINRA, SEC, Labor Department, Treasury Department, NCUA, Office of Thrift Supervision, FHFA, NCUSIF, Comptroller of the Currency, Office of Foreign Assets Control, Pension Benefit Guaranty Corporation, hundreds of criminal penalties, and state level regulators. Are we admitting the Government is incapable of policing criminal and predatory behavior? Do we have invincible predators plundering the people, or do politicians Cry Wolf?
And about that crisis in the economy. Former Congressman Barney Frank, one of the authors of Dodd-Frank, admitted to Larry Kudlow that Government was to blame for the housing crisis.
Professor Ghilarducci said "humans often lack the foresight, discipline, and investing skills required to sustain a savings plan." Professor Ghilarducci tells us that people are flawed, no argument there.
Her solution, substitute Government decisions for the judgment of the millions of people who actually earned and saved the money. She fails to mention the government bureaucrats wielding the power to compel you to comply are themselves imperfect. Which is preferable, one faulty Government solution or millions of individual free choices?
4) Are there other forces pushing Government to confiscate people's savings? With $16 trillion in debt the short answer is yes. When governments embark on a path of spending money they don't have, they resort to financial repression. According to Wikipedia:
Financial repression is any of the measures that governments employ to channel funds to themselves, that, in a deregulated market, would go elsewhere. Financial repression can be particularly effective at liquidating debt.Do we have any evidence that the US Government is pursuing financial repression? Yes we do. Jeff Cox at CNBC. "US and European regulators are essentially forcing banks to buy up their own government's debt-a move that could end up making the debt crisis even worse, a Citigroup analysis says."
An Investors Business Daily article, Banks Pressured to Buy Government Debts, notes that "[b]anks can't say no. They fear the political fallout. So they meekly submit to the government's dictates."
Meanwhile the Wall Street Journal reports that "[i]n 2011, the Fed purchased a stunning 61% of Treasury issuance." Then a CNS News article revealed that "[s]o far this calendar year [2013], the Federal Reserve has bought up more U.S. government debt than the U.S. Treasury has issued."
5) Is the health of Social Security (SS) a factor? There are several potential measures of when Social Security retirement goes broke. One measure is when FICA tax income doesn't cover the cost of retirement checks. We have passed that point already. Others say that SS is fine until the lock box runs out of special issue bonds (IOUs).
Even though the SS bonds in the lock box cannot be sold on the open market, the Treasury Department remains under political pressure to honor that obligation by borrowing real cash to redeem the IOUs. At least until the IOUs in the lock box are gone. How long is that? Based on a credible source, Bruce Krasting at Zerohedge suggests not long.
SS consists of two different pieces. The Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Both entities have their own Trust Funds (TF). OASI has a big TF that will, in theory, allow for SS retirement benefits to be paid for another 15+ years. On the other hand, the DI fund will run completely dry during the 1stQ of 2016.So Krasting expects the President and Congress will soon be forced to choose between 4 solutions:
1 Increase Income TaxesKrasting predicts Congress and Obama will be behind door number four. His credible source is the Congressional Budget Office report Social Security Trust Fund--February 2013 Baseline. In the footnotes it projects a $1 Trillion drain on the retirement fund which currently holds $2.8 Trillion. That's a loss of approximately one third of the retirement IOUs.
2 Increase Payroll Taxes
3 Cut disability benefits by 30%
4 Kick the can down the road and raid the retirement fund to pay for disability shortfalls.
Krasting however omits another possible solution, politicians can raid private retirement savings to put more IOUs in the lock boxes and more real money in the Treasury. Other people's money is a temptation and $19.4 Trillion is a very large temptation.
Social Security is the largest entitlement program with a trust fund of $2.8 Trillion IOUs, soon to be reduced by another $1 Trillion. Can any politician, addicted to spending, resist that temptation of $19.4 Trillion? That's real people's real money that will be spent by Government in exchange for IOUs given to the SS lock box.
Meanwhile newly minted Senator Elizabeth Warren has entered the debate. Conservatives and Republicans have challenged the CFPB in the wake of the unconstitutional recess appointment. Bloomberg speculates that Warren might agree to trim the CFPB powers in a compromise. Bloomberg reported:
"A strong independent consumer agency is good for families and lenders that follow the rules and good for the economy as a whole," Warren said yesterday in an interview. "I will keep fighting for that." [snip]Bloomberg also notes that soon "the Senate will have to decide whether to vote to confirm director Richard Cordray in his post, which would make a legal challenge pointless."
Some observers have suggested that Warren's original support for a commission-led bureau might mean she would be amenable to compromise on that issue. Warren spokesman Dan Geldon said such speculation is mistaken.
"Senator Warren thinks the single director structure makes sense and that CFPB should continue to be able to operate, like every other banking regulator, without relying on appropriations for its funding," Geldon said.
Conservatives and Republicans challenge the surrender of legislative power to the bureau, the concentrated power of a single director, the unconstitutional recess appointments, and the violation of constitutional separation of powers. The Republican position is the constitutional questions and litigation presently underway should be resolved prior to approving a director of CFPB.
The constitutional issues surrounding Dodd -- Frank and the CFPB are beyond the space for this article. For those interested in the legal issues, a good synopsis can be found at the Mark Levin Radio Show podcast for February 18th. Mark is an attorney and his Landmark Legal Foundation has argued many cases before the Supreme Court. He can explain complex legal issues in straightforward language.
The True Story Behind the Financial Crisis
Expert: Accepted narrative of the 2008 financial crisis is wrong
Wallison, a member of the Financial Crisis Inquiry Commission and a financial policy expert at the American Enterprise Institute, discussed his recent book Bad History, Worse Policy: How a False Narrative About the Financial Crisis Led to the Dodd-Frank Act during a lunch event hosted by Americans for Tax Reform.
“The Dodd-Frank Act is the most intrusive, the most regulatory, the most comprehensive financial regulation since the New Deal, and there’s really no comparison with the New Deal,” he said. “This piece of legislation is truly extraordinary.”
Wallison said the narrative of the crisis championed by the press and liberal politicians is that Republican deregulation and greedy big banks are to blame.
The media is suspicious of capitalism, Wallison said. They view it as “Darwinian,” the “enemy of equality,” and an “inherently unstable system that results in crashes time and time again.” Regulatory agencies also have an interest in the conventional narrative. “Whenever they fail, they get more power,” Wallison said.
But this narrative is wrong, Wallison argued. “Anyone in the financial industry will tell you it wasn’t financial deregulation,” he said, although even the financial institutions themselves did not fully understand the causes of the crisis at the time.
Wallison spent about five minutes outlining his version of the causes of the crisis.
The government created Fannie Mae and Freddie Mac to buy home mortgages from banks in order to free up capital at those banks and permit more loans. And according to a 1992 piece of legislation, 30 percent of the home mortgages that Fannie Mae and Freddie Mac bought had to be from individuals at or below the area’s median income level.
The 1992 legislation also gave the Department of Housing and Urban Development the power to raise the requirement. By 2005, 55 percent of all mortgages bought by the two government-owned mortgage-backing institutions were for low-income individuals .
While Fannie and Freddie could meet the initial 30 percent requirement without too much trouble, the steadily increasing requirement forced the two institutions to lower their underwriting standards for mortgages. They reduced the minimum FICO credit score and began accepting mortgages with no down payment—two of the most important indicators for the quality of a mortgage.
“Over time, these poor quality mortgages stacked up in the financial system,” Wallison said. Half of all mortgages in the United States—28 million out of 55 million—were subprime or very low quality by 2008. And of these 28 million loans, three quarters were on the federal government’s books.
A housing bubble had been building since 1997, Wallison said, and when the bubble began to deflate, many of these low-quality mortgages defaulted. Many financial institutions that had bought so-called “mortgage-backed securities” began to struggle.
Private financial institutions did indeed buy these sub-prime mortgages, but the government created the primary market for them, Wallison added.
“When Lehman Brothers collapsed, panic ensued,” he said.
Congress enacted the Dodd-Frank financial reform act in response to the crisis. The legislation was an attempt to fix the underlying causes of the crisis—causes that were understood in light of the accepted narrative. Dodd-Frank “implements the left’s view of what was wrong,” Wallison said.
“It does not do anything to deal with the government’s involvement in the housing market,” he said.
According to the regulations under Dodd-Frank, the lender now has the burden to show that the borrower can afford the mortgage. However, if the lender sells the mortgage to the Federal Housing Administration, Fannie Mae, or Freddie Mac, the lender is no longer liable for selling a bad mortgage.
“So what we are doing here, then, is recreating again the same system that we had before where low quality mortgages are preferentially going to go to the government … because the government wants to increase home ownership for people who otherwise can’t afford homes,” Wallison said. He predicted America could have another financial crisis in 10 to 15 years.
“The Republicans at least have begun to see what actually happened … and have recognized that the Dodd-Frank Act was a mistake,” Wallison said.
Florida Republican Sen. Marco Rubio attributed the financial collapse to government policies in his response to the president’s State of the Union address. His statement lit up the “left wing blogosphere,” Wallison said.
“Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted,” Krugman fumed.
Wallison expressed hope that Dodd-Frank could be substantially changed if Republicans take control of the Senate and presidency in 2016.
“This is not a hopeless case,” he said.
http://freebeacon.com/the-true-story-behind-the-financial-crisis/
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