Capitalism Mafia style is now the system
Listening to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, we get a sense of the "new capitalism" that our new Democratic leadership tells us America needs.
Frank recently praised Bank of America chairman (now ex-chairman) Ken Lewis for acting in "the public interest" for caving in to bribes and threats from former Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke regarding B of A's takeover of Merrill Lynch. Lewis wanted to back out the deal last year when he discovered the massive scope of Merrill's losses. But Paulson and Bernanke decided that Merrill shouldn't fail, so they bribed Lewis with $20 billion of taxpayer funds, instructed him to conceal the agreement from his shareholders, and told him his job would be on the line if he didn't play ball -- which he did.
These sordid details have come to light in an investigation being conducted by New York State Attorney General Andrew Cuomo. So if such behavior is what Barney Frank calls economic patriotism, what might constitute subversive behavior?
When Congress moved last year to politically engineer changes in terms of existing mortgages in the name of bailing out distressed homeowners, Bill Frey, who manages a fund that holds mortgage-backed securities, protested. Frey told the New York Times, "Any investor in mortgage-backed securities has a right to insist that their contract be enforced."
Contracts? Private property? That's the old capitalism. Frank fired off a letter to Frey saying he was "outraged...that you are actively opposing our efforts to achieve diminution in foreclosures by voluntary efforts." Frank then clarified his idea of "voluntary" by summoning Frey to testify in Washington, noting that "if this cannot be arranged on a voluntary basis, then we will pursue further steps."
The House has passed legislation, which is now in the Senate, containing Frank's idea of "diminution in foreclosures by voluntary efforts." It amounts to -- what a surprise -- taxpayer funded bribes to abrogate existing mortgage contracts and provisions for legal protection for doing so. Frey and others managing funds for investors holding billions in mortgage-backed securities are fighting back. We're not talking Bernie Madoff here. We're talking about funds that have invested in these securities on behalf of pension funds and 401Ks.
Financial institutions -- banks like B of A and Wells Fargo -- originate mortgages and then sell them off to be sliced and diced up into bonds that individual investors can purchase. This financial innovation has been a boon for providing capital and liquidity to our mortgage markets. The originating bank, however, stays in the picture to service the loan, collecting and processing the payments. Contractual agreements exist between the bank and the bondholders that this will be done in good faith, according to the terms of the original mortgage.
For a host of reasons, mostly massive government meddling and social engineering, the mortgage market exploded and thus, we've got homeowners who can't make payments. The House passed bill proposes to bail these folks out by paying banks servicing the mortgages $1000 for each one they re-finance, cutting interest rates and payments. Those who actually own the loans -- the bondholders -- are left out to pasture. And, the bill protects servicing banks from lawsuits to which they would normally be exposed for breaking their contracts.
So taxpayers will subsidize banks to refinance the bad loans they originated but no longer own, homeowners who borrowed beyond their means get bailed out, and investors -- the bondholders -- are left to bear the costs. On top of this, many of these same banks originated second mortgages on these same homes. The second mortgages, which the banks still own, bear even higher interest rates because they are allegedly more risky. Yet, they will be left secure and undisturbed.
Aside from the costs that our society will bear as law and contracts no longer have meaning, Frey rightly points out that it all will just make future mortgage borrowing more expensive. Who will take risks to lend when politicians can change contracts at the drop of a hat?
Welcome to the new capitalism. Where politicians rule, irresponsible behavior is rewarded, and theft is legal.
Shipping Jobs Overseas?
A common refrain among protectionists, economic nationalists and other advocates of strong government intervention in the economy is that so-called “big corporations” are “shipping jobs overseas.” This charge is used particularly often with regards to manufacturing jobs, where the specter of jobs fleeing en masse to China, India and Mexico is described in breathless terms.
Whether the goal is “renegotiating” (or ending altogether) free trade agreements like NAFTA, bailouts of domestic industries or some sort of tax code manipulation to “reward” companies who “create American jobs,” the bogeyman of choice is what Ross Perot dubbed the “giant sucking sound” in the 1990s—particularly when a politician is campaigning in former manufacturing centers in Rust Belt areas of Pennsylvania, Ohio and Michigan. Along with the loss of jobs themselves, the so-called “trade deficit” is often mentioned, noting that it is at record highs and that it somehow signifies loss of American jobs and a manufacturing base; foreign capital investment is often also a target of political derision.
The facts, however, continue to show otherwise. As documented by the pro-trade Center for Trade Policy Studies, foreign investment by multi-national companies tends to be focused on opening up new markets to goods and services—to making these companies more profitable by reaching new customers—rather than a method for shipping out American jobs and moving capital out of the United States.
One by one, Director of the Center for Trade Policy Studies Dan Griswold’s research punctures the myths promulgated by the anti-trade crowd. Worried about the U.S. manufacturing base moving factories to China, India and Mexico? Then consider this: “Between 2003 and 2007, U.S. manufacturing companies sent an average of $2 billion a year in direct investment to China and $1.9 billion to Mexico”; meanwhile, U.S. corporations were investing $165 billion per year in the USA. An additional $15 billion per year was being invested in manufacturing in the United States by foreign corporations during this time. These data show that while, yes, American companies were spreading their manufacturing wings overseas, they were investing more than 80 times as much here at home.
But what about the loss of manufacturing jobs? True, the U.S. workforce employed in manufacturing shrank by 3 million in the years 2000-2006. But as shown above, corporations were making capital investments in the United States; those investments, rather than workers, were in technology and automation. Those jobs weren’t being shipped overseas, they were being replaced with more efficient technology, creating other high-tech jobs elsewhere in the labor market. Meanwhile, “an increase in 172,000 jobs at U.S.-owned affiliates in China was partially offset by an actual decline of almost 100,000 jobs at affiliates in Mexico.”
One by one, the justifications for increased government intrusion in the marketplace fall by the wayside when examined more closely, when facts are employed rather than innuendo. A free market and free trade, unencumbered by government interference, management or directives is still the best way to promote prosperity.
Rather silly PC guesswork: Fragments of bone from Europe of around 40,000 years ago have been used to "reconstruct" what ancient Europeans looked like. The reconstructor has given his reconstruction brown skin even though modern Europeans are all pale-skinned and he admits that there is no way of determining the skin colour from the bone fragments.
I have put up a few things on my Paralipomena blog in the last few weeks -- for anybody who fancies a bit of offbeat reading.
Some charming Muslim on Muslim action: "At least 41 people have been killed in an attack on a wedding party in a village in southeast Turkey, an official from the governor's office said. At least three others were wounded in the shooting in the village of Bilge, the official, who requested anonymity, said. In Ankara, Prime Minister Recep Tayyip Erdogan was briefed about the incident by Interior Minister Besir Atalay, Anatolia news agency reported. There was no official word on who might be behind the shooting. Separatist Kurdish rebels are active in southeast Turkey, where they have waged a 24-year campaign for self-rule. Blood feuds are also frequent in the region." [It's all Israel's fault, of course]
Communists lose one in Nepal: "Nepal's Maoist Prime Minister Prachanda announced his resignation yesterday, plunging the country into a political crisis triggered by a stand-off between his ex-rebels and the army chief. In a televised address to the nation, Mr Prachanda said he was stepping down in response to an "unconstitutional and undemocratic" move by Nepal's President to stop the elected Maoist Government from sacking the head of the army. He also warned that the impoverished nation's 2006 peace deal, which ended a decade of civil war, was at risk. The Maoist Government on Sunday fired the army chief, General Rookmangud Katawal, for refusing to integrate 19,000 former Maoist rebel soldiers into the regular army, as stipulated by the peace accord. But President Ram Baran Yadav, a member of the main opposition party, yesterday told the head of the army - traditionally a bastion of Nepal's elite and the former monarchy - to stay put. "The move by the President is an attack on this infant democracy and the peace process," said Mr Prachanda, a former school teacher who led the insurgency before signing up for peace. Since the elections, the Maoists have managed to carry through with their pledge to abolish the monarchy but complain Nepal's traditional ruling elite is blocking other key reforms. Centrist parties, meanwhile, appear to have sided with the army against what they see as an attempt by the Maoists to assume dictatorial powers."
House Democrats leave Gitmo closing money out of bill: “Amid fears that terror suspects could be brought to the U.S., House Democrats on Monday rebuffed the Obama administration’s request for $50 million to relocate prisoners from the detention facility at Guantanamo, Cuba. House Appropriations Committee Chairman David Obey, D-Wis., dropped the request from a $94.2 billion measure funding military and diplomatic efforts in Iraq and Afghanistan through the fall.”
ACORN charged in voter fraud case: “Nevada authorities filed criminal charges Monday against the political advocacy group ACORN and two former employees, alleging they illegally paid canvassers to sign up new voters during last year’s presidential campaign. ACORN denied the charges and said it would defend itself in court. Nevada Attorney General Catherine Cortez Masto said the Association of Community Organizations for Reform Now had a handbook and policies requiring employees in Las Vegas to sign up 20 new voters per day to keep their $8- to $9-per-hour jobs.”
Congress leery of Obama’s plan on tax loopholes: “President Barack Obama promised sternly on Monday to crack down on companies ‘that ship jobs overseas’ and duck U.S. taxes with offshore havens. It won’t be easy. Democrats have been fighting — and losing — this battle since John F. Kennedy made a similar proposal in 1961. Obama’s proposal to close tax loopholes was a reliable applause line during the presidential campaign, but it got a lukewarm response Monday from Capitol Hill.” [Any guesses about how much money Congressmen have got offshore? You've got to put bribes SOMEWHERE! Only William Jefferson was silly enough to put it in his freezer]
Obama’s empathetic judicial poison: “Barack Obama’s statement that ‘empathy’ would be a key qualification he’d look for in a nominee to replace David Souter on the Supreme Court is not simply soft liberal thinking, it’s a direct attack on the rule of law, an abrogation of Obama’s oath of office — and entirely consistent with Obama’s prior statements.”
White House Council on Men and Boys: The right thing to do: “One of the greatest failings of the Great Society programs of the 1960s was the devastating blow they dealt to low-income African-American families. And it’s no secret how all this happened. Thanks to President Johnson’s signature legislation, newly-minted social welfare programs provided an array of services and benefits that were designed to help single moms. But these programs proved to afford powerful incentives for women to become pregnant, and then make sure the dad didn’t hang around too long. The effects were devastating as they were dramatic.”
High-speed rail is no solution: “The facts do not bear out several aspects of President Barack Obama’s desire to push high-speed rail projects with federal resources ($8 billion in the economic stimulus package, another $5 billion in his 2010 budget) — chiefly, that the rail projects are more efficient and more environmentally friendly than modes of travel now widely in use. Saving energy and reducing pollution are worthy goals, and if high-speed trains could achieve these goals, the president’s plan might be a good one. But since they cannot, it isn’t.”
For more postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)