Wednesday, October 07, 2009
I imagine that there must be a few people who read this blog who share my love of Baroque music. So for them some news: I have just discovered the music of Zelenka, a Czech contemporary of Bach whom Bach thought highly of. I am listening to one of his Kyrie Eleisons as I write this. It is marvellous. What a wonder that the Baroque period is still yielding up forgotten treasures for us! I have also just heard on the radio one of his oratorios: "Penitents at the tomb of the Redeemer". It grabbed me immediately.
A Poisonous Cocktail: Expanding the Community Reinvestment Act
The White House and Congress want to expand a 30-year-old law--the Community Reinvestment Act--that helped to fuel the mortgage meltdown. What the CRA does, in effect, is compel banks to seek the permission of community activists to get regulatory approval for bank expansions and mergers. Often this means striking a deal with activist groups such as ACORN or unions like the Service Employees International Union (SEIU) and agreeing to allocate credit to poor and minority areas that are underserved.
In short, the CRA encourages banks to make loans they would not ordinarily make. What's more, these agreements often require that banks offer no-money-down mortgages and remove caps on how much debt a borrower can take on. All of this is done in the name of "financial democracy."
Liberals pooh-pooh the idea that a 30-year-old law could have contributed to the current subprime crisis and credit crunch. But what they ignore is the massive expansion of CRA-commitments forced on banks in the run-up to the 2008 financial crisis.
According to the National Community Reinvestment Coalition, in the first 20 years of the act, up to 1997, commitments totaled approximately $200 billion. But from 1997 to 2007, commitments exploded to more than $4.2 trillion. (Keep in mind this is more than four times the size of the current health bill being debated in Congress.) The burdens on individual banks can be enormous. Washington Mutual, for example, pledged $1 trillion in mortgages to those with credit histories that "fall outside typical credit, income or debt constraints," and was awarded the 2003 CRA Community Impact Award for its Community Access program. Four years later it was taken over by the Office of Thrift Supervision. In 2004 Bank of America agreed to provide $750 billion in CRA loans to applicants with poor credit who had previous difficulty obtaining a mortgage. By 2008 Bank of America was reporting that CRA loans represented only 7% of its portfolio but 29% of its losses. Numerous large banks are now in the middle of enormous CRA commitments. In 2004 J.P. Morgan Chase agreed to provide $800 billion of such loans over the course of 10 years.
For all the talk of unsold condos in Miami and foreclosed McMansions in California, the epicenters of the mortgage crisis are inner-city urban areas--precisely those areas where the CRA was most applicable. As the Boston Federal Reserve put it in a massive 2008 study, "In the current housing crisis foreclosures are highly concentrated in [urban] minority neighborhoods." The study found that borrowers in these areas were seven times more likely to be foreclosed on than the general population. Analysis by the Pew Research Center and another by The New York Times found that mortgage holders in these areas had foreclosure rates four times higher than the national average. In short, the CRA is compelling banks to make trillions in loans to individuals who have poor credit and who often can't or won't make their payments.
Now comes Rep. Eddie Bernice Johnson, D-Texas, and 50 other co-sponsors (all Democrats) of H.R. 1479 the "Community Reinvestment Modernization Act of 2009," who want to expand the CRA to include not just banks but also credit unions, insurance companies and mortgage lenders. Congressman Barney Frank, chairman of the House Financial Services Committee, has supported the idea in the past. The SEIU and ACORN, along with a host of other activist groups, are also behind the effort.
Stimulating Our Way to Depression
In 1932, FDR had an opportunity to change the conventional way that governments deal with a recession. His predecessor, Herbert Hoover, who also had a tendency towards central planning, had started the process. Instead of allowing markets to correct themselves as they had in all the previous panics, as depressions were then called, both men instituted programs of government intervention.
Hoover signed the Smoot Hawley tariff even after many of the leading economists of the time personally implored him not to sign it. A tariff would help improve farm prices, which was a cornerstone of the progressive movement. He asked businesses not to lower wages, as had been done in previous panics. Wages remained high but unemployment soared.
Although Roosevelt had campaigned on a platform of balanced budgets, once in office things changed. Many of his advisors were college professors and writers from within the progressive movement. Very few were trained economists, but several had been to Russia and seen Stalin’s central planning first hand. Others had an admiration of Benito Mussolini’s nationalization of industry in Italy. Once FDR was in office they were determined to apply what they had seen in America.
The utility industry had been one of the most highly leveraged industries to be affected by the Stock Market Crash, and was essential to industrial production. The newly developed utilities were grossly overvalued similar to the internet companies of the 1990’s or the housing industry of early last year. By 1932, utility stocks were worth a mere fraction of their 1929 value. FDR began to plan how the government would replace private utilities as a large scale electrical power producer. This would also enable him to take credit for providing thousands of construction jobs and control energy production. The first government utility was the Tennessee Valley Authority. It would provide power in the Appalachian region rather then allow private industry to electrify the area.
To prevent wages from going down in response to the demand for labor, FDR instituted the National Industrial Recovery Act, which allowed large business to form cartels in exchange for allowing unionization of their plants. This helped large businesses that had lower costs absorb the additional costs of unionization but was very damaging to small businesses. Wage rates were 25% higher than they should have been, but so was unemployment. Prices for goods were also 25% higher then they should have been.
When unemployment failed to go down as the result of the NIRA programs and the associated unionization, FDR instituted numerous make work programs through out America. These programs employed not only construction workers but also actors, artists and writers. These programs also greatly increased government expenditures and the national debt.
FDR and his progressive advisors generally resented those people that earn more then their college professor salaries, especially industrialists. They blamed industrialists for not hiring more people to reduce unemployment. This gave progressives justification to raise the marginal tax rates on the wealthy from 26% to above 90%. The wealthy responded by investing in other types of investments and their share of the total tax revenue actually fell during the Depression.
Even though the ideas and programs that FDR and the progressives instituted were not effective in preventing the stock market crash of 1929 from turning into the Great Depression, they were effective in creating a loyal voting base. By demonizing the wealthy, FDR was able to take credit for the government jobs his programs created at the expense of jobs in private industry that the provisions of the NIRA took away. FDR learned by 1935 that a crisis should never go to waste.
If this narrative sounds familiar, it should. The progressives of the 1920’s that had been shut out of politics since Wilson’s administration needed a crisis to return to power and institute their ideas of central planning in America. Today liberals are trying to do the same. Progressives of the 1930’s stifled industrial production with regulation and unionization and today they want to do the same. During the Depression, progressives wanted to control the production of energy, today they propose cap and trade to do the same thing.
Socialists then and now rely on the writings of the economist, John Maynard Keynes to justify large government spending programs to stimulate the economy. However, Keynes himself wrote to FDR in 1938 questioning his spending programs and why FDR would use only one aspect of his economic theories. The answer is very simple: government programs create the illusion of improving the economy. People only see the jobs created by government programs, never the jobs that are lost in the private sector to create them. Programs focus on the benefits that will be provided to a particular segment of society, never to who pays for those benefits. Progressive solutions buy votes but not economic prosperity.
McChrystal’s critics are wrong — very wrong — to suggest he has gone PC
By Frederick W. Kagan
The politicization of the analysis of American generalship is one of the worst consequences of the partisan excesses of the past several years. Whether it was Gen. David Petraeus in 2007 or Gen. Stanley McChrystal today, far too many commentators on both sides of the aisle have become comfortable saying that commanders who offer recommendations the critics don’t like are doing so because they have become captive of some ideology. Petraeus was charged with carrying water for the Bush administration’s supposed crusade to spread democracy throughout the world. Now McChrystal is accused of committing the soldiers under his command to needless death and maiming out of a misplaced sense of political correctness inspired by Barack Obama.
The reality is that America’s commanders over the last eight years have consistently given their best professional military advice, making the recommendations they thought would achieve the goals set for them by their political masters. That includes all of our commanders: Tommy Franks, Ricardo Sanchez, John Abizaid, George Casey, David Barno, Karl Eikenberry, Dan McNeill, David McKiernan, David Petraeus, Ray Odierno, and now Stan McChrystal. Some of them were right, some were tragically wrong. But not a single one of them made a recommendation to his superiors or gave an order to his soldiers that he did not think would lead to the success of his mission. American commanders simply do not do such things, and it is time to stop trying to avoid serious discussions of strategy by claiming that they do.
General McChrystal and the team that drafted his assessment and policy recommendations (full disclosure: I was a member of that team in June and July) may be wrong, of course. War is extremely complex, and no one is infallible. But before consigning the McChrystal assessment to the dust-bin of history, we owe it to such a commander to consider carefully the possibility that the sophistication in the document is not simply pseudo-intellectual code for political correctness. It may in fact represent an attempt to grapple with the real complexities of the situation on the ground as seen by officers who have spent years of their lives operating in Afghanistan against our enemies — something that none of their defenders or critics among the chattering classes (myself included) can say.
Andy McCarthy’s attack on McChrystal in this regard is particularly odd. McChrystal should be Andy’s hero: As commander of U.S. special-forces efforts in Iraq and Afghanistan for more than four straight years, McChrystal is responsible for killing and capturing thousands of Islamist terrorists. As the recent 60 Minutes interview revealed, McChrystal has personally accompanied his soldiers on some of those raids. He’s met the enemy fighters Andy so rightly wants to target — met some of them rather personally. This war has not been a clinical or theoretical exercise for McChrystal, nor has it been the stuff of Foreign Affairs essays. It has been as dirty and bloody as anything Andy McCarthy or Ralph Peters could desire. One thing no one can say about McChrystal is that he has a problem killing the enemy.
Obama's big money-printing splurge has destroyed confidence in the value of the dollar: "In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading. Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars. The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."
Sanctions are a stupid idea: "President Obama has vowed to keep the pressure on Iran over its nuclear program after last week’s meeting in Geneva, and his advisers said the United States was intensively recruiting other nations to join in a harsher economic embargo against Tehran should diplomacy fail. But as the focus on sanctions intensifies, a review of the United States’ experiences in enforcing its own longstanding restrictions on trade with Iran suggests it would be difficult to truly quarantine the Iranian economy. Black market networks have sprouted up all over the globe to circumvent the sanctions. A typical embargo-busting scheme was detailed in a plea agreement filed in federal court here on Sept. 24, the day before Mr. Obama and European allies announced the existence of a previously undisclosed Iranian nuclear enrichment facility near Qum. In the court filings, a Dutch aviation services company and its owner admitted that they had illegally funneled American aircraft and electronics components to Iran from 2005 to 2007..."
Lawmaker calls on Obama to fire official in gay sex ed controversy: "Iowa Republican Rep. Steve King is calling on President Obama to fire gay activist Kevin Jennings, the controversial head of the Education Department's Office of Safe & Drug Free Schools. Although Jennings has come under heavy criticism from social conservatives in recent months, King is the first member of Congress to call for his ouster. King says Jennings has no background in anti-drug work, and his experience in education has focused not on the issue of school safety but on introducing the topic of homosexuality into the classroom, including in elementary schools. "The totality of his life has been the promotion of homosexuality, and much of it within education," says King. "He has focused on nothing else during the last two decades, and that is not the focus that our schools need to be on."
The Republican revival: "Ignore anyone who says Republicans have no chance of winning 40 seats in next year’s midterm elections and grabbing control of the House of Representatives. A landslide of that dimension is quite possible. All it would take is for current political trends to continue. If that happens, Republicans will win the House in a landslide. The Senate is another story. The deep trouble that’s beginning to engulf Democrats is now an inescapable fact of political life. With the congressional election 13 months away, Democrats have time to halt their decline and prevent a Republican surge. But they’ve shown no signs of reversing their slide. In 2006 and 2008, they were on offense. Today they’re stuck on defense.”
Irwin Stelzer on the revival of the right: "A funny thing happened on the way to the collapse of market capitalism in the face of the worst economic crisis since the Great Depression. It didn't. Indeed, in Germany voters relieved Chancellor Angela Merkel of the necessity of cohabiting with a left-wing party, allowing her to form a coalition with a party favouring lower taxes and free markets. And in Pittsburgh leaders representing more than 90% of the world's GDP convened to figure out how to make markets work better, rather than to hoist the red flag. The workers are to be relieved, not of their chains, but of credit-card terms that are excessively onerous, and helped to retain their private property—their homes. All of this is contrary to expectations. The communist spectre that Karl Marx confidently predicted would be haunting Europe is instead haunting Europe's left-wing parties, with even Vladimir Putin seeking to attract investment by re-privatising the firms he snatched. Which raises an interesting question: why haven't the economic turmoil and rising unemployment led workers to the barricades, instead of to their bankers to renegotiate their mortgages? All of those factors contribute to the unexpected strength of the right in a world in which a record number of families are being tossed out of their homes, and jobs have been disappearing by the million."
GOP to gain many seats in '10: "Following major setbacks in 2008, the national political landscape for Republicans has improved so dramatically in recent months that election analysts say the only remaining question is how deep the Democrats' losses will be in the 2010 congressional midterm races. President Obama's approval rating has fallen to 51 percent in the Gallup tracking survey. A recent NBC/Wall Street Journal poll showed that voters were nearly evenly divided on which party should control Congress, with Democrats edging Republicans by just three points, down from a seven-point lead in July, and election analysts have moved nearly two dozen Democratic House seats into "competitive" rating columns benefiting the Republican Party... Longtime elections handicapper Charlie Cook agrees that the national political movement has turned decidedly away from the Democrats at this point in the two-year election cycle. "As the political environment for Democrats has turned ugly, it is widely assumed the party will sustain losses in next year's midterm elections. The operative question is: How bad will those losses be?" he said in a recent analysis for Congress Daily".
My Twitter.com identity: jonjayray. My Facebook page is also accessible as jonjayray (In full: http://www.facebook.com/jonjayray). For more blog 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
List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here or here or here
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)
Posted by JR at 1:38 AM