The Silent Encroachment: Goverment Against the People?
I know it has been far too long since my last post, however, recent events with the economy and now the governmental response have forced a response from these otherwise dormant pages.
As anyone who has been paying attention to the news for the last couple of months knows, and certainly anyone with any money in the stock market is aware, we are in the midst of arguably one of the worst economic corrections this country has seen since 1929. First, I refuse to refer to this recent down-turn in the market as a crisis. This is not a crisis since we are not dealing with a situation where people are jumping out of windows or literally swallowing a bullet to resolve their troubles. The hope is that investors have learned from history and adequately diversified their interests to prevent the true destruction of the financial system. Watching trading trends shows that money is still to be made in the futures and commodities markets such that we aren't staring down the pipe at the kind of bankrupting bust of Black Monday. This doesn't mean that I am happy with the present circumstances. I don't like seeing 500 point swings on the Dow Jones any more than any other investor. However, we are far from the crisis the media would have us believe plagues our portfolios. In addition, our nerves should be settled some by the fact that the economic big wigs can't decide whether we are presently mired in a recession. Looking at the economy with a level head, we see a lot of people, some in high places and some in not so high places, who made a lot of bad decisions. The current result is a market correction. Besides, anyone who is willing to throw around the "R" word needs to remember that the Dow is still up well over 1000 points since the last recession.
That being said, we need to look at what those geniuses on Capitol Hill are suggesting to fix the problem. First, there was the Bear Sterns bailout. This was an understandable move since the debt load taken on by the government is still debt that could be recovered. The same goes for Fannie, Freedie, and AIG. Leheman Brothers was allowed to die a slow free market death because it didn't necessarily impact the greater economic good by having an influence on the operation of the American or World economies. These moves have brought positive repsonses in the markets as would be expected by the likely benefits they will provide in stabilizing the insanity that has consumed the credit markets since the beginning of the year. Now, though, there is a ludacris idea that a member of the Bush administration should be handed the reigns of the credit markets in what one commentator has called the biggest peacetime hand-over of power from the legislative to the executive.
Last week, a bill floated into Congress suggesting the creation of an new administrative entity that would be in charge of watching and maintaining the credit markets. Superficially, this sounds great, a solution for all of this market instability. On further review, the office suggested is far more deletarious to the American taxpayer. The bill would create an office that reports to Congress on the health of the credit system once every 6 months, and is responsible for managing volatile mortgage debt. I want to be clear, the ambit of power provided to this agency specifically concerns mortgages. Effectively, $700 Billion (yes that says BILLION) would be used to "purchase" a bulk of the bad mortgages floating around the system, reinfusing the financial industry with all of the funds that seem to be caught up in a myriad of mortgage foreclosure litigation. The other scary aspect of this bill is its increase on the federal debt cap to $11,315,000,000,000 (the thought of $11 trillion in national debt makes me physically ill). At present, the national debt sits just shy of $9.7 trillion.
Also, I have to point out that Section 8 of the bill prevents any other governmental body from reviewing or revoking its decisions in direct contravention of the Constitution and the Administrative Procedure Act. Isn't this kind of unchecked authority what landed us in this mess in the first place? This goes without even raising the concern of this section setting a precedent for permitting the President or one of his subsidiary entities from opting out of review and regulation. Could you imagine what would happen if the next version of the PATRIOT Act permitted the Secretary of Defense this kind of Deference?
The bill has some other interesting ramifications as well. It will be able to get funding under only one part of the US Code not withstanding the restrictions of other sections esbalished by Congress. In addition funds will be raised by buying and selling mortgage backed securities. Is it me, or does it sound like the Executive Branch just opted the whole of the American Electorate into a joint mortgage backed securities investment firm? With the current state of the markets, that doesn't sound like it will protect the American Taxpayer or stabilize the markets (the considerations the secretary of this new administrative body is legislatively bound to take pursuant to Section 3 of the bill). In addition, this new found ability to acquire and secure mortgages and mortgage securities sounds a lot like what Fannie and Freddie were doing before their "takeover". It is almost as if these financial firms were taken over by the Executive in a legislatively backed adminstrative fiat. I shudder to think of the exposure of the average American, many of us reeling from current state of the economy.
The bottom line: This probably isn't a good move. First, deregulation proposed by the Bush administration got us into this mess. The conflagration grew as a result of the Federal Reserve attempting to control deflation by keeping interest rates very low. The economy boomed because of this loose liquidity. The government, namely the President, kept spending, too, racking up unheard of amounts of national debt thanks to a war no one wanted but the President wanted in the first place.
Why should we permit the Executive branch, who so thoroughly managed to put us in this situation, dig the taxpayers into a deeper hole through more bad policy and economic centralization?
I wouldn't go so far as to call this the next step on the way to a Fascist American government, but it certainly won't help anyone any more than if it were.
As anyone who has been paying attention to the news for the last couple of months knows, and certainly anyone with any money in the stock market is aware, we are in the midst of arguably one of the worst economic corrections this country has seen since 1929. First, I refuse to refer to this recent down-turn in the market as a crisis. This is not a crisis since we are not dealing with a situation where people are jumping out of windows or literally swallowing a bullet to resolve their troubles. The hope is that investors have learned from history and adequately diversified their interests to prevent the true destruction of the financial system. Watching trading trends shows that money is still to be made in the futures and commodities markets such that we aren't staring down the pipe at the kind of bankrupting bust of Black Monday. This doesn't mean that I am happy with the present circumstances. I don't like seeing 500 point swings on the Dow Jones any more than any other investor. However, we are far from the crisis the media would have us believe plagues our portfolios. In addition, our nerves should be settled some by the fact that the economic big wigs can't decide whether we are presently mired in a recession. Looking at the economy with a level head, we see a lot of people, some in high places and some in not so high places, who made a lot of bad decisions. The current result is a market correction. Besides, anyone who is willing to throw around the "R" word needs to remember that the Dow is still up well over 1000 points since the last recession.
That being said, we need to look at what those geniuses on Capitol Hill are suggesting to fix the problem. First, there was the Bear Sterns bailout. This was an understandable move since the debt load taken on by the government is still debt that could be recovered. The same goes for Fannie, Freedie, and AIG. Leheman Brothers was allowed to die a slow free market death because it didn't necessarily impact the greater economic good by having an influence on the operation of the American or World economies. These moves have brought positive repsonses in the markets as would be expected by the likely benefits they will provide in stabilizing the insanity that has consumed the credit markets since the beginning of the year. Now, though, there is a ludacris idea that a member of the Bush administration should be handed the reigns of the credit markets in what one commentator has called the biggest peacetime hand-over of power from the legislative to the executive.
Last week, a bill floated into Congress suggesting the creation of an new administrative entity that would be in charge of watching and maintaining the credit markets. Superficially, this sounds great, a solution for all of this market instability. On further review, the office suggested is far more deletarious to the American taxpayer. The bill would create an office that reports to Congress on the health of the credit system once every 6 months, and is responsible for managing volatile mortgage debt. I want to be clear, the ambit of power provided to this agency specifically concerns mortgages. Effectively, $700 Billion (yes that says BILLION) would be used to "purchase" a bulk of the bad mortgages floating around the system, reinfusing the financial industry with all of the funds that seem to be caught up in a myriad of mortgage foreclosure litigation. The other scary aspect of this bill is its increase on the federal debt cap to $11,315,000,000,000 (the thought of $11 trillion in national debt makes me physically ill). At present, the national debt sits just shy of $9.7 trillion.
Also, I have to point out that Section 8 of the bill prevents any other governmental body from reviewing or revoking its decisions in direct contravention of the Constitution and the Administrative Procedure Act. Isn't this kind of unchecked authority what landed us in this mess in the first place? This goes without even raising the concern of this section setting a precedent for permitting the President or one of his subsidiary entities from opting out of review and regulation. Could you imagine what would happen if the next version of the PATRIOT Act permitted the Secretary of Defense this kind of Deference?
The bill has some other interesting ramifications as well. It will be able to get funding under only one part of the US Code not withstanding the restrictions of other sections esbalished by Congress. In addition funds will be raised by buying and selling mortgage backed securities. Is it me, or does it sound like the Executive Branch just opted the whole of the American Electorate into a joint mortgage backed securities investment firm? With the current state of the markets, that doesn't sound like it will protect the American Taxpayer or stabilize the markets (the considerations the secretary of this new administrative body is legislatively bound to take pursuant to Section 3 of the bill). In addition, this new found ability to acquire and secure mortgages and mortgage securities sounds a lot like what Fannie and Freddie were doing before their "takeover". It is almost as if these financial firms were taken over by the Executive in a legislatively backed adminstrative fiat. I shudder to think of the exposure of the average American, many of us reeling from current state of the economy.
The bottom line: This probably isn't a good move. First, deregulation proposed by the Bush administration got us into this mess. The conflagration grew as a result of the Federal Reserve attempting to control deflation by keeping interest rates very low. The economy boomed because of this loose liquidity. The government, namely the President, kept spending, too, racking up unheard of amounts of national debt thanks to a war no one wanted but the President wanted in the first place.
Why should we permit the Executive branch, who so thoroughly managed to put us in this situation, dig the taxpayers into a deeper hole through more bad policy and economic centralization?
I wouldn't go so far as to call this the next step on the way to a Fascist American government, but it certainly won't help anyone any more than if it were.
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