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The Real Problem with Credit Cards: The Cardholders

Bank bailout may hurt taxpayers, be open to fraud – Yahoo! Finance.

Most of us who have mortgages have done the responsible thing and made our payments on time, every time, year after year. Some have behaved irresponsibly and taken on mortgages they simply could not afford, and hence gone into foreclosure. These are the ones who are going to be rewarded under President Obama. But then, that’s liberalism: rewarding sloth and irresponsibility while punishing achievement and responsibility.

Seeking to tackle “a crisis unlike any we’ve ever known,” President Barack Obama unveiled an ambitious $75 billion plan Wednesday to keep as many as 9 million Americans from losing their homes to foreclosure. Announcing the plan in Arizona — a state especially hard hit by the housing crunch — Obama said that turning around the battered economy requires stemming the continuing tide of foreclosures. The housing crisis that began last year set many other factors in motion and helped lead to the current, widening recession.

“In the end, all of us are paying a price for this home mortgage crisis,” Obama said at a high school outside Phoenix. “And all of us will pay an even steeper price if we allow this crisis to deepen.”

All of us will pay, Mr. President? Not hardly. Those of us who have always paid will continue to pay not only for ourselves but also for the irresponsible obligations made by others. Those are the ones who will not pay.

Obama unveils $75 billion mortgage relief plan.

Surprise, surprise. We don’t really know where it has gone.

The AP did an in-depth story on Sunday detailing how Fannie Mae and Freddie Mac spent their lobbyist dollars as the two government-backed behemoths fought regulatory efforts by Republicans, which led to their failure.

What began as a pre-election government bailout of Fannie Mae and Freddie Mac has become a soup line for the American financial industry, the car manufacturing industry, and quite possibly state governments. It seems as though every private and public institution in the U.S. that is feeling a financial pinch has turned  to the taxpayers for either a bailout or a financial guarantee.

After listening to Democrats complain about deficit spending during the eight years of the Bush presidency, Barack Obama says economic recovery efforts will trump deficit concerns. Boy, I’ll say. The current-year deficit is expected to hit an astounding $1 trillion, far and away the largest in our history, far larger than any deficit during the Bush presidency, and most of that $1 trillion is due to the Democrat Congress’ giddiness in handing out bailout money to the private sector, spending money that we absolutely do not have.

To put the bailout into its proper perspective, Barry Ritholtz, who runs a blog called “The Big Picture,” pointed out on November 25 that the total cost of all the bailouts exceeds $4.6165 trillion dollars. And that was two weeks ago. That’s more than the combined inflation-adjusted costs of: the Marshall Plan ($115.3 billion), Louisiana Purchase ($217 billion), race to the moon ($237 billion), S&L crisis ($256 billion), Korean War ($454 billion), New Deal ($500 billion, estimated), invasion of Iraq ($597 billion), Vietnam War ($698 billion), and NASA ($851.2 billion). All those add up to only $3.92 trillion.

The federal government was never intended to guarantee the success or prevent the failure of the private sector. The free market has a marvelous way of rewarding efficiency and good business practices, while punishing inefficiency and poor business practices. What bailouts do is reward companies that are on the verge of bankruptcy, thereby allowing them to perpetuate the same business practices that got them in a mess in the first place without the negative consequences that are built into the free market.

Granted, the federal government does shoulder some of the blame for the hardship faced by the mortgage and automobile industries. By forcing mortgage companies to make high-risk loans beginning during the Clinton administration, that industry was set up for a meltdown once interest rates climbed and defaults started pouring in. The U.S. Congress has also mandated CAFE (Corporate Average Fuel Economy) standards that have forced automobile manufacturers build smaller, lighter cars that consumers don’t want to buy. And the market share enjoyed by the U.S. automobile industry has, unfortunately, decreased over the last several years.

Therefore, we don’t need bailouts. The most effective way for Congress to handle this mess is to cut taxes and get out of the way of the private sector by removing burdensome regulations. Yet the president-elect has instead promised to raise taxes on companies, and increase energy regulation to fight the global warming hoax.

And so we have bottomless bailouts. Once the Congress bailed out Fannie and Freddie to the tune of $700 billion, the floodgates were opened, and the private financial sector came asking for a handout, then it was the automobile industry, and now state governments that are facing budget deficits are knocking on that door, and so one has to ask where this actually ends.

Anytime the government starts meddling in the private sector, we get the Law of Unintended Consequences. For example, we had to have that bailout of the mortgage industry, and we had to have it right now. Yet many of the banks that benefited from the infusion of taxpayer money aren’t doing what the government wanted them to do with it.

On October 28, it was reported that the White House was prodding banks and other financial companies to stop hoarding billions of dollars flowing into their coffers from the taxpayers and start making more loans. So the bailout money was intended to flow back into the economy, yet the banks simply hoarded it. We should have learned from Hurricane Katrina that you don’t throw a big pile of money at a crisis and solve the crisis.

The economy shrank during the third quarter of this year, and unemployment is rising. Granted, we are not yet officially in a recession, defined as two or more consecutive quarters of negative GDP growth, but fewer people working means fewer taxes being paid, which increases the size of the deficit without corresponding cuts in spending. But rather than cut spending, the U.S. Congress is spending money more recklessly than ever before.

The current federal debt stands at $10.7 trillion. We’re adding more than a trillion dollars to that just this fiscal year alone. The Congress is spending wealth that hasn’t even been created yet, and the objective is to avert an economic crisis. Folks, what Congress is doing IS the economic crisis. If companies are facing bankruptcy, let them go bankrupt. It doesn’t necessarily mean an end to that company, just that it will have to reorganize under bankruptcy laws. The worst thing the Congress can do is put the taxpayers on the hook for even more debt. But that is exactly what our lawmakers are doing.

The hypocrisy of the left is in the forefront these days. After listening to Democrats complain about deficit spending during the eight years of the Bush presidency, Barack Obama says economic recovery efforts will trump deficit concerns. Boy, I’ll say. The current-year deficit is expected to hit an astounding $1 trillion, far and away the largest in our history, far larger than any deficit during the Bush presidency, and most of that $1 trillion is due to the Democrat Congress’ giddiness in handing out bailout money to the private sector, spending money that we absolutely do not have.

To put the bailout into its proper perspective, Barry Ritholtz, who runs a blog called The Big Picture, points out that “If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars.” That’s more than the combined inflation-adjusted costs of: the Marshall Plan ($115.3 billion), Louisiana Purchase ($217 billion), race to the moon ($237 billion), S&L crisis ($256 billion), Korean War ($454 billion), New Deal ($500 billion, estimated), invasion of Iraq ($597 billion), Vietnam War ($698 billion), and NASA ($851.2 billion). All those add up to only $3.92 trillion.

Indeed, the bailout is intended to avert a financial crisis, but it has become such a behemoth, even by standards of the federal government, that the bailout has become the financial crisis.

Now that the Democrat-led Congress is throwing bailout money at anything and everything, American Express is lining up to be a recipient, and there is now talk of a bailout for the automobile industry. This comes as the Democrats have railed against the Bush administration for running deficits, yet the Democrats seem to have no limit to the amount of taxpayer money they are willing to pass around to private-sector industries, which will only add to the federal deficit and the national debt. Meanwhile, the stock market continues to tumble, despite the excuse that the bailout(s) was supposed to rescue the financial industry. It’s too bad the Democrat-led Congress isn’t as willing to throw money back at the taxpayers in the form of tax cuts. Oddly, Democrats consistently rail at big corporations and their fat-cat CEO’s, yet what we’ve seen these past few weeks is a massive transfer of wealth from the taxpayers to private-sector industries.

Michelle Malkin » American Express lines up for bailout money

Congressional Democrats are after your private retirement accounts. In an attempt to use the recent stock market drop as a power grab, Congressman George Miller (D-CA), wants to end $80 billion in tax savings for higher-income people enrolled in a 401(k).

According to an October 7 article at InvestmentNews.com, Congressman Miller explained “We’ve invested $80 billion into subsidizing this activity,” referring to tax breaks allowed for 401(k) contributions and savings.

With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 billion for a policy that is not generating what we … say it should?” Mr. Miller said.

Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

When workers collect Social Security, the guaranteed retirement account would pay an inflation-adjusted annuity under her plan.

“The way the government now encourages 401(k) plans is to spend $80 billion in tax breaks,” which goes to the highest-income earners, Ms. Ghilarducci said.

In those paragraphs, you have pretty much everything you need to know about liberalism.

Those of you who invest a portion of your income in a 401(k) know that money is considered non-taxable. It encourages personal savings and personal initiative. Democrats consider this a “subsidy.” They don’t particularly care for personal savings and personal initiative, because those things lead individuals to personal freedom, thereby avoiding government dependence. Liberalism is designed to lure (or force) people into government dependence. That $80 billion tax break is considered a “subsidy” by Democrats, because they view our paychecks as property of the State, and whatever shows up as our net pay is what lawmakers have graciously allowed us to keep.

Also, notice how Democrats would use the stock market drop to lure people away from personally-owned 401(k) accounts and into government bonds. Notice how government bonds are linked to Social Security, the mother of liberal government entitlement programs. Of course, anybody who can do math knows Social Security is headed for a train wreck as a shrinking percentage of workers is going to be expected to fund the retirement of an increasing number of older Americans. Rather than use the impending doom of Social Security as evidence that the government does NOT belong in the retirement business, Democrats want to lure even more Americans into giving up their private retirement assets and accepting government bonds as an alternative.

Liberals honestly believe the average American is too ignorant to be trusted with handling his own retirement, so they have to do it for us. In reality, there are a great number of Americans who are smarter than the people they elect to Congress, which is why it would be foolish for us to turn over our private retirement accounts to them.

Although Democrats want to give Americans the choice of giving up their personal retirement savings and accepting government bonds, they never offer the choice of giving up our “government accounts” (i.e., Social Security) and moving that money into the private sector. Such is the authoritarian nature of liberalism.

If you need more evidence that Democrats have absolutely no business meddling in the financial market, look no further than Fannie Mae, Freddie Mac, and the mortgage crisis, which is entirely the result of Democrat policies.

The fundamental difference between liberals and conservatives is the concept of personal freedom. Conservatives believe in empowering individuals. Liberals believe in empowering government at the expense of individuals. That’s why the Democrat-led Congress has its eye on our private 401(k) accounts. This has nothing to do with protecting Americans. It has everything to do with giving even more power to government, and more control to the Democrats.

My dear brother pointed me to a surprisingly accurate op/ed piece in the Los Angeles Times that explains how the financial crisis was the result of three factors, none of which have to do with President Bush and the GOP, which is what the Democrats would have us believe. No, the reasons can be laid primarily at the feet of the Democrats. Amazingly, Democrats want their liberal policies written into law, but then want to blame Republicans whenever their policies produce a negative result, which is pretty much all the time. The reasons are:

1. Easy money from the Federal Reserve

2. A corrupt system of subsidies from Fannie Mae and Freddie Mac

3. Government-mandated lending to borrowers with bad credit

I ran across this curious entry when going to Wikepedia yesterday for something totally unrelated. It sounds sort of like what we’re going through in 2008:

The Panic of 1907, also known as the 1907 Bankers Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell close to 50 percent from its peak the previous year. Panic occurred during a time of economic recession, when there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks, loss of confidence among depositors, and the absence of a statutory lender of last resort.

The crisis occurred after the failure of an attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs which later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York Citys third-largest trust. The collapse of the Knickerbocker spread fear throughout the citys trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.

Panic of 1907 – Wikipedia, the free encyclopedia

That’s a line George H. W. Bush used on Bill Clinton during their campaign in 1992. I sort of liked that line. And it proved to be true. Sixteen years later, Willy’s not after your wallet, but Congressional Democrats sure are. In an attempt to use the recent stock market drop as a power grab, Congressman George Miller (D-CA), wants to end $80 billion in tax savings for higher-income people enrolled in a 401(k).

“We’ve invested $80 billion into subsidizing this activity,” he said, referring to tax breaks allowed for 401(k) contributions and savings.

With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 billion for a policy that is not generating what we … say it should?” Mr. Miller said.

Congress should let workers trade their 401(k) assets for guaranteed retirement accounts made up of government bonds, suggested Teresa Ghilarducci, an economics professor at The New School for Social Research in New York.

When workers collected Social Security, the guaranteed retirement account would pay an inflation-adjusted annuity under her plan.

“The way the government now encourages 401(k) plans is to spend $80 billion in tax breaks,” which goes to the highest-income earners, Ms. Ghilarducci said.

Whoa. In those five paragraphs, you have pretty much everything you need to know about liberalism.

1. Those of you who invest a portion of your income in a 401(k) know that money is considered non-taxable. It encourages personal savings and personal initiative. Democrats consider this a “subsidy.” They don’t particularly care for personal savings and personal initiative, because those things lead individuals to personal freedom, thereby avoiding government dependence. Liberalism is designed to lure (or force) people into government dependence. That $80 billion tax break is considered a “subsidy” by Democrats, because they view our paychecks as property of the State, and whatever shows up as our net pay is what lawmakers have graciously allowed us to keep.

2. Notice how Democrats would use the stock market drop to lure people away from personally-owned 401(k) accounts and into government bonds. Notice how government bonds are linked to Social Security, the mother of liberal government entitlement programs. Of course, anybody who can do math knows Social Security is headed for a train wreck as a shrinking percentage of workers is going to be expected to subsidize the retirement of an increasing number of older Americans. Rather than use the impending doom of Social Security as evidence that the government does NOT belong in the retirement business, Democrats want to lure even more Americans into giving up their private retirement assets and accepting govenment bonds as an alternative.

3. Liberals honestly believe the average American is too ignorant to be trusted with handling his own retirement, so they have to do it for us. In reality, there are a great number of Americans who are smarter than the people they elect to Congress.

4. Notice how Democrats want to give Americans the choice of giving up their personal retirement savings and accepting government bonds. But they never offer the choice of giving up our “government accounts” (i.e., Social Security) and moving that money into the private sector.

5. If you need more evidence that Democrats have absolutely no business meddling in the financial market, look no further than Fannie Mae, Freddie Mac, and the mortgage crisis, which is entirely the result of Democrat policies.

As I’ve written many times, the fundamental difference between liberals and conservatives is the concept of personal freedom. Conservatives believe in empowering individuals. Liberals believe in empowering government at the expense of individuals. That’s why the Democrat-led Congress has its eye on our private 401(k) accounts. This has nothing to do with protecting Americans. It has everything to do with giving even more power to government, and more control to the Democrats.

My brother has pointed out something quite interesting about the AARP, which, as you know, opposes Social Security reform. One of its reasons is that “Personal accounts come with a host of risks. The stock market goes down as well as up, and sometimes it stays down for quite awhile. Not every individual or every fund earns a lot of money; many have returns well below the average return.”

Yet the AARP also encourages its members to participate in the AARP Investment Program, where it offers “A wide selection with a family of 38 mutual funds. Choose from many asset classes and risk levels, including money market funds, bond funds, U.S. large cap funds, U.S. small cap funds, and international funds.”

Furthermore, the AARP lists investment income of $60,326,000 in 2003, and $46,270,000 in 2002. As of December 31, 2003, the AARP listed investment assets of $180,204,000 in common and preferred stocks, with various other amounts invested in mutual funds.

Dave Ramsey has one here.