Stupid, stupid, stupid

Chances are you don’t need me to tell you I earnestly wanted the “rescue” bill to die a horrible death and was appreciative of the House Republicans’ efforts in making sure that happened. Still, this thing is news. It’s somewhat amusing that the media, the President, and Congress have been telling us for two weeks that we have to do something NOW! NOW! NOW! or we will all DIE!…but that hasn’t happened.

Left alone, the market always rights itself. Unfortunately, whiny Americans and Congresscreatures can’t leave well enough alone (and, indeed, government intervention and messing around with the housing market is what got us into this disaster in the first place). If only they could!

Still, there are people out there wiser and more succinct than I, so let’s look at what they have to say.Difster agrees with me that we need to just stick ‘em up and back slowly away — and “we” includes Congress and the President. Besides,

Is the market corrupt? Sure, sometimes. But ask yourself, what’s more corrupt, the market or the government? Here’s what people don’t seem to get; if the government wasn’t involved, the market would have a different nature than it does now. If we have a market that the government can so easily usurp, then we don’t have a free market to begin with.

Hmm… Interestingly, he also notes (and he should know) that the dollar is up despite international caterwauling about the financial mess.

Listen, a short recession is better than a long one or, worse, a Depression. Let’s take the hit and suffer now, because the pain will only get worse the longer we try to put it off.

Via QuandO, wisdom from Dick Armey.

…many proponents of the bailout have tried to put the blame for this massive government intervention squarely on the market, asserting that free market capitalism has somehow failed and the only solution is more government intervention. Yet markets do not operate in a vacuum. In fact, government institutions can have a strong – and too often corrupting – influence on markets. In the specific predicament financial markets face today, there is a long history of government actions that have led to what is most accurately described as a government, not market, failure.

How I wish I could triple-bold that. It is precisely government “actions” (such as insisting banks give home loans to people who could barely afford lunch, much less a mortgage, because to do otherwise was “racist” or “discriminatory” against people in certain neighborhoods) that caused this debacle. The most frightening words in the English language ought to include, “I’m from the government, and I’m here to help!”

Back to Armey:

Some point to “unbridled greed” as the root cause of the crisis. There are plenty of bad actors to point to, but self-interest is in the very nature of human action, a constant that cannot provide an accurate explanation of the extraordinary distortions in the housing and financial markets. Self interest does indeed drive private economic behavior and the invisible hand of the market, but it equally drives so-called “public” political action. A more serious examination of the current financial meltdown suggests government excesses, not unbridled markets, played a determinant role in today’s market meltdown.…Those quick to call for more regulation forget the power of markets, and refuse to acknowledge government culpability in the current mess.

Well, these days, “government excesses” is beyond redundant.

As QandO’s McQ points out,

We are probably in for the long-version of pain management (the Japanese version). And it may become chronic pain management if the government is allowed to continue to intrude and block corrections and their results by claiming it is the market that is the problem.

Which is precisely the danger. We saw this with the housing market, when what was simply a market correction of over-inflated housing prices caused screwballs who paid $300,000 for a $150,000 home to panic, as did the press. It was a bubble, and it NEEDED to burst on its own. But no, that’s just not fair.

Anyhow.

Now, from Acton’s PowerBlog,

Last week an email newsletter from Sojourners featured a quote from U2 rock star and activist Bono (courtesy the American Prospect blog):

It’s extraordinary to me that the United States can find $700 billion to save Wall Street and the entire G8 can’t find $25 billion dollars to saved 25,000 children who die every day from preventable diseases.

The quote is pretty striking given the current shape of the debate over the Wall Street bailout. Bono’s insight is instructive: Once the government takes upon itself tasks that fall outside its regular purview, how do we rightly adjudicate between all the different needy causes? It simply becomes a game of which special interest can hire the most lobbyists.

Indeed, the $25 billion that Bono points out would be necessary to save 25,000 children a day is the same amount that the US government just paid to bailout the domestic auto industry over the weekend.

If the feds are willing to dole out $600-700 billion in corporate welfare for Wall Street, it only seems right that poor families and individuals get their own relative share of government redistribution.

…There’s now going to be an implicit government guarantee of corporations that are “too big” or too important to fail. The cost of this bailout may be $700 billion, but it sets a precedent for future bailouts whose costs are inestimable.

But enough hasn’t been said on another moral hazard that has to do with the good players, people who didn’t take out gimmicky mortgages to finance half-million dollar homes or rush into home ownership when they should have been renting. That’s the flip-side of bailing out bad players…good players get punished and are less likely to continue responsible behavior.

What’s the point? Everyone else got bailed out, after all.

Finally, from El Rushbo:

As complicated as the language of this is, it’s not complex for the average citizen, which understands that the market and the government are two different things.

They understand that the government has botched every attempt it’s made to toy with, fix, promote, whatever, the market. They instinctively understand that this is not how these things are to be done. They also understand that for $700 billion, you could give every American $75,000 toward retiring their mortgage, and if this is a mortgage crisis, then give every American $75,000 or $50,000 bucks instead of giving it someplace elsewhere shore up so-called liquidity. They understand if you’re going to start passing out money, give it to us. …If you’re really concerned about this, they’re saying, if you’re really, really concerned, imagine the economic activity that would be spurred on — if we’re going to give $700 billion away, now, don’t misunderstand, I’m not suggesting this should happen, but I’m saying the American people say, “If you’re going to give $700 billion away why give it to people who made these bad loans in the first place just to make them healthy? Give it to us, let us retire a lot of our mortgages and watch us go to town here in the economy causing economic growth. I mean, if our objective here is to bring the economy back, save the economy, then hell, give it to us.” They instinctively understand this.

…So the Republicans are watching all these Democrats vote “no” after being told all week it was their responsibility to join with Democrats to make this happen, and after knowing full well that the Democrats really wanted this to happen, they could have passed it on their own without Republican help. That was the spin. And then they sit there and they see all these Democrats voting against it, voting nay, and they say, wait a minute, what’s happening here, and they figured it out. They figured out that the vast majority of public opinion around the country is dead set opposed to this, isn’t even close, and they see Democrats in crucially close districts voting against it so they can run around and campaign, “I voted against that bailout, I knew it was the wrong thing to do, but our Republicans voted for it.”

It was a setup from the get-go, and however it is that the Republicans decided to change votes or to vote against it, it was the wise and smart thing to do. Now there’s time to put something together that makes some sense, but this is not the bunch to do it! This is the bunch that caused it!

…And then we have such a catastrophic (sic) here, we have such an Armageddon, we have such a crisis — we’re on the verge of the Great Depression 2 — Congress takes two days off! (pause) How can these two go together? The American people are not this dumb. You don’t have Armageddon right around the corner. You don’t have Armageddon at the end of the day and have Congress take two days off.

Well, you do if they don’t really care about the country, but that is the point, isn’t it? Then Rush talked about the mind-boggling $700-million figure.

This $700 billion “is amazing,” but, “they need every penny to prop up the mortgage lenders,” they say. Okay, so you ask (again, this is Wizbang blog), “How many bad mortgages are there? Then after playing with that hypothetical in my head I wondered, how many mortgages are there in active in the whole country? So I looked it up. According to this 2006 pdf from the US Census, there are 33 million owner-occupied dwellings with first mortgages active.” So, “$700,000,000,000 / 33,000,000 = Over $21,000 cash the government could just give to everyone with a mortgage!” Give it to the people that make the country work. People could pay off their mortgages. “If we’re going to give $700 billion away, what kind of stimulus would that have on the economy to hand 33 million people $21,000?” I’m not advocating this, I’m just saying — if we did that once, it’s over — it would be the same thing here as the government owning your mortgage in a sense because they’re going to get it back from you one way or the other.

But I’m just making a point here of how much money $700 billion is and how much of a profound impact it could have if it were injected into the market, into the private sector, into the hands of the people who make the country work rather than the lenders. But then Kevin at Wizbang blog says he “took it to the next level… On page 174 of the pdf [he] found an interesting table,” and I can’t give you the numbers of the table here; I’ll just give you the results here. Numbers are hard to follow on the radio. He found an interesting table and “put the highlighted numbers into a spreadsheet to figure out just how many mortgages $700 Billion could retire if [the Congress] gave the money (back) to the people. I got this. The Bottom Line: If the Treasury simply took the $700 Billion and started paying off taxpayer mortgages, they could pay off every mortgage in the country worth less than $75,000…”

…Now, back to Jeffrey Miron’s piece at CNN.com, ’cause basically what he’s saying is that bankruptcy is the right answer here, not a bailout.

He’s a Libertarian lecturer — not a professor, he’s a lecturer — at Harvard. “This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle. Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets. The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government…”

So that’s what Rush had to say, and he’s right (note again, though, that he is NOT suggesting the feds pass out cash to every homeowner in the country).

Tomorrow we’ll take a fun look at how BHO’s cronies at ACORN had a cloven hoof in this.