Free Markets, Free People

Politics

Easy come, easy go

Today, Rep. Mike Pence and Rep. Cathy McMorris Rodgers, the Chair and Vice Chair of the House Republican Conference, led a blogger conference call. The representatives stayed on point throughout the call:

  • On the economy generally and on the Democrats’ budget proposal specifically, they repeatedly said the Democrats are spending, borrowing and taxing too much.
  • They hammered on the Democrats’ proposal as bad for families and small businesses, including family farms.  They emphasized the role of small businesses in job creation.
  • They said they believed in free markets, fiscal restraint and tax relief as the keys to growth.
  • To that effect, they said Senate and House Republicans would be cooperating closely to promote those messages over the next several weeks and then unveil an alternative budget proposal of their own, which they promise will be a bold, clear contrast with that of the Democrats.

I expected something along these lines, and I don’t object to the sentiment or disagree with their diagnosis of the Democrats’ budget. They’ve identified what’s wrong with the Democrats’ plan, they’ve developed a strategy for responding with their own alternative, and they want to get everyone on record as either supporting the Democrats’ messy bill or the ideal Republican vision.

The first question went to Quin Hillyer over at AmSpec, who asked how unified we can expect the GOP response to be if a Republican leader like Lamar Alexander broke to vote for the omnibus spending bill. Pence acknowledged that he and Sen. Alexander had a difference of opinion on that one, but hastened to add that Sen. Alexander had voted for all the limiting amendments and had voted against the stimulus, etc.

For my part, I asked the representatives why, in light of Republicans’ so-far unsuccessful attempts to bring “clean” Republican versions of bills to the floor for debate, their alternative budget would be different.

Rep. Pence answered that Republicans would be given the opportunity on this one. The Republican House leadership is working closely with the budget committee, and specifically with Rep. Paul Ryan, the ranking Republican on that committee. There are some limitations on how quickly they can move their alternative and get a CBO estimate done on it, but they’re going to use the interim to expose problems with the Democrats’ budget before unveiling their alternative.

Rep. Morris Rodgers said that it was important that it goes to the House floor for debate, and that they wanted the difference in approach to be clear to the American people, too.

As I said earlier, this is about what I expected – when your party is some 70 seats down in the House and retains only the most meager leverage in the Senate, having lost all credibility, you need to remind people that you at least remember what a conservative is supposed to want.

I just hope that’s not all they have in their playbook. It’s much easier to present a principled image when you’re out of power and have no sway over whether a given bill will pass.

Assurances that the GOP will remain so principled when they regain a measure of power won’t carry a lot of weight without some kind of binding commitments – changing the structure and practices of the party rather than the short-term tactics. After all, misbehavior that receded smoothly when the majority last changed hands can come back just as readily. Easy come, easy go.

* Cross-posted from The Next Right

Hayek, Greenspan And The Designs Of Men

Alan Greenspan has a piece in the Wall Street Journal today which essentially casts him as the Pontius Pilate of the financial crisis.  Or, to sum it up rather sucinctly, “it wasn’t my fault”.  You’re welcome to read through it and agree or disagree.  However, the imporant point I think that should be taken from the Greenspan piece are the last two paragraphs:

Any new regulations should improve the ability of financial institutions to effectively direct a nation’s savings into the most productive capital investments. Much regulation fails that test, and is often costly and counterproductive. Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed. Such requirements will not be overly intrusive, and thus will not interfere unduly in private-sector business decisions. 

If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.

Those words reminded me of the quote I saw in business columnist Tom Oliver’s piece today in the Atlanta Journal Constitution: 

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” — F.A. Hayek

Any columnist who starts with a Hayek quote is guaranteed to get my attention. And I’ve come to enjoy Oliver’s columns. However, reviewing Greenspan’s advice and admonitions in those two paragraphs, juxtaposed against the simple and elegant truth of Hayek’s statement you find yourself back in the outback watching that big red kangaroo headed for a collision with the car. It is inevitable, there’s nothing you can do about it, they can’t or won’t hear your warnings and all you can do is watch – and cringe.

Frankly, as we watch the machinations of government and listen to their declarations, we have begun to understand that for the most part, those in charge of all of this haven’t a clue. As Oliver states:

Far from demonstrating the demise of free enterprise, this long-running, deepening recession is revealing the limitations of government.

Government, in its various yet powerful incarnations, has been offering one fix after another since August 2007.

The more the Fed and Treasury have tried, the less sure they seem and the more nervous the money makers have become.

It’s understandable that folks would look to the new administration for new ideas. So it’s harder than usual to acknowledge that the ideas are in fact pretty old and, having been tried, found wanting.

Whatever one may think about the so-called stimulus, it’s too easily deconstructed as pork and policy initiatives.

And if it’s still debatable whether to nationalize the financial industry, the move to nationalize health care, education and energy can hardly be disguised as economic recovery programs.

It is understandable that those who derive their power from government would use this recession as an excuse to further government’s reach. But they act as if government has been absent — as if they’ve been absent — from the role of regulator and legislator.

He’s precisely right – it wasn’t a problem with lack of regulation or lack of legislation. It was a lack of proper regulatory oversight and a willful decision by legislators to ignore the building crisis coupled with government distorting the market and actually incentivizing risk taking far beyond that which is prudent that led us here. And now that they have us in this position, all of them, Greenspan included, are engaged in a flurry of finger-pointing and name calling at every one but the right ones. This wasn’t a crisis which happened in just the last 6 months or 8 years. This one has been building for a while.

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” — F.A. Hayek

We had Democrats in charge and then we had Republicans. Again and again.

Both endorsed and encouraged the subprime sleight-of-hand. Both appointed heads of the regulatory agencies that could’ve stopped the poison seeping through our banks’ balance sheets. Both allowed gamblers to hedge and swap derivatives on top of derivatives that no one can explain and that are proving far more debilitating than the debacle they were insuring against.

Freddie Mac and Fannie Mae became toxic assets of the government while doing the bidding of congressmen who now act like the piano players in a brothel.

The Federal Reserve proved to be anything but reserved, instead stoking a fire that burned us all.

These were not the result of idle hands of government, but rather deliberate deeds that created false markets with inflated credit while turning a blind eye to those who finance election results.

Oliver’s characterizations are dead on – and he’s nailed both the fed and the Congress. The most irritating thing to me about this whole mess, other than the obvious huge loss of wealth, is the success those who were responsible for writing the rules, laying out the playing field and calling the game are escaping both blame and punishment for what they’ve brought about. That toad Barney Frank having the chutzpa to talk about prosecuting those who were guilty of getting us in this mess still astounds me. If anyone should be undergoing such prosecution right now, it is he and numerous other congressmen and women, both past and present.

Oliver concludes as follows and I can’t help but say a hearty “amen” to what he has to say:

We periodically recoil in horror at government’s failure to protect foster children or care for veterans or the mentally ill. But then we turn around and assume government will perform better in areas more complicated.

Why does the failure of government so often lead so many to believe we need more government?

Like the hair of the dog for the alcoholic, it may calm the trembling hands for a moment but it inevitably leads to another spree and another hangover.

Or worse.

We’re headed into a “or worse” moment. No one in government is going to listen to Alan Greenspan’s admonitions or believe Tom Oliver’s brief accounting of the history of this crisis. Instead we’re going to see precisely the opposite happen – more regulation, more strings, more intrusion, more control. And, as Hayek said, we’ll again see “how little [men] really know about what they imagine they can design.”

~McQ

Brooks On Capitalism

David Brooks had started down the road to Damascus when he was called back into the fold by Dear Leader. His Op-Ed in today’s NYT is the result.

Most of Brooks’ offering is a rather transparent attempt to shame congressional Republicans into supporting Pres. Obama’s agenda:

The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.

The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.

There are myriad problems with Brooks’ line of reasoning, including many in just to two foregoing paragraphs (e.g. How much input did Republicans have into the recent legislation? By “adopted a posture” is he referring to “not having control of either the House or the Senate”?), but I wanted to focus in on a couple of points in particular.

After some platitudinous admonitions, Brooks launches into his prescription for Republicans to save capitalism:

Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.

I really don’t know what point Brooks thought he was making, but he failed miserably on any score. First of all, “exogenous forces” cannot be “weaknesses” and/or “shortcomings” with capitalism since, by definition, they come from outside that system. At best, examining such forces can be used to understand better ways of protecting capitalism from them. In the context of the entire Op-Ed piece, however, it appears that Brooks is pitching the tired line that capitalism must be reigned in so that people don’t get hurt. That’s like diagnosing the problem with house, finding termites, and then thinking of ways to protect the termites from the house.

Furthermore, Brooks cites a “flood of easy money” (which, of course, is caused by government) as an example of an exogenous force, and then lists the following “shortcomings” of capitalism: “higher debt, a grossly enlarged financial sector and unsustainable bubbles.” What do any of those things have to do with capitalism? If anything, these are once again a failure of government skewing incentives.

In fact, when the government does its darnedest to make the cost of borrowing money historically low, people would be really stupid not to take advantage of that. We all know that rates fluctuate, and that the cost of money will be more expensive when they go back up. Logically therefore, it only makes sense to borrow when the Fed turns the money spigot on and then to find some sort of an asset to grow that money in. That, of course, is what leads to bubbles as everyone has barrels of money but not as many clear ideas of what makes a good investment. Instead of taking the time to really investigate what opportunities are available, and which ones fit a particular person’s portfolio, the herd mentality takes over and we all tend to keep up with the Jones and Smiths whether that means buying tulip bulbs or a run-down house we intend to flip.

The bottom line, however, is that these sorts of scenarios start with government intervention into the market place. In addition to turning on the money spigot, the federal government was also encouraging lenders to make high-risk loans, and for the Freddie Mac and Fannie Mae to buy them up, securitize them and sell them into the derivatives market. Again, that’s all fine and dandy (until it it all goes to hell), but it has nothing to do with “weaknesses” and “shortcomings” of capitalism, and everything to do with government sticking its big fat honker where it doesn’t belong.

More Brooks:

If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them.

The “free market party”? Who does he think he’s kidding here? The Republicans haven’t acted like a free market party since … well … it’s been so long I can’t remember.

Moreover, I simply can’t fathom how Brooks thinks a “free market party” would ever be able to reconcile itself to joining hands with Obama on his completely anti-capitalist agenda.

Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.

Earth to Brooks: that’s already happened. Look who the president is for crying out loud, or take the time to read your own newspaper. Each and every day we hear about how the excesses of capitalism caused this crisis, and how the “libertarian” policies of Bush (HA!) have landed us in this awful spot. Capitalism didn’t get a trial, Mr. Brooks, it was rounded up, convicted and summarily shot as soon as the latest grand experiment in government do-goodism failed (again).

Intellectually Incurious

Yesterday on the podcast, we talked about Pres. Obama’s attitude towards certain aspects of his presidential responsibilities.  Apropos of that discussion, he is receiving some criticism for his indifference to the markets.

Some Wall Street economists think President Obama could have voiced some sympathy about the plight of frightened shareholders when he compared the stock market’s plunge to an election tracking poll that “bobs up and down, day to day.”

They worry that the president is underestimating the important role the stock market plays in the economy’s performance, and that the markets’ precipitous slide is actually a vote of no confidence in the administration’s handling of the economy. There’s also a suspicion that Mr. Obama and his advisers think only wealthy people own stocks.

“There is some of that feeling that rich people are the ones who have stocks. He does have somewhat of that feeling. But you’ve got to remember that most people who own stocks aren’t rich,” said David Wyss, chief economist at Standard & Poor’s, the influential Wall Street financial research and forecasting firm…

…Mr. Wyss and some of his colleagues on Wall Street – where investors have lost trillions of dollars in savings and the market is not so much bobbing as dropping straight down – think Mr. Obama could have shown more concern for the markets, which represent the economy and signal its future direction.

During Mr. Bush’s tenure, there was constant criticism that he was “intellectually incurious”, e.g., he showed a lack of interest in the portions of his job he wasn’t required to be engaged in on a regular basis.  I wouldn’t dispute those criticisms, of course, but it seems to be a trait that Pres. Obama shares with his predecessor.

Pres. Obama appears to be fascinated by aspects of politics such as “green jobs” and health care that aren’t actually part of the president’s core portfolio, while being uninterested in the foreign and military policies that are essential parts of the president’s purview.At the moment, we’re in the midst of an economic crisis–and I use the word intentionally–that stems from a credit bubble collapse.  The stock market is a predictor of future earnings and profitability for private sector firms.  As such, it tells you things about the expectations investors (which at this point includes more than half of the population) have about the future income that their investments will produce.  What the collapse in the stock market tells us is that investors are voting with their money that future earnings will be substantially lower, meaning that firms all across the country will be less profitable.

What happens on a day-to-day basis, of course, may be subject to a variety of market whims and fancies, but long-term trends do indicate the direction of the economy.  The market is a leading indicator.  So when there are several straight weeks of decline in stock prices, the market is telling us something.

This seems not to be a reality that the president comprehends.

Instead, the president’s main focus seems to be on health care, green jobs, more policemen and prosecutors, and the like.  All of which may be wonderful things, and none of which will happen if the economy implodes. To the extent the current crisis forces him to concentrate on economic policy, he appears to resent it.

Similarly, the president has made missteps in foreign policy this week.  The Obama Administration apparently attempted to sell our Eastern European allies down the river by offering to shut them out of missile defense if the Russians cooperate on nuclear non-proliferation in Iran–until they got caught out on it.  That was a  major misstep.It was quickly followed by two minor missteps.

First was Sec. Clinton presenting the Russian foreign minister with a button which was supposed to say, in Russian, “Reset”, to symbolize the new engagement with the world the Obama Administration was supposed to bring about.  What the button actually said was “overcharge” in Russian.  On top of this, it’s generally a bad idea, symbolically, to present the Russians with a button to push of any sort, considering that the major foreign policy goal of the last half of the 20th century was to prevent the Russians from pushing “the button”.

Second was the treatment of Gordon Brown, the prime minister of the UK, during his visit.  Rather than pulling out all the stops to showcase the visit of the head of government of what, by nearly any measure, is the United States’ most important ally, Mr. Obama treated it as if the Deputy Agriculture Minister of Azerbaijan had showed up on the White House’s doorstep.  In what may be a first in my lifetime, the various press organs in Britain, from the commies at The Spectator Observer, to the staid tories of The Times of London all agreed that Pres. Obama’s treatment of Mr. Brown amounted to an egregious snub of the United Kingdom.

In addition to the above, one has to note the retention of Sec. gates at the DoD, along with the retention of the great majority of the Bush Administration’s positions on executive privilege and the prosecution of the Global War on Terror.

What all of these things add up to is a picture of a president who is essentially uninterested in military policy, or foreign policy, or, really, economic policy, and who in effect simply ignores them to the extent he is able, and delegates their operation to his subordinates.  What he cares about is government, and its ability to intervene in the marketplace, and to provide goods and services.  It is in those areas where his interest and attention actually lie, and the remainder of the executive branch can, as far as he’s concerned, operate on auto-pilot.

Take all of the above together, and it appears to present an emerging picture of a man who is truly intellectually incurious, and who wishes to ignore, to the extent possible, those aspects of the president’s job that he doesn’t find personally appealing.

Sadly, he appears to be fascinated by aspects of politics such as “green jobs” and health care that aren’t actually part of the president’s core portfolio, while being uninterested in the foreign and military policies that are essential parts of the president’s purview.

Paul’s pork

The following was written by Andrew Davis for Conservative HQ. It has been posted here with his permission.

During the 2008 election, Ron Paul became a grassroots icon in his fierce denunciations of Big Government, Big Spending and the federal government’s failure to live by our Constitution.

Unfortunately, his actions don’t match his rhetoric.

According to a Houston Chronicle analysis of the $410 billion dollar spending bill passed by Congress at the end of February, Ron Paul had a role in obtaining 22 earmarks, totaling $96.1 million—making him the pork-leader of Houston’s congressional delegation.

Paul’s office did not respond to comment requests from the Chronicle; however, on Paul’s congressional Web site, it states: “As long as the Federal government takes tax money from [Paul's] constituents, he will make every effort to return that money to his district.”

Comforting logic, consistent with our Constitution? Not really.

This isn’t the first time Congressman Paul has been caught with his hand in the federal cookie jar. In August of last year, a Wall Street Journal article highlighted Paul’s request for 65 earmarks costing nearly $400 million. This included $8 million for marketing shrimp, and $2.3 million for shrimp-fishing research.

At the time, Paul’s spokesperson told the Journal that, “Reducing earmarks does not reduce government spending, and it does not prohibit spending upon those things that are earmarked.”

“What people who push earmark reform are doing is they are particularly misleading the public — and I have to presume it’s not by accident,” the spokesperson added.

Again, not a very convincing logical justification. And, Paul’s spokesperson certainly didn’t explain how marketing shrimp is consistent with the U.S. Constitution.

Paul is far from the top of the list of Big Spenders in Congress, but he isn’t at the bottom either. Earmarks are a small portion of Congress’ overall spending; however, you have to start somewhere to cut spending, and eliminating earmarks is as good of a place as any.

Although Paul ended up voting against the $410 billion spending bill, he still had his hands in the cookie jar. At the end of the day, he’ll end up with taxpayer cash flowing into his district, but can boast about a clean record.

A list of Congressman Paul’s 2009 earmark requests can be found here.

On the “tea parties” and “going Galt”

I don’t want to get off on a rant here, but…*

I don’t mind people protesting against massive government expansion and taxation.  But do they have to call their protests “tea parties”?

Mailing bags of tea to Congress costs very little and risks nothing.  It’s just one step up from sending a strongly worded email, which is only one step up from an online form letter or petition.

Do they know what the Boston Tea Party was about?  And if so, what are they implying when they send tea to Congress?  We have representation to go with our taxation, more direct representation than the American Revolution established.  If the “tea party” protests of 2009 aren’t really related to the original Tea Party, why draw a comparison?

I’d be more impressed if they fired a shot across the bow and coordinated a national day for cranking up their withholding allowances, just as high as they can.  They’re planning their next party on Tax Day, right?  One might think they’d be interested in ceasing to lend their earnings interest-free to the government.  They might take some satisfaction in doing something that actually shows up on the government’s ledger.

I’d be convinced of their sincerity if they subsequently considered actually not paying their taxes next year if the government didn’t change its policies.  That would be civil disobedience, as opposed to loud-but-obedient.  But still, hold the tea.

The “going Galt” thing has been a bit better — at least it involves refusing to produce — but “John Galt” is a rather radical standard, ladies and gentlemen.  Reducing your income so that you don’t pay the higher marginal taxes in the next bracket; partially shutting down businesses and taking more leisure time; retiring early.  These are nice, but it’s like “going Martin Luther King, Jr.” without risking jail or invoking the Alamo without risking death.

Galt refused to let the public seize his creations for their (immense) benefit.  He led an illegal strike.  He accepted nothing more than a night watchman state.  He openly scorned all religion and mysticism.  His opposition to government was not of the “vote the bums out 20 months from now” variety, or merely underperforming–although he did discuss underperformers in his marathon speech, much of which is dramatized here (note: videos spoil much of the book – the part about underperformers is at 7:20 or so in Part 14).

Not that radical?  Not willing to take that kind of risk?  Then don’t play dress-up.

Content yourself to call your actions by their proper names.  If you know what the fictional character symbolizes, and that’s not a standard by which you judge yourself, it’s better that you don’t compare your actions to his.

________

* This isn’t a Dennis Miller-style rant.  Sorry.  If I tried to emulate that, I’d just pale in comparison.  Speaking of which…

The “Deregulation” Bogeyman

As Dale has mentioned before, ginning up support for massive federal expenditures and deepening deficits was much easier for FDR because he had Nazis. Obama does not have any such luxury, so he has to invent an equivalent enemy. Luckily for him, decades of propaganda have cemented the idea into many heads that capitalism=rightwing=nazi, leading to the inexorable conclusion that anyone or thing whose primary purpose is to make profit is dangerous and must be controlled.

Dovetailing nicely with that need is the meme that deregulation is to blame for the current financial mess. Although it’s a fairly ridiculous claim (as I’ve pointed out before), that won’t stop “studies” like this from being published and reported on:

$5 BILLION IN POLITICAL CONTRIBUTIONS BOUGHT WALL STREET FREEDOM FROM REGULATION, RESTRAINT, REPORT FINDS

Steps to Financial Cataclysm Paved with Industry Dollars

March 4 – The financial sector invested more than $5 billion in political influence purchasing in Washington over the past decade, with as many as 3,000 lobbyists winning deregulation and other policy decisions that led directly to the current financial collapse, according to a 231-page report issued today by Essential Information and the Consumer Education Foundation.

The report, “Sold Out: How Wall Street and Washington Betrayed America,” shows that, from 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, a financial juggernaut aimed at undercutting federal regulation. Nearly 3,000 officially registered federal lobbyists worked for the industry in 2007 alone. The report documents a dozen distinct deregulatory moves that, together, led to the financial meltdown. These include prohibitions on regulating financial derivatives; the repeal of regulatory barriers between commercial banks and investment banks; a voluntary regulation scheme for big investment banks; and federal refusal to act to stop predatory subprime lending.

The quote above comes directly from the report’s financial backers, Essential Information and the Consumer Education Foundation. The former is a non-profit that was created by Harvey Rosenfield, a lawyer who also controls the advocacy group Consumer Watchdog, formerly known as the Foundation for Taxpayer and Consumer Rights. The latter is an entity created by Ralph Nader. None of that information is found either in the press release, or in the news stories reporting on (i.e. quoting) the release.

The Hill reports:

The organizations are a nonpartisan, nonprofit advocacy groups which push for stronger consumer protection laws and to curb “excessive corporate power.”

The report alleges that excessive deregulation of the financial sector combined with undue influence from the billions spent in lobbying and political contributions resulted in the current financial crisis.

And CBS’ Political Hotsheet finds:

The two men behind the report are California lawyer Harvey Rosenfield of the nonprofit Consumer Education Foundation and Robert Weissman of Essential Information, a Washington nonprofit “that seeks to curb excessive corporate power.”

The report argues that the lobbying and contributions kept financial derivatives from being regulated, led to the repeal of regulatory barriers between commercial banks and investment banks and kept the government from stepping into halt predatory subprime lending.

The remainder of the reporting is merely quoting and paraphrasing the press release. Absolutely zero analysis of the actual report is offered. Why would they report anything else? Well, just looking at the press release provides one clue:

Financial deregulation led directly to the current economic meltdown. For the last three decades, government regulators, Congress and the executive branch, on a bipartisan basis, steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies. “Sold Out” details a dozen key steps to financial meltdown, revealing how industry pressure led to these deregulatory moves and their consequences:

1. 1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
2. Regulatory rules permitted off-balance sheet accounting — tricks that enabled banks to hide their liabilities.
3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives — which became the basis for massive speculation.
4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal “risk-assessment models.”
7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.

The damning list offers only one instance of actual deregulation (the Glass-Steagall Act), at least seven instances of regulation that the authors simply disagree with (nos. 2-5, and 8-10), one claim each of “global regulators” and ratings agencies failing to do their respective duties (nos. 6 and 12), and two allegations that federal regulators didn’t pursue their jobs aggressively enough (7 and 11). So, despite the bold claim that “Financial deregulation led directly to the current economic meltdown,” the authors produce almost no evidence to support their conclusion.

It seems like that may have been a little more newsworthy than simply regurgitating the press release.

Then there is the fact that a Ralph Nader organization is partly responsible for the funding. Not only has the man run for president four times, one of those times perhaps leading to the election of George W. Bush, he’s notorious for his left-wing politics, including having a serious distaste for corporate America and capitalism.

Could be relevant, no?

But the real failure of journalism here was to take anything that Harvey Rosenfield has to say at face value.

The Foundation for Taxpayer and Consumer Rights (FTCR) [owned by Essential Information creator, Harvey Rosenfield] has decided to re-brand itself as “Consumer Watchdog.” Will a simple name change help shore-up the eroding reputation of this “consumer group?”

Few days pass without someone from FTCR pontificating in a newspaper story or TV report. Agents of this organization often are quoted — without explanation of their credentials — about auto, fire or health insurance, gasoline pricing, stem-cell research, or just about any public policy debate on the FTCR’s mind.

[...]

Behind the pithy quotes from FTCR’s leaders lies an organization with too much to hide and too many faults to be taken seriously anymore. It has survived by quietly pocketing millions of dollars in fees stemming from an initiative it wrote and sponsored nearly two decades ago. Along the way, it has engaged in hypocritical and speculative stock trading, enjoyed the secret patronage of wealthy trial donors, and either cozied up to or bullied politicians. All of this came despite operating under IRS rules as a “public-benefit” charity.

[...]

Of course, the public has no idea what is really motivating FTCR because its agents refuse to disclose their financial backers. Their reasons for hiding the facts are insulting to the average Californian’s intelligence.

FTCR declined to release a list of donors on its website by ludicrously equating their work to the civil rights movement in the South. It’s refusal to list details about its financial backers is particularly galling since FTCR spends a lot of time lambasting politicians for alleged corruption surrounding their own political donations.

One source of income is clear, thanks to some available public disclosure forms. Following the disastrous 1994 Northridge earthquake, founder Rosenfield extracted $5 million in a consumer-protection settlement with Allstate Insurance. The money was placed in a new group he controls, the Consumer Education Foundation, which was supposed to prevent the kinds of insurance disasters that followed the Northridge quake.

But nearly a decade after the group was formed, its biggest accomplishment appears to be paying Rosenfield a $100,000 salary and writing a few grant checks … including to Rosenfield’s own FTCR, to fund its operations. One wonders what the judge in the Allstate settlement would think about this cozy relationship, let alone why Northridge consumers have yet to see much benefit from the $5 million that was paid out supposedly for the public good.

It gets even more absurd.

Rosenfield’s Consumer Education Foundation invested some of its Northridge windfall in Enron stock — the Texas company that bilked California consumers out of billions of dollars. This laughable investment, which the CEF was forced to reveal in disclosure statements, is almost too incredible to believe. The “consumer” foundation put its money in one of the biggest consumer ripoff companies in U.S. history.

Enron wasn’t the only hypocritical stock purchase made by the Rosenfield’s Consumer Education Foundation. The group purchased stock in Abbott Labs, Amgen, Merck, Pfizer, Idec Pharmaceuticals, Johnson and Johnson, and Proctor and Gamble. Meanwhile, FTCR would soon get busy lambasting politicians for accepting campaign donations from these same companies. And while FTCR has lashed out at automobile and chemical companies, the “consumer” foundation has invested in Clorox, DuPont, General Motors, Ford Motors, and Toyota Motor Credit.

There’s more on Rosenfield’s endeavors here (scroll through the comments to the ftcrfollies.org stuff), but the original site is now defunct, so caution is warranted.

In any case, it seems that Rosenfield’s alleged background as an agent provocateur should raise enough red flags to warrant at least a mention that perhaps the report he’s funded (written?) should be taken with a grain of salt. Instead, we get news stories that basically repeat exactly little more than the juiciest allegations from the press release, absolutely zero analysis of the actual report (or the press release for that matter), and nothing more than the bare bones information regarding the provenance of the report.

With apologies to Mike Judge, “What would you say ya do here, MSM?”

Podcast for 03 Mar 09

In this podcast, Bruce, Bryan, and Dale talk about the president’s new budget, and the end of the Post-WWII global financial system.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

Romney wins CPAC poll

Mitt Romney won the presidential straw poll at CPAC today:

One day after delivering a forceful campaign-style speech to the conference of conservative activists, former Massachusetts Gov. Mitt Romney won his third straight CPAC Straw Poll, earning 20 percent of the vote on a ballot that included nine other Republicans who could seek the party’s presidential nomination in 2012.

Romney’s straw poll win at the 2007 Conservative Political Action Conference helped to elevate Romney from a little-known governor to a bona fide presidential frontrunner, and his narrow victory in last year’s straw poll reaffirmed his support among conservative voters. But Romney failed to win the Republican nomination, which was eventually won by Arizona Sen. John McCain.

In the 2009 poll, Louisiana Gov. Bobby Jindal came in second with 14 percent of the vote, while Alaska Gov. Sarah Palin and Texas Rep. Ron Paul tied at 13 percent. Jindal and Palin did not attend the conference.

Rounding out the straw poll results were former House speaker Newt Gingrich at 10 percent, former Arkansas Gov. Mike Huckabee at seven percent, South Carolina Gov. Mark Sanford at four percent, former New York City mayor Rudy Giuliani at three percent, Minnesota Gov. Tim Pawlenty at two percent, and Florida Gov. Charlie Crist at one percent. Nine percent of poll participants were undecided.

Glad to see the folks at the conference aren’t taking Tax Hike Mike too seriously, though I’m a bit bummed about Mark Sanford’s numbers. I’m surprised to see how well Ron Paul did. I know C4L had a presence at CPAC, looks like it paid off.

Here is a better look at things from CPAC:

Here’s A Bit Of A Surprise

Eric Holder talked about reviving the assault gun ban. But he’s meeting opposition from unexpected quarters.

Senate Majority Leader Harry Reid will join Speaker Nancy Pelosi (D-Calif.) in opposing any effort to revive the 1994 assault weapons ban, putting them on the opposite side of the Obama administration.

Reid spokesman Jim Manley said the Nevada Democrat will preserve his traditional pro-gun rights voting record.

“Senator Reid would oppose an effort (to) reinstate the ban if the Senate were to vote on it in the future,” Manley told The Hill in an e-mail late Thursday night.

There’s a pretty political explanation for the opposition.

A) gun bills are always losers for Democrats. It seems that Pelosi and Reid have finally figured out (at least in this case) that it is rather stupid to hand your opposition ammo (no pun intended).

B) unpopular legislation like this wastes time and goodwill. They have a much more ambitious plan to sell us down the river than piddling stuff like this, and they don’t want to be distracted by something that will be virtually ineffective the second it is signed into law (but put the pro-gun lobby front and center for a while).

C) Reality.

A number of House Democrats lost their seats after being targeted by the National Rifle Association for voting for the 1994 ban.

And finally, it is a way to make sure the Obama administration knows that it is Congress they must coordinate these things with before they go shooting their mouths off. Eric Holder said, without such coordination, that he planned on trying to reinstate the assault weapons ban. Pelosi and Reid used the opportunity to send a message.

That said, be aware that Holder certainly appears to have an anti-gun agenda, or, at least, so it seems.

~McQ