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Posts Tagged ‘healthcare reform’

More Government Mandates for Medical Coverage

Posted by Steve Markowitz on July 16, 2010

The tentacles of Obama’s healthcare “reform” are beginning to take hold.  The Walls Street Journal reported that the government is now mandating additional preventative coverage in all new healthcare plans offered after September 23, 2010.  Like most government mandates, this one starts with a reasonable premise, but deteriorates under any logical scrutiny.

In this new mandate, free preventative treatments for alcohol abuse, depression and obesity, for example, will be required for consumers.  But that will not be the end of the additions.  Each special interest group will want their pet items added to the coverage.  Already Planned Parenthood wants birth control included.

While insurers estimate that the Obama mandated change will increase premiums by about 1.5% a year, this figure will rapidly rise as benefits continue to get added.  Just follow what the knucklehead Progressives in Washington did to Social Security over the years.  You know what’s coming.  The cost of these new medical services will ultimately break the bank.

The book on Federal mandates is the same chapter repeated over and over again.  In this case:

  • The Progressives started the ball rolling by stating that preventative healthcare is a good thing that all Americans should have access to.  The first half of this thesis is correct.
  • Then, the Progressives proffer the logic that the newly mandated program will cut costs in the long-term, in this case by keeping people healthier.
  • Next, lobbyists get to work adding more benefits and people to the program.
  • Finally, the program falls apart under the weight of exploding costs.  You don’t need an Ivy League degree to understand the script.

While the government continuously mandates new programs, they never come up with a plan to pay for them.  Progressives know that the huge cost of this healthcare reform will not explode on their watch.  Obama will long be out of office and living off a fat government pension when taxpayers are forced to fix the mess he created.

One of the ironies in the Journal article was a quote by the First Lady, Michelle Obama, who said: “Services like these will go a long way in preventing chronic illness.”  Hmmmmm.   Ms. Obama, isn’t your husband an addicted cigarette smoker?  Why hasn’t the President quit this dangerous habit given his access to preventative care?  No need to respond.  As they say, “you can lead a horse to water…..”  You can’t legislate morality nor force people into preventative healthcare.

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Posted in healthcare reform, Michelle Obama, Progressives | Tagged: , , , , , , , , , | Leave a Comment »

Obama’s Budget Director to Jump Ship-II

Posted by Steve Markowitz on July 1, 2010

On June 22 this Blog discussed the departure of President Obama’s Budget Director, Peter Orszag, in a post titled “Obama’s Budget Director to Jump Ship”.

This week www.dailyreckoning.com included an article titled “Flip, Trip, Double-Dip” by Bill Bonner that offers color on the Orszag departure.  Bonner states”

“Barack Obama’s budget director left after disagreeing with Obama’s tax pledge.  ‘Read my lips,’ the chief executive might have said; no new taxes for people earning less than $250,000.

Mr. Orszag hastened to distort the record: ‘I want to emphasize that it would be inaccurate to say that I have told the president personally that I’m leaving because of concerns about our fiscal ‘policies,’ he said in his exit interview.”

“Mr. Orszag can’t seem to put a simple sentence together.   But he can count.  According to the last census results, there were 1.7 million households in America with incomes of $250,000 or more.  Even if you took an additional $250,000 in tax from each one of them, raising the effective rate on many of them to nearly 150% of income, it you would still have a trillion-dollar deficit.  There is no way the rich alone are going to be able to shoulder America’s growing debt burden.

“’Peter feels strongly that this is a pledge that has to be broken…’ said an administration source.”

Bill Bonner and The Daily Reckoning focus on economic issues, often getting it right and ahead of the curve.  As Bonner indicates, the numbers just don’t add up and Obama will be forced to raise taxes on the 50% of Americans who actual pay taxes.  Most of these taxpayers do not earn more than $250,000 per year, so Obama will be forced to break yet another of his campaign promises.

Budget Director Orszag’s integrity was only one reason for the resignation.  Another relates to a report offered this week by Congressional Budget Office (CBO) chief Douglas Elmendorf who stated:

  • In the best scenario, public debt will rise by 2035 to the point that interest on it will be about a third of all of federal revenue.
  • With the current policies, public debt will reach 185% of GDP by 2035.
  • Obama’s healthcare reform made a dent in the problem, but did not significantly reduce the debt challenges.
  • Medicare spending will double by 2035, increasing our cost by $700 billion per year.
  • We must sharply reduce U.S. spending, drastically increase taxes to rates never before seen in the United States or some less dramatic combination of the both actions to address the debt crisis.
  • The longer policymakers wait to stabilize the debt, the harder their task will become.
  • If debt grows unchecked it will mean declines in peoples’ standards of living.

It is remarkable that just a few weeks after the President told the American people that his healthcare reform was needed to help balance the country’s finances that the CBO issues such a contrary report.  It is also remarkable that Obama and his Progressive pals in Congress ignore the warnings of the CBO and so many other economists on the dangers of America’s ballooning debt.

Repeating Elmendorf’s warning: “If debt grows unchecked it means declines in people’s standards of living.”  No wonder Peter Orszag resigned.  He won’t be the last to leave a sinking ship.

Posted in Debt, Deficits, economics, economy | Tagged: , , , , , , , , , , , , , | Leave a Comment »

Obamacare’s Big Lie

Posted by Steve Markowitz on June 1, 2010

President Obama and his Democrat compatriots in the Congress attempted to create the narrative that their healthcare “reform” was about compassion and care for those in need.  While these issues may have played a role for some in this debate, the “reform” from the beginning was always about the government taking more control over our  economy.

On May 17 that great intellect from the Left, Nancy Pelosi, gave a speech at the Capital that exposed the Progressives’ real intent with for the healthcare reform bill.

We see it as a entrepreneurial bill a bill that says to someone, if you want to be creative and be a musician or whatever, you can leave your work, focus on your talent, your skill, your passion, your aspirations because you will have health care.” (See the incredible video clip below.)

Now we know why Pelosi said that “we have to pass the bill so that you can find out what is in it …”.  I guess she is finally starting to tell us.  It is designed to get more people on the government dole.

Healthcare reform is but another European-style welfare program.  Heck, the Europeans are doing so well, let’s just follow them to the edge of the cliff.

Posted in Governmental Intervention, healthcare reform, Progressives, Welfare | Tagged: , , , , , , , , , , | Leave a Comment »

Obama Scapegoats Goldman Sachs

Posted by Steve Markowitz on April 24, 2010

The Obama Administration has proven adept at riding (creating?) one crisis after another in pursuit of a political agenda.  Before we get to the latest one, investment banks, let’s review what we have survived to date since Obama took office:

  • Stimulus Package – Upon entering the White House Obama claimed that we needed a financial rescue and gave us the Stimulus Package.  The President claimed that without this $800 bil. spending plan the country would face an unemployment rate of 8%.  Forget that we subsequently went to a 10% rate with the Package passed, the Administration has since declared victory for the program.
  • Auto Manufacturers Bailout – At about the same time, Obama told us that unless we bailed out General Motors and Chrysler the ripple effect would lead to economic Armageddon.  Well, after about $60 bil of taxpayers’ money and the Cash-for-Clunkers program, GM paid back only about 10% of the money this past week.  But that did not stop the Administration from again declaring victory.  However, not one more car was sold because of the government’s efforts.   The only differences were that two failed companies and their unions received taxpayer money that the successful auto manufactures and their workers did not  receive and a few more cars were sold earlier than would have occurred without the intervention.  The taxpayers still have tens of billions invested into GM.
  • H1N1 Flu – Then the geniuses gave us the H1N1 (Swine Flu) scare.  This time we were told by the Administration that without the entire country getting vaccinated we were in for the worst pandemic of modern times.  Remember Joe Biden telling the country he wouldn’t recommend flying because of this flu?  What a comedy of errors.  First, the vaccine was too late for the flu season.  By the time it was available, the pandemic scare proved false and we had only a very mild flu season.  Now, we have too much vaccine that nobody wants.  More government waste.
  • Global Warming – President Obama is a true believer in the false religion of manmade climate change.  The President flew to Copenhagen, Denmark, for the big revival meeting last year and was unable to get his compatriots to agree to a deal to reduce global carbon emissions.  This failure could turn out to be Obama’s greatest achievement, saving the world untold billions of wasted spending.  Only a few weeks before Copenhagen, the world learned that the data behind the manmade global warming theory was intentionally falsified.  On a related note, Obama’s plan for the United States to address its carbon output was through a trading process controlled by none other than the investment banks he now attacks.  Incredible!
  • Healthcare Reform – No further details are needed on this one.  Unless we passed the President’s healthcare reform we were told that all sorts of bad things would happen.  The fact that most Americans did not want the reform would not get in Obama’s way.  This is in keeping with the Progressives’ philosophy that the people they work for are just too dumb to know what they need.

While the above list is probably missing a crisis or two, it makes the point.  Either President Obama is so out of touch as to not know a real crisis when he sees one or he is purposely creating them for political gain.

Now we have the latest crisis/villain to go after; the investment banks.  Rather than go after the entire industry, Obama is taking on the big one, Goldman Sachs (GS).  GS is certainly no saint.  However, their business model has remained consistent over the years.  Thus, the timing of this attack is political and the leaking of memos, as well as the government’s inaction prior to this week, proves it.

The GS memo leaked, as reported by the New York Times, indicates that in 2007 with the mortgage crisis growing, GS executives sent e-mails indicating they were making “serious money” betting against the housing market.  Surprised?  Why?  That is what GS does, betting with and against markets and making money in the process.  The Progressives had no problem with this business model during the economic boom times (bubble).  Now that we are in the bust they need a scapegoat, which by the way, will keep the public’s attention away from the government’s (Progressive’s) role in creating the bubble and the subsequent mess.

If Goldman Sachs and the rest of the banks are so bad, why did the Progressives bail them out?  Why not let them fail?  The government’s excuse, first Bush then Obama, was that the investment banks were “too big to fail”.  They told us that had we not bailed them out that more serious problems would have occurred to our economy.  The government’s inaction since the bailouts indicates this to be a false claim.  Since Lehman closed its doors, large banks like GS have become even larger.  Why hasn’t the Obama Administration used the anti-trust laws to break them up?  Could it be that government wants to take control of these powerful banks and breaking them up would diminish the power they wish to control?

Only the staunchest apologists for President Obama would not see the writing on the wall.  This President and his Progressive partners are on the largest power grab this country has witnessed in modern times.  While Obama’s policies are being rejected by the electorate, as indicated by nearly every poll, this has not tempered his drive to push the envelope.  The man can be called a lot of things including arrogant, but he cannot be called stupid.  Therefore, we should expect even greater crises to be conjured in the future t be used by Obama to further increase governmental power.

There are greater dangers to our Constitution than that offered by Goldman Sachs!

Posted in Banks, Constitution, Goldman Sachs | Tagged: , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

The Goldman Sachs Fraud Charges: Covering Up the Next Bubble

Posted by Steve Markowitz on April 19, 2010

The Securities and Exchange Commission (SEC) has charged Goldman Sachs (GS), America’s largest investment bank with fraud.  Before getting into details, the timing of these charges is at the least curious.

1. It is reported that the SEC’s GS investigations has be ongoing for about nine months.  Why did they wait so long to file the charges?

2. The Progressives just past the healthcare reform bill making sweeping changes to the healthcare industry, about one sixth of the American economy.

3. The Obama Administration has jumped from one crisis another in its drive to fundamentally change America.  As Rahm Emanuel, President Obama’s Chief of Staff said: “”Never let a serious crisis go to waste.  What I mean by that is it’s an opportunity to do things you couldn’t do before.” We had the Stimulus Package crisis, the General Motors bailout crisis, the climate crisis, and the healthcare crisis.  Starting to see a pattern?

Is President Obama going after GS now for the good of the country or in his never-end quest to grab power and bring more of the economy under federal government’s control?  As they say, if it quacks like a duck it’s not a buffalo!

Irrespective of the President’s motivations, the larger investment banks’ greed has been out of control.  These banks helped facilitate the dot.com bubble, then the datacom bubble and more recently the housing bubble.  They gave us the creative financing and counter-party insurance that made highly risky investments look safe to many investors.  While possibly not illegal, the obscene profits the banks made on the bubbles doesn’t pass the smell test.

OK, so we started questioning the government’s motives in prosecuting GS.  Then we questioned the banks huge profits made on other peoples’ miseries.  Now it’s time to go full circle and looked to the root causes of the meltdown, the actions that let the bankers act on their greed.  This goes back to the same government now prosecuting the GS.

The government’s complicity on creating the modern bubbles goes back to the stock market crash of 1987.  The Dow dropped 22% in one day.  However, instead of letting the market sort itself out and rebalance itself naturally, the Federal Reserve (Fed) panicked and flooded the world with liquidity.  This led to a positive short-term result with the Dow actually being up for the year, even with the crash.  But there was a dark side to this intervention.  It sent a message to investors that in the future the Fed would come to their rescue should there be further serious market disruptions.  This inevitably made investors less diligent and got us started on a slippery slope that continues building ever larger bubbles.

In the late 1990’s we had other major disruptions in the economy; the dot.com and telecom bubbles were created and popped.  Then 9/11 caused a rapidly forming recession.  Instead of allowing this recession to rebalance the economy naturally, the Fed dropped interest rates to historic lows and kept them there for an extended time.  This cheap money policy was directly responsible for the housing bubble, the largest one to date.  It led to cheaper mortgages that facilitated the purchase of more homes than were needed with speculators entering the market.  Also, since returns on safe investments went so low, investors were made easier prey for riskier investments that offered greater returns.  Finally, the low Fed rates facilitated the investment banks’ quest to sell collateralized debt obligations to investors.  It were these risky investments that were sold as safe and ultimately led to the implosion of economies worldwide.

There was another major way that government intervention into the markets helped create the housing bubble and its subsequent popping.  By changing the charters of Fannie Mae and Freddie Mac to promote home ownership to people that could not afford mortgages, they created higher artificial demand for homes that led to higher prices, speciation and refinancing.  The artificial demand was destined to evaporate during the next economic downturn; and it did just that.  The rest is history.

Now back to the SEC’s charges against Goldman Sachs.  The SEC complaint in essence states that GS did not properly disclose information about sub-prime mortage investments that they were packaging and selling to investors.  The most damming charges include the claim that GS engaged a firm to put these investment packages together, who at the same time was betting that these same investments would go down in value.  If true, such action does not pass the smell test in perfume shop.

What can be concluded from this convoluted story?

1. The Obama Administration is out for another power grab.

2. The investment banks used their size and greed to take advantage of investors.

3. The government is in a conflict position going after Goldman Sachs since they are complicit in costing investors billions.

What corrective actions should be taken:

1. The prosecution of GS should go forward full speed.  However, it should be removed from the politicized SEC.  They are biased not only because they ultimately report to the President, but because they misread the tea leaves so badly as the bubbles were growing.  Need I mention Bernie Madoff?

2. Enforce the anti-trust laws already on the books  to break the large banks into smaller ones that we allow to fail in the future.  If these large banks were too large to fail in 2008, why hasn’t the Obama Administration taken this action by now?  This lack of action indicate a more nefarious motivation on the Administration’s part.

3. A truly non-partisan team of outsiders needs to be formed to create a new regulatory environment for banks going forward. Incredibly, Senator Chris Dodd who got the sweetheart personal mortage from Countrywide Financial, another corporate player in this mess, and Congressman Barney Frank who played a key role in changing Fannie Mae’s and Freddie Mac’s charters, are currently in charge of creating new banking regulations.  Talking about the foxes guarding the henhouse!

While prosecuting banks that broke laws must be done, it is being used by President  Obama to cover up an even larger bubble that his Administration is in the midst of creating: the government debt bubble.  This debt bubble is being created by bailing out industries and individuals who got burnt in the housing bubble, moving bad private debt onto the government’s balance sheet and printing money to pay for various programs.  The housing bubble had to dwarf the dot.com and datacom bubbles that preceded it since only a larger bubble could prolong our false sense of economic prosperity.  Similarly, this debt bubble is already dwarfing the housing bubble.  It’s hard to see a larger bubble coming along that would bail us out from this latest bubble.  And so the insanity continues!

Posted in Bubbles, Debt, Deficits, Governmental Intervention, Mortgages | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

Healthcare Reformed: Now Comes a Shortage of Doctors

Posted by Steve Markowitz on April 13, 2010

President Obama and the Democrats spent a year getting their healthcare reform bill through Congress.  Since its passage the Progressives are on to other ways to fundamentally change America.  However, the healthcare challenges that this country faced before the bill past, i.e. the high cost of healthcare, have not been addressed.  In fact it is likely that the healthcare reform bill will increase the total cost of healthcare in the Unites States.

One obvious reason for the coming increased healthcare cost is human nature.  Give people low cost access to healthcare, subsidized by the government, and they will use more of it.  No rocket science here.  In addition government programs always grow over time, adding additional benefits to buy votes.

There is another more insidious reason that the cost of healthcare will increase as a result of the reform bill: doctor shortages.  With the signing of a bill, President Obama promised to give millions of additional Americans access to low-cost or free medical services.  This market manipulation creates unintended consequences.  For example, the Wall Street Journal published an article yesterday titled: “Medical Schools Can’t Keep Up”. A link to the article is included below.  It concludes:

  • Experts warn there won’t be enough doctors to treat the millions of people newly insured under the law. At current graduation and training rates, the nation could face a shortage of as many as 150,000 doctors in the next 15 years, according to the Association of American Medical Colleges.
  • A shortage of primary-care and other physicians could mean more-limited access to health care and longer wait times for patients.
  • There are about 110,000 resident positions in the U.S., according to the AAMC. Teaching hospitals rely heavily on Medicare funding to pay for these slots.  In 1997, Congress imposed a cap on funding for medical residencies, which hospitals say has increasingly hurt their ability to expand the number of positions.

Progressives from both political parties continually ignore the laws of supply and demand at the peril of the overall goods of the country.  This convenient omission enables politicians to come up with seemingly noble ideas without having to take responsibilities for their failures.

As the WSJ concluded:  A shortage of primary-care and other physicians could mean more-limited access to health care and longer wait times for patients. This will fit in quite well with the Progressives desire to redistribute wealth and services.

Medical Schools Can’t keep Up – WSJ

Posted in economics, healthcare costs, healthcare reform, Progressives, Supply and Demand | Tagged: , , , , , , , , , | Leave a Comment »

Bailouts for Mortgagees: Here We Go Again

Posted by Steve Markowitz on March 25, 2010

When the President signed the healthcare reform bill this week he instituted historic changes to America’s healthcare system, about one sixth of the Country’s economy.  Anyone who thought that Obama and his Progressive friends in Congress were finished were dead-wrong.  Even before the ink was dry on the bill they are on to the next major realignment of capitalism.

The New York Times just reported that the Obama Administration will introduce a major initiative offering substantial assistance to those behind on their mortgages or even if they are merely underwater, owing more on the mortgages than the current value of the homes.  According to the Times, the program will include:

1. The government encouraging lenders to write down the loans.

2. The government repackaging millions of loans for borrowers whose home values have gone below the amounts owed on the mortgages.

3. Holders of the affected mortgages will be asked to take losses, but less than if foreclosures were forced to occur on the homes.  The newly repackaged loans will then be insured by the Federal Housing Administration; i.e. taxpayer guaranteed.

4. Lenders will be cajoled into reducing payments for unemployed workers for some period of time.

The Obama Administration’s wading into the mortage market with what is another bailout is a further march down a path that is destroying capitalism.  First, we bailed out the banks that created this mess in the first place.  Then we rewarded auto companies who produced cars that consumers did not want with a bailout.  And now we will bail out people who barrowed too much for houses they could not afford; yes others who helped create the housing bubble.

The bailouts are all justified by Progressives as saving us from far worse disasters.  This argument has proven fallacious by the fact that each bailout is succeeded by yet another one.  We are traveling down a slippery slope of never ending bailouts.  But, they will be forced to end at some time, unless you believe in perpetual motion.

When the government gives a bailout it can be funded in two ways.  Taxes can be used in which case the government charges the people who do not receive bailouts.  In other words the government taxes those who used prudent behavior to pay for those that were imprudent.  The alternative is to barrow funds and charge the next generation for this generation’s foolish behavior.  Neither choice can be morally or economically justified.

Capitalism, while imperfect, is the most efficient system for regulating a complex and dynamic economy.  It accomplishes efficiency by rewarding individuals who produce things of value; i.e. goods and services, better than others.  However, it is equally important that capitalism punish those that make poor decisions that are not productive, often referred to as the moral hazard.  Bailouts remove or lessen the punishment for bad decisions, leading not only to inefficiencies in the economy, but more significantly to more imprudent behavior by capitalist as the fear of the consequences of failure fades.  Without punishment, capitalism will not work, period.

President Obama is fully aware of the negative consequences of bailouts.  His continuance down the bailout trail can only be because of: 1) a lack of political courage to correct our economic problems that will require pain, or 2) because this trail leads to socialism, the Holy Grail for the Progressive movement.

Let us recall the words of Peggy Joseph shortly after Barrack Obama was elected (video below).  This was the young lady that with tears in her eyes said “I won’t have to worry about paying my mortgage” referring to the result of Obama’s election.  It seems Ms. Joseph understood the President-elect better than many who voted for him.

Posted in Bailouts, Business, Capitalism, Mortgages, Progressives | Tagged: , , , , , , , , , , , , | Leave a Comment »

Feds/Progressives Take Over Student Loan Program

Posted by Steve Markowitz on March 22, 2010

In recent weeks the Country’s attention has been focused on the government’s attempted takeover of America’s healthcare system.  This focus masks the larger challenge as Progressives have been implementing a broader plan to transform America into a European style socialist system.  The evidence is convincing.

Progressives started their assault on capitalism with a soft sell approach.  Realizing that America would never outwardly accept socialism, for decades they nibbled at the edges as they succeeded in adding a handout program here and there and then expanding coverage for these seemingly benign programs.  The purported goals for these programs was humanitarian; to help the less fortunate.  As a wealthy country, how could we not help our fellow citizens?  But there were more insidious goals behind these seemingly separate governmental programs: to make more people dependent on the government.  The Progressives understood that you own (and they vote for) people who offer the handouts.

What started as programs for the “needy” slowly became more mainstream. We would give subsidizes to farmers and other industries we deemed “important”.  Then we would add programs for more middle-class Americans.  With each new program we would also need a growing group of workers dependent on government “industries” for distributing funds and services, another beholding group.  The Progressives would let this growing industry organize so that these labor unions would support the Progressive politicians who in turn would let the unions grow and collect more dues.

With the popping of the housing bubble and the economy’s rapid downward spiral, the Progressives in the federal government got the opportunity of a lifetime.  In the chaos that followed, they bailout large corporations making them wards of the state.  Bailout General Motors and they must do the government’s bidding.  Bailout banks and the government “owns’ them.  Bailout states and the federal government could control their spending too.

The healthcare industry, one-sixth of our economy, caused a hiccup in the Progressives march.  This industry didn’t need a bailout making governmental control problematic.  No problem: the Progressive-in-Chief, Barack Obama, created a crisis by telling Americans we all need a bailout (saving) being offered by the just passed healthcare overall bill.  While it wasn’t easy sell, the backroom deals are leading us down the planned path.  Starting to see a pattern here?  Just coincidence?  But wait, they aren’t finished yet.

While not given much air time, there are surprises in the healthcare bill.  Take for example the government’s takeover of the student loan program.  CNN Newsroom’s Kyra Phillips reported that weaved into the bill is language that would require all federal student loans to originate with the government.  According to Phillips, The measure also reaches beyond health care to education. Another one of President Obama’s top priorities – it will offer new help to needy college students”. Phillips went on to report that the change will save the government money in the future by eliminating the middleman.  Sure Mr. Phillips, every program the government creates is initially touted as a money saver.  But it never happens!  And by the way Mr. Phillips, the government employees who now make more than their private industry counterparts are not middlemen?  Really!  I wonder if you also believe in the tooth fairy?

OK, so you ask: What does the student loan program have to do with healthcare reform?  Absolutely nothing.  However, it does fit in nicely with the Progressives’ desire to socialize our economy and have the government manage all aspects of it.

When this President said just prior to his election that we were: “Five Days Away from Fundamentally Transforming America “ he meant it.  Now many who voted for the Progressive-in-Chief are having buyer’s remorse.  They expressed this in the gubernatorial elections in New Jersey and Virginia and the senatorial election in Massachusetts.  But Washington isn’t listening.  Oh yes, that’s another thing about Progressives, they know better than the people.

Posted in Bailouts, Capitalism, Government Handouts, healthcare reform, Progressives, Wasteful Government Spending | Tagged: , , , , , , , , , , , | 2 Comments »

Fannie Mae’s $72 Billion 2009 Loss and the Progressives

Posted by Steve Markowitz on March 19, 2010

Fannie Mae’s $72 Billion 2009 Loss and the Progressives

In its most recent report, Fannie Mae showed a loss of $72 billion for 2009.  No problem, they just went to the US Treasury and tapped it for another $15.3 billion of Taxpayer money.  That will bring the Fannie Mae bailout to date to in excess of $76 billion.  But what’s a mere $76 billion when we are running trillion dollar deficits?

The 2009 loss of $72 billion exceeded Fannie Mae’s 2008 loss of $59 billion.  Amazingly, even with these huge losses none at these government supported firms has been held accountable.  Remember Bernie Madoff?  He bilked us out of a mere $50 billion or so and is in jail were he belongs.  Rip off the taxpayers for much more; no problem if you are in with the Progressives running things in Washington.  They make the excuses and let you sip rum in the islands enjoying the wealth created at taxpayer expense.

To add insult to injury, with the 2009 reported loss, Fannie Mae Chief Executive Michael Williams excused the loss with typical Progressive dribble.  “Our overriding objective is keeping people in their homes whenever possible.”  Hey Mr. Williams, how about protecting taxpayer money as an overriding objective?  Why would you want to force people to stay in homes in which they owe more than it is worth?  Doesn’t that just guarantee their stay in the poor house for the long term?  Had it not been for Fannie Mae supporting bad loans, these folks would not be in the tight spot they now find themselves.  Is your objective for the good of the folks whose mortgages are underwater or to protect the knuckleheads that made these bad loans in the first place?

Fannie Mae’s role in created the housing bubble and the subsequent economic mess that the popping bubble created is huge.  Just a few years ago the Progressives in Congress told us that Fannie Mae’s balance sheet and loan policies were sound.  They either lied or had no idea what they were talking about.  Either way, this is to be expected of governmental intervention.  Should the Progressives be successful in nationalizing America’s healthcare system, we should expect similar results.

Posted in Bailouts, Bubbles, Capitalism, Fannie Mae, Governmental Intervention, Progressives | Tagged: , , , , , , , , , , | 1 Comment »

Bailout Nation Meets a Bailout World

Posted by Steve Markowitz on March 14, 2010

What started as government bailouts for manufacturers, banks and individuals is rapidly morphing into bailouts for countries.  The bad news is that these bailouts have progressively gotten larger with time.  The good news is that they can’t get much bigger than bailing out countries!  One needs to be an extreme optimist to see good news in this reality.

European governments recently announced that they will bail Greece out of its excessive debt problems.  They took this unusual step due to fears for the alternatives; 1) either letting Greece go into default that would depress or break up the Euro, or 2) make Greece live up to its obligations, which would create significant economic turmoil for the people of Greece and probably lead to social unrest.  If history is a good barometer, the European Union will not avoid the problem they seek to avoid, but will only create greater problems for Europe down the road.

Let’s start with the more basic problems caused by the creation of the Euro and European Union.  In an effort to create a more powerful economic block, the European Union (“EU”) was created over a decade ago that included many European countries.  The larger players were Germany, France and England.  In addition, a single currency, the Euro, was created and is in use throughout most of these countries.  Incredibly, while England is a part of the European Union, it continues to use the Pound Sterling as its currency.

Another problem with the EU structure is the loose federal control that it has over member countries.  For example, unlike the United States with one federal government, each country in the EU maintains its own government and in fact its own army.  Just as problematic, countries that use the Euro still maintain their own sovereignty over fiscal matters, including debt and barrowing.  While the EU created guidelines in these areas, member countries like Greece have been cheating for years.  Now it is time to “pay the piper” and that brings us back to Greece’s need for a bailout.

Had Greece still had its own currency, the current turmoil would have lead to its devaluation making Greek goods and services less expensive compared to other countries.  This would have resulted in more business for Greek companies, more taxes for Greece and ultimately a resolution to the problem.  But with the Euro, Greek is stuck with a currency that remains strong based on the strength of Germany and France.

The current Greek Tragedy will be blamed on all but those that are responsible for creating the mess.  They will blame the banks and other capitalist.  However, the real culprits are the Progressives who believed that they could create the European Union just because they thought it made sense.  These Progressives instead created a problem that is now breaking down because of economic realities and the laws of Supply and Demand.

It is going to take time and pain to correct the problems in Greece.  This is unavoidable.  The lesson here is for the future and how to avoid messes caused by grand experiments like the creation of the European Union.  We must start by rejecting the Progressives and their future adventures.  That brings us back to the United States.  President Obama and the Liberal Democrats are Progressives who are currently attempting to push through government controlled healthcare in the United States.  Should they be successful, we will have our own Greek Tragedy.

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