Lies & Truth About the Financial Crisis

The Junior Senator from Colorado (Senator Michael Bennet) replied to an email I sent to him. His response included the following lie about the cause of the financial crisis:

"It is important to remember that the seeds of the current economic turmoil were planted during the past eight years, when unregulated markets allowed financial institutions to swell and the housing market to balloon to unrealistic proportions."

By the way, any Colorado residents reading this: Please remember in 2010 what type of person Senator Bennet is. By promulgating lies and denying the truth, he is unfit to be elected to this office. (Senator Bennet was appointed to fill the remaining term of Secretary of the Interior Salazar.)

If the Senator is wrong about the cause of the financial crisis, then what is the truth?

First, and foremost, the cause of the financial crisis is the Federal Reserve. Allan Greenspan oversaw a massive inflation of the money supply by keeping interest rates below the rate of inflation for several years. Interest is the cost of "renting" money. If the interest rate is less than the rate of inflation, then borrowers effectively pay back in dollars that are cheaper than the dollars they borrowed.

But, that's not the only way in which Senator Bennet has lied. His assertion that the crisis was caused by "unregulated markets" is false The housing (and financial) industries in the United States are heavily regulated. A review of the agencies and laws that regulate just the housing industry clearly demonstrates that there is no free market in housing:

• The tax deductibility of mortgage interests and exemption of real estate capital gains encourages home ownership. (Let me be clear: I’m not advocating higher taxes. Quite the opposite, taxes should be lowered to stimulate the economy. If we are to have an income tax, then that tax should be devoid of incentives and penalties that influence behavior based on someone’s definition of what is in my best interest.)
• The Community Reinvestment Act forces banks to lower underwriting standards for home loans to high-risk borrowers.
• The government created Freddie Mac, Fannie Mae and Ginnie Mae GSEs and implicitly guaranteed their debt. That guarantee allowed the GSEs to steal market share from private mortgage companies through an unfair cost advantage. Congress then passed laws requiring these GSEs to purchase more mortgages from high-risk borrowers as part of the government’s intervention to encourage home ownership. GSEs are NOT private, unregulated entities. Of course, Congress then made clear that the guarantee was not implicit when Freddie Mac and Fannie Mae were nationalized.
• Other regulatory agencies and laws that interfere with the housing market include: Department of Housing and Urban Development, Federal Housing Finance Board, Federal Housing Administration, Federal Home Loan Bank, Office of Federal Housing Enterprise Oversight, Fair Housing Act, Equal Credit Opportunity Act, Community Reinvestment Act (previously mentioned), Home Mortgage Disclosure Act, National Affordable Housing Act, Community Development and Regulatory Improvement Act, Home Ownership and Equity Protection Act and American Dream Down Payment Act.

The evidence is clear: The free market is not to blame because there was no free market. The government created the crisis. Politicians don't want you to know they are responsible because the cure for the problem is to reduce their power to take your property and run your business for their purposes.

Free America Again!

Towards a Broader Republican Coalition

Senator Arlen Specter’s defection to the Democrats followed by Gen Colin Powell’s admonishment to Republicans to adjust to the current political fad that believes the US citizenry want a bigger government has caused much self-introspection and external criticism of the Republican Party, specifically its platform and core principles. However, no commentary has yet to get to properly define how the Republican Party can once again attain prominence and leadership in American politics. The commentators are right in one respect: The Republicans can only rise again if they broaden the people supporting their platform. None of the commentators are right on how to accomplish that goal.

People voluntarily associate because they have something in common. In the case of political party affiliation, the uniting principles are the role the government plays in the lives of its citizens. The words written into a Party’s platform are mere words. The actions of its members – specifically, the elected politicians affiliated with the party establish the de facto platform of the party. As Obama has been president for a short period and succeeds a Republican President and the President is the leader of their political party while in office, examining the policies of Bush and Obama are illustrative of their party’s platforms.

Obama has spent billions of dollars bailing out banks, insurance companies, government sponsored mortgage companies and automotive companies. He is exercising the power of the government to impose his political will on private entities – controlling the pay of bank employees, trashing contracts, working to increase taxes, egging on the Federal Reserve in its debasement of every dollar in savings and escalating the war in Afghanistan. President Bush spent billions of dollars bailing out banks, insurance companies, government sponsored mortgage companies and automotive companies. He exercised the power of the government to impose a massive enlargement of government intrusion into health care through the Medicar prescription drug program, appointed Bernanke to head the Federal Reserve and watched (even encouraged) him to debase the dollar over 8 years of deficit spending, initiated the wars in Iraq and Afghanistan without a Congressional declaration of war, and significantly compromised our freedom of speech by signing the McCain-Feingold campaign speech limitations law.

In other words, there is no fundamental difference between the Democrat and Republican parties. Instead of protecting the lives and treasures of its citizens, both parties accept the principle that the government has the power to violate the rights of its citizens. While the founders of the United States meticulously created a constitutional republic, our two political parties function as though the U.S. is an unbridled democracy where the majority has the power to do anything they choose to the minority. Gen. Powell explicitly admits that he shares this philosophy as he criticizes Republicans for failing to recognize that the majority of the citizenry wants higher taxes to pay for more government. Senator Arlen Specter has openly admitted he has no specific political philosophy and only cares about winning re-election. To that end, he sees the path of greatest opportunity to re-election comes from running as a Democrat in 2010. An unprincipled man deserves all the arbitrary, unjust and feckless consequences that reality can toss his way.

Since the Democrats are far more consistent in their ideological beliefs in the right and supremacy of the government over the individual, in their belief that the collective has priority over the individual even to the extent that the individual must be sacrificed for the collective good while the Republican party at least pays lip service to smaller, constrained government, the Republican Party must define itself in complete opposition to the fundamental ideals that form the foundation of the Democrat Platform. In so doing, the Republican Party will open itself to the widest possible diversity of ideas and participation.

The Republican Party Platform should state:

The Republican Party believes in a government strictly limited to the protection of its citizens from the initiation of force, actual or threatened (explicitly as in extortion or implicitly as in embezzlement), from any person or group of persons.

That is it. Nothing more needs to be said. Everyone is welcome to the Republican Party as long as they accept this single principle: that no one can force anyone else, that everyone is free to pursue their happiness as long as it does not result in the violation of another’s rights.

The altruist is welcome as long as they agree that they are free to try to persuade others that it is morally right to donate some or all of their wealth to others (directly or via charities) but that they cannot promote governmental action requiring others to live by their moral code (to support others through taxes that fund a welfare state).

• Born-again Christians are welcome as long as they agree that they are free to proselytize on their own property or at the invitation of others but that they cannot force anyone to belong to a church, worship their God, tithe their wealth or listen to them.
• Bigots are welcome as long as they accept that they are free to argue the inferiority of some group of people but that they cannot use laws and governmental force to infringe the rights of anyone who is associated with that group.
• Environmentalists are welcome as long as they renounce using the power of government to dictate the choices of transportation and energy that individuals select without establishing in a court of law that such transportation or energy production violates the property rights of others. They are free to persuade citizens to choose a higher, in monetary cost, product or service while accepting that they may not compel them to use a specific product or service regardless of that product or service’s advertised benefits to the ecology.
• Proponents of affirmative action are welcome as long as they agree that they may argue to private individuals and organizations that there is a moral responsibility to favor one group over another for whatever reason while agreeing that the government only recognizes individuals.
• Laissez-faire capitalists are welcome as long as they agree that they cannot prevent others from freely associating in communes where all work for the common good and production is distributed on basis of need.
• Atheists are welcome as long as they agree that the government has no right to stop others from worshipping the God or gods of their choice in the manner of their choosing.
• Homosexuals are welcome as long as they agree that a heterosexual bleeds the same as a homosexual when brutally attacked regardless of the attacker’s motivation.
• Foreign policy hawks are welcome as long as they agree that the government cannot compel servitude in the military or taxation to force doves to pay for military action they oppose.
• Foreign policy doves are welcome as long as they agree that they are free to stick their heads in the sand and ignore the dangers in the world but cannot prevent others concerned about the protection of their rights from foreign aggression from volunteering for military service and paying to support the military.

In other words, what the United States desperately needs is a political party that offers a real, fundamental choice between a government that protects the rights of its citizens and a government that violates those rights.

Will the Republican Party adopt this platform? The chances are low as the Republican Party is filled with people who want to use the power of government to compel their fellow citizens to financially support causes they believe worthy and to regulate behavior that violates no one’s rights but which they find offensive and undesirable. However, I am hopeful that the over-reaching, control-obsessed Obama administration and Democrat Congress are causing a great political awakening. If the proper leadership can ascend to the top of the Party, then there is a chance that a majority can be attained in the Party and in a future election. That majority might then set to work resuscitating the constitutional republic that our founders gave us. A constitutional republic that protects, not violates, the rights of its citizens.