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More Demands and Regulations From the Nanny State

*The following was my opening monologue to start my internet radio show “Gillespie” airing Tuesdays at 7pm on FTRradio.com.  In case you miss the show I will be posting these here every Wednesday following the Tuesday show.*

“Hi, I’m from the government and I’m here to help.” That line comes from a famous quote from the late President Ronald Reagan. You could also say with a straight face that it also sums up the governing policy of President Barrack Obama quite nicely.

To better understand this current situation, we need to go back to The Great Depression. As historians such as Amity Shlaes and Paul Johnson have pointed out so eloquently, nearly all of Franklin D. Roosevelt’s efforts to fix things only exacerbated them, to the point that many economists believe that those efforts prolonged and deepened the crisis so that it was only solved during the production ramp-up for World War II. Sadly, most textbooks (shockingly written by liberals) teach otherwise and have made Roosevelt out to be one of history’s greatest presidents.

Fast forward to the Obama Administration and we see much of the same thing being played out. And instead of liberals learning from history in order to avoid repeating it (as Francis Fukuyama reminded us), we see them re-writing history in order to prove their failed policies actually had a positive impact on The Great Depression.

Many economists such as Harvard professor Gregory Mankiw have written that the roots of our current crisis stretch back to the practices of originating home mortgages by either banks or mortgage brokers, then selling those loans to Federally chartered companies like “Fannie Mae” and “Freddie Mac”. Those two companies borrowed money at below-market rates and then purchased trillions of dollars of home loans which they turned around and combined into bonds which were sold to large institutional investors like insurance companies. One huge problem which developed was that nobody involved in these transactions had any interest in making sure that the original borrowers could actually make the payments. The originating company such as the bank who wrote the loan didn’t care, they sold the loan, pocketed a fee for writing it and then a fee for servicing it. Neither Fannie or Freddie  had any reason to care for much the same reasons, they were no longer on the hook for the bad loans once they were bundled and sold, and the investors who bought those bonds were operating under the fiction that few home owners ever default on their loans.

The important factor that was left out of that equation was that once the underwriting rules were changed (or ignored), that also changed the likelihood of default, making those deals much more suspect than anyone wanted to admit.

This house of cards kept building upon itself, fed by huge bonuses to executives on Wall Street as well as Fanny and Freddie, not to mention the sweetheart mortgages given to lawmakers such as Chris Dodd (ironically one of the authors of this current reform bill, this after he ignored the problems in the system that caused this mess in the first place).

Now, lets look at this administration’s attempts to fix things. First, we had the “Stimulus” package which was rammed through despite not receiving a single Republican vote, a somewhat surprising development after the spend-happy GOP we saw over the previous eight years. The administration that told us that “We are the ones we’ve been waiting for” promised us repeatedly passage of this bill would keep unemployment under 8%. Even an IU grad can see that number is much lower than the current rate of around 9.5% and which has risen well over 10%.

After this so-called stimulus was passed, the White House rammed through a health-care reform bill which neither reformed health-care or improved the situation. In fact, the administration has no answer to those who are wondering why their rates continue to rise and their benefits continue to be cut even after passage.

Now, we have yet another bill that promises to fix yet another crisis, yet it does absolutely nothing to address the situation we just mentioned in the home mortgage market, though that didn’t stop Republicans like Olympia Snowe, Susan Collins and Scott Brown from heartily supporting it. Simply put: we have yet another bill that uses a crisis in order to ram through more government intrusions under the guise of “reform” but doesn’t even address the root causes of the crisis. Neither Fannie or Freddie are addressed in this bill, nor are the causes of the mortgage crisis even mentioned in this bill. That must be why a recent CBS poll found that 86% of Americans believe the president’s policies have hurt them or have had no effect.

I want to leave you with yet another classic Ronald Reagan quote to consider: “Concentrated power has always been the enemy of liberty.” This administration, with the assistance of Democrats on the Hill, is using a series of problems which they’ve done nothing but worsen in order to concentrate more power into their hands at the expense of our liberty. At what point do we take a stand?

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