Pelosi's Follies

Let's be clear to all reading this on where you should concentrate your own research efforts in regard to the bailout bill. Both parties came together to craft a (frankly poor - my opinion) bill that raids taxpayers pockets. But many were ready to hold their nose and vote to help the markets.

Several things then happened to change the game.

1. Pelosi majority whip didn't whip (major warning sign to Republicans)
2. Pelosi then took the House floor and fixed blame on the Republicans. We have discussed this topic on NJ Tax Revolution and it is clear that at the least this problem was caused by both parties. At worst it should tilt in the Democrats favor.
3. Republicans can count votes. Pelosi gave permission to her caucus to vote their conscience while expecting Republicans to bail her caucus out.
4. Republicans caught wind and voted their conscience too.
5. The measure was defeated.

That's what happened. No more. No less.

Bailout is not the only option!

There was buzz the other day about a large number of economists that sent a letter to the congress suggesting that there was a better way to handle the mortgage crisis. Now today, Jeffrey Miron a Senior Lecturer of Economics at Harvard explains what the content of that communication included (from CNN):

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This represents well understood fact except for Democrats in the House and Senate (and much of the media as well). This statement really brings the issue home:

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

So what to do?

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

A massive transfer of wealth from taxpayers to Wall Street isn't the only answer. And congress should do their job and investigate every potential option with an eye toward the bill paying taxpayer first and Wall Street executives second.

Read the entire article here.

For once, our House members attempt to vote for us

There is nothing more infuriating in this state than the party line voting that occurs in the House and Senate. For example, our Senators Menendez and Lautengerg ALWAYS go along with Harry Reid and the Democraticv leadership of the Senate regardless of the harm to NJ. But for once, the members of the House used their brains and made a judgement call. From this article in Newaday:

The majority of New Jersey's U.S. House delegation joined their colleagues in voting down a $700 billion rescue plan for the nation's financial system on Monday, with some saying it didn't help regular people while others complained it wasted taxpayer dollars.

Stocks were falling on Wall Street even before the House voted 228-205, with New Jersey's delegation voting 7-6 against the bill.

Party lines broke down as Democrats and Republicans alike voted against the bailout, even as their party leadership and President Bush warned the economy could plummet into recession without it. The Garden State congressmen voting against the bill included four Republicans and three Democrats.

I don't care if any of these politicians voted for or against right now. I am impressed with all for attempting to do what they thought was right. Bravo to all on both side of this issue. Bravo!

Democrats like root causes - view this video

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Nancy Pelosi can shut off the lights/cameras of congress on drilling but can't pass a bailout bill without Republican help?

A very interesting question. Why is it that the Republicans cannot even get an amendment to a bill to the floor when Czar Nancy wields the gavel are now awash with so much power in the House that a bailout bill can't go through? Doesn't anyone remember Nancy Pelosi shutting off the cameras and lights while the Republicans kept debating energy policy when the Democrats went on vacation?

But now, all of a sudden, she can't get a bill through without a small band of conservative legislators in the House? Oh I get it. It is because there were only about 4 votes from Republicans and the bill would have gone through as a piece of partisan Democrat legislation. Apparently, the Democrats do have some level of shame.

For you see, this bill has been crafted by Chris Dodd and Barney Frank. Remember these two. Chris Dodd got more money than anyone from Fannie and Freddie to look the other way while they continued to write bad loans. Chris Dodd also got a sweetheart deal from Countrywide as a "friend of Angelo". In most states, Chris Dodd would be in jail. But not in the senate. Oh, and don't forget Barney Frank. These are the people who are leading the bailout:



And even Nancy Pelosi knows that the media will not protect her if Nancy along with her Democrat colleagues were major contributors to the problem, failed in their oversight responsibility and enacted a flawed bailout with no opposition support. Even Nancy isn't that stupid apparently. Harry Reid on the other hand...