The Liberal Left was warned as far back as 2001 by Republicans that Fannie Mae and Freddie Mac were unstable, and that certain regulations needed to be put into place in order to prevent an eventual meltdown of the mortgage industry. The practice of providing loans to lower income families needed to be halted because eventually the ever-growing pile of bad money in the system would collapse the banking system, and place our economy in danger of recession. Barney Frank, and his leftist cronies argued against that proclamation by the Republicans. Then, when the system failed, true to their unethical character, they blamed it on the Republicans, and the sheep out there in "voting land" believed every word of it.
In fact, after Republicans told the Left that regulations needed to be put into place, and Democrats balked at the idea, the Liberals turned around after the chaos began and blamed the problem on deregulation. Even more amazing, is that their argument about deregulation was applied without them even understanding the Conservative views on deregulation. Every liberal I have talked to has proclaimed that Conservatives desire all regulations lifted. Honestly, when it comes to regulations, which ones should be in place, and which ones should be eliminated, depends on the industry and the situation. Conservatives believe that any regulations that restrict a private business to perform freely in the free market, or makes the business environment hostile for them, must be removed, otherwise, the business will pack up and take business elsewhere, or remain and struggle to grow. That is not to say, however, that businesses can freely engage in illegal practices that are not in the best interest of the consumer. Therefore, though there should be many less regulations against businesses in the American system, there should still be a number of them that remain in order to protect the consumer.
Democrats disregard business models, and fail to understand that a robust private free market encourages growth in the economy. Their personal agendas are too important for them to consider the long-term consequences for their actions. Then, when the predicted outcome arrives, they conveniently forget that it was them, in the first place, that placed the economy on the footing for failure in the first place.
The Democrat Party cried about affordable housing, demanding that banks continue to be mandated by government to provide loans to people who can't afford them. It is unfair, they claimed, if everyone can't get into a home. Some arguments even claimed that having strict lending standards that rejected loaning money to lower incomes for homes was racist. The eventual consequences for mandating such bad lending practices on the industry, and the rejection by the left to place regulations in the system that prevented bad loans from being initiated, were ignored by the Democrats, and even argued against.
If you don't recall the facts because the mainstream media has covered it up, and conveniently swept it all under a rug, here's a reminder; thanks to my buddy Gawfer. Watch the video on his page Gawfer">HERE, and listen carefully as Barney Frank proclaims that bad loans must continue to be provided, and that Fannie Mae and Freddie Mac are too stable to fail. He even argues against adding more regulation to the banking entities.
As Obama's policies that dictate we must try to spend our way out of this mess that the Democrats created materialize, and the people begin to revolt against such a horrid governmental direction with nationwide "tea parties," the left is taking advantage of the situation to spread their Marxist ideals, and to take control of private industry. Amazingly, there are actually people out there that have fallen for their "spend our way out of this mess" mentality that is not only doomed to fail in the long run, but will create a worse economic mess down the road than we are in now.
The most amazing part of the madness is the theory that a business can be too big to fail. AIG and the Big 3 automakers are prime examples of this maddening myth of "too big to fail" being used into scaring the American public into accepting governmental intrusion into the private sector. In fact, last night on the program Founding Truth, a liberal decided to call in and argue the point with me. It is amazing how little the left understands basic economics.
AIG and the U.S. automakers, due to the practice of allowing their equity to assets ratio to drop low because of the use of, in the simplest terms, having a majority of their holdings in credit, lessened these companies' ability to withstand economic shock should an economic crisis arise. Such an economic crisis did arise, thanks to the mortgage collapse, and as a result, with essentially negative equity on the books, these companies fell into trouble. With a low committment to capital preservation, and the necessity to allow non-profitable activities to continue due to government regulations requiring that these companies maintain those profit killing activities, it was only a matter of time before these "too big to fail" companies would be on the verge of failing.
Conservatives have been arguing that the best thing we can do for the economy is to allow any failing corporation to fail. Allow them to file for bankruptcy, attempt restructuring if it is at all possible, or allow them to be broken up into smaller parts and for those parts to be bought by emerging businesses in the same industries. However, the Democrats conjured up their "too big to fail" argument, claiming that it was the government's responsibility to pump taxpayer money into a failing business so that it can't fail. Then the Democrats demonized the company for allowing themselves to approach failure, and in the case of AIG, forced the CEO to resign, and then used the excuse that taxpayers were now part owners of the corporations to condone capping the wages of remaining executives.
If the company is a failure, and their failure is a part of the reason for the damage that has been done to the economy, why would the government then decide to save the failure so that it can continue to fail?
The United States Government, under the control of the liberal left arm of the Democratic Party argues that AIG and the American automakers are indespensible to the U.S. economy. If they fail, argues the Left, we will suredly plummet into a chaotic economic mess worse than The Great Depression. With this argument, the Democrats persuaded a large chunk of the U.S. taxpayers that it is perfectly reasonable to throw good money after bad.
Saving failed industries by throwing money into an entity that is burning through millions a year, and failing to turn a profit, is absolutely idiotic. Not allowing these companies to restructure adds to the madness.
Through bankruptcy, with perhaps a miniscule amount of government guidance, these companies would be enabled to restructure. In this restructuring process worker compensation and benefits levels could be brought into line, reducing the costs while keeping them at a relatively competitive level. Companies, on their own, would then in turn cap unnecessary payouts and perks in order to keep the doors open. Note, retention bonuses to the best talent, in my opinion, is a necessary payout. Without the talent, the company is doomed. And these companies, then, would keep cutting expenses and eliminating unprofitable activities (including the ones mandated by the U.S. Government) until the companies are either restored to health, or are able to section off parts to be sold to other more healthier companies so that the production of such products may be maintained.
This is how the industry adjusts. Free market systems see their fair share of successes and failures. Failures create opportunities for other business models on the rise. Bad paper and unprofitable activities are weeded out naturally, and only the strongest and most profitable practices survive.
During such a restructuring, one of the most unprofitable practices, and damning activities that must be eliminated if companies are to be salvaged, is their relationship with the unions. The extraordinary compensation and benefits paid out to unionized workers has all but destroyed the auto industry, for example. Unions are no longer necessary. Laws on the books, and the need to provide superior products, encourage companies to treat employees fairly, and to pay them competitively. Too many companies without unionization of their labor force have contributed greatly to the economy, provided employment, and have compensated their workers with benefits not much lower than what is being provided by companies locked into damaging relationships with unions.
The health of our economy is in the balance, and spending our nation into more debt, only for these failed industries to eventually fail anyway, is a bad move. The Obama Administration, and the Congressional Democrats, are placing this nation into a level of debt that we may not be able to pull out of if their idiotic practice of bailouts and government intrusion continue for much longer. Right now the market can be saved if we stop the madness. Waiting much longer may create a quagmire of epic proportions in our economy that may take generations to resolve, and a Great Depression to endure. We owe it to our children, grandchildren, and great-grandchildren to be politically involved, and to do what we can do to stop this maddening spiral by Obama into an economic model that Karl Marx, and the Communists that followed him, would be proud of.
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