Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (110735)	1/23/2008 4:14:11 PM
From: Freedom Fighter	Respond to of 132070

Subprime Bailout By Walter E. Williams Wednesday, January 23, 2008 A subprime lender is one who makes loans to borrowers who do not qualify for loans from mainstream lenders. It's a market that has evolved to permit borrowers with poor credit history and an unstable financial situation the opportunity to get home mortgages. The catch is they pay a higher and typically an adjustable rate mortgage (ARM). Encouraged by the housing bubble, easy credit, along with the expectation that housing prices would continue to appreciate, many subprime borrowers took out mortgages they could not afford in the long run, particularly if interest rates rose and housing prices depreciated. As with most economic problems, we find the hand of government. The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that mandates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers. According to an article in The Atlanta Journal-Constitution (11/04/07) titled "Black Atlantans often snared by subprime loans," by Carrie Teegardin, a national study of credit scores, not just mortgage loan applicants, found that 52 percent of blacks have credit scores that would classify them as subprime borrowers compared with 16 percent of whites. Many lenders did make loans to people who had no realistic ability to pay them back. But that doesn't qualify as fraud, although there might have been a bit of exuberance in the repackaging of the mortgages into securities and selling them to investors. Some argue that many borrowers defrauded the banks by misrepresenting their income, the so-called "no doc" loans or "liar's loans". President Bush's plan to deal with the subprime crisis is to freeze interest rates on adjustable rate mortgages. Freezing interest rates would stop people's mortgage payments from increasing. That is a gross violation of basic contract rights and would appear to be a Fifth Amendment violation. If a contractual agreement is willingly entered into and agreed upon by a borrower and lender, it is binding and if broken by one party or the other, harsh penalties should ensue. Now here comes government, under the Bush plan, to declare millions of contracts null and void. The long run effect of the Bush plan is to make lending institutions even more selective in choosing borrowers. Then there's the question: If government can invalidate the terms of one kind of contractual agreement where the borrowers can't pay, what's to say that it won't invalidate other contractual agreements where the borrowers encounter hardship and what will that do to financial markets? The Bush bailout, as well as Federal Reserve Bank cuts in interest rates, is a wealth transfer from creditworthy people and taxpayers to those who made ill-advised credit decisions, and that includes banks as well as borrowers. According to Temple University professor of economics William Dunkelberg, 96 percent of all mortgages are being paid on time. Thirty percent of American homeowners have no mortgage. Delinquency rates were higher in the 1980s than they are today. Only 2 to 3 percent of all mortgages are in foreclosure. The government bailout helps a few people at a huge cost to the rest of the economy. Government policy got us into the subprime mess and government's measure to fix the mess is going to create more mess. As such I'm reminded of Marcus Cook Connelly's spiritual play, "Green Pastures," where God laments to the Angel Gabriel, "Every time Ah passes a miracle, Ah has to pass fo' or five mo' to ketch up wid it," adding, "Even bein' God ain't no bed of roses." That's something the president and congressmen should think about and leave the miracle business up to God. Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well. Be the first to read Walter Williams' column. Sign up today and receive Townhall.com delivered each morning to your inbox.

To: Freedom Fighter who wrote (110735)	1/23/2008 5:25:58 PM
From: Kerry Phineas	Read Replies (3) \| Respond to of 132070

Just remember how Hillary turned it all around: By crying. I can't imagine that wouldn't be used against her every few weeks. If Bloomberg runs we would have legit candidates who are black, female, and Jewish and as a Republican I would consider all of them vs the Republican candidates- and I hate Hillary. This country has changed dramatically in the last 20 years, just given that these options are even available. An independent would likely be more successful at making the changes that the country needs to make.

To: Freedom Fighter who wrote (110735)	1/23/2008 6:22:53 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Wayne, Hate Radio does not convince anyone. The folks who listen to it are already convinced. They hate McCain. I can understand that. He was a war hero and the hate radio group are mostly draft dodgers and paintball heroes. Or, would be if they weren't scared of paint. Air America is the same deal. The folks who listen to it are already convinced and are just looking for some ammo to use against the massive barrage of America's right wing media. I haven't quite figured out why Hate Radio hates Huckleberry. However, I don't see one of the GOP candidates being acceptable to Hate Radio. Romney seems to come closest to what they usually like, but he's not nearly as ignorant as Bush. Obama may be too nice to beat Hillary, which means he would have no chance against the slime masters of the Republicrook Party. I still like and support him, but I'm seeing a lot of chinks in his electability. I like Hillary, except for her Bushlike attitude toward American military imperialism. McCain is similar. There is a lot I like about him. If he just hadn't hugged Dumbya, which gives me the willies, and not the slick ones. I think he may be a guy who is a military hero and a political quisling. Much like Duke Cunningham. It is like Napoleon said of Marshall Joaquin Murat: "Murat has no fear of death on the battlefield and leads charges that look foolhearty, until he succeeds in routing the enemy. But, as a political ally, he is the worst sort of coward. What can the Tsar's diplomats do to him that the Tsar's cannons couldn't?"