The Exaflood, Mortgage Bailouts and Bear Stearns

Rising demand for bandwidth-intensive Internet applications threatens to swamp existing network capacity.

The Senate considers a bill to “rescue” the U.S. housing market.

Senators investigate the recent sale of struggling investment bank Bear Stearns to JPMorgan Chase.

1. TECHNOLOGY

Rising demand for bandwidth-intensive Internet applications threatens to swamp existing network capacity.

CEI Expert Available to Comment: Vice President for Policy Wayne Crews on why adopting “network neutrality” regulations would make the situation far worse:

“Elevating the principle of mandatory net neutrality above the principle of investor ownership and wealth creation in pipes and spectrum deflects market forces away from the infrastructure development that we need. And we do need it: recent news notes potential bottlenecks on the Internet caused, not by anyone’s blockage, but by escalating data and video. Growing hand-in-hand in response to market demand, private infrastructure companies can handle any traffic growth at all; with neutrality, it’s in no one’s interest to take the risk or bother.”

2. CONGRESS

The Senate considers a bill to “rescue” the U.S. housing market.

CEI Expert Available to Comment: Special Projects Counsel Hans Bader on the ideological pork written into the legislation:

“The bill fashioned by Senate leaders to supposedly ‘help’ homeowners struggling with their mortgages contains tons of left-wing pork, such as money for ‘mortgage counseling’ by left-wing groups. When the economy goes sour and borrowers with bad credit have difficulty paying their mortgages, the left-wing housing groups claim that they should be able to get out of their mortgages because they were victims of ‘predatory lending.’ But if the banks had refused to make those very same loans, they would have been accused of ‘discrimination’ or ‘red-lining.’ Left-wing housing groups specialize in extortion and bait-and-switch.”

3. BUSINESS

Senators investigate the recent sale of struggling investment bank Bear Stearns to JPMorgan Chase.

CEI Expert Available to Comment: Center for Entrepreneurship Director John Berlau on the troubling precedent the deal creates:

“The deal is lousy not because of the share price offered — although $10 a share still may be chump change for a company selling for $30 just before the deal was announced a week ago and more than $80 at the beginning of the year. Bear’s officially stated book value is also $84 per share. Perhaps that is too high, but even if the book value were half that, $40 is still four times higher than the $10 that Morgan plans to pay shareholders. But the real reason the deal is so flawed is the unprecedented government-sanctioned breach in corporate governance practices. Shareholders, the true owners of the company, are being denied a voice in the fate of the firm.”

 

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FOR MORE INFORMATION

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