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OpenMarket: Subsidies and Bailouts

  • Payback? Government Targets S&P And Egan-Jones, Not Moody's Or Fitch

    February 12, 2013
    Why not Moody's? Why not Fitch? Of all the questions raised about the U.S. government's strange case against Standard & Poor's—a lawsuit that actually  asserts that some of the nation's largest banks were S&P's "victims," and that the credit rating firm somehow fooled these banks about products the banks actually created—the lack of similar actions against S&P competitors still rings the most alarm bells. S&P, Fitch and Moody's all gave AAA rating to many packages of subprime mortgages that imploded. But of those three, only S&P downgraded the U.S. government from its decades-old AAA credit rating. Floyd Abrams, the attorney representing S&P's parent company McGraw-Hill in the litigation and a veteran First Amendment lawyer (and yes, the First Amendment is a strong concern here, as I will get to in a second),...
  • Thrifty People Punished Yet Again By Obama Administration

    January 29, 2013
    When I bought my home, I chose a mortgage that was within my means. That meant buying a little two-bedroom house, and using much of my life savings for a 40-percent downpayment, so that my mortgage interest rate would be lower, and my monthly payment would be manageable even on my modest salary as a think-tank employee. It turns out that people who behaved like me -- saving up their money for a big downpayment and not buying more house than they could afford -- are suckers, since the Obama administration is using their tax money to bail out people who made smaller downpayments relative to their home value (and thus have larger mortgages that exceed the value of their home in the current depressed real estate market). The administration is busy writing...
  • New Jersey State Senate Pushes Union Giveaway in Project Labor Agreement Bill

    January 23, 2013
    The extent and huge costs of the damage from Hurricane Sandy to New Jersey should make rebuilding the worst affected areas a priority for Garden State lawmakers. That would include keeping down costs. Yet the Democrat-controlled New Jersey State Senate is trying to do the exact opposite. Last week it passed, along a 23-13 party-live vote, a bill (S2425) that expands the use of project labor agreements (PLAs) in state construction projects. Astoundingly, the Senate did not consider any other legislation. “So in these days post-Sandy, we’ve been called back to debate only one bill,”...
  • Qualified Mortgage Rule Is One Of Many Dodd-Frank Boots To Drop

    January 10, 2013
    The first thing that should be said about today's "qualified mortgage" rule is that it is just one of many new regulations the Consumer Financial Protection Bureau (CFPB) will issue under Dodd-Frank. Believe it or not, the 2,500 pages of Dodd-Frank contains both a "qualified mortgage" rule and a "qualified residential mortgage" rule, the latter of which has yet to be issued. And the powerful and unaccountable CFPB -- subject to a lawsuit by the Competitive Enterprise Institute, the 60 Plus Association, and the State National Bank of Big Spring (Texas), a community bank -- still has the incredibly broad power to ban a mortgage or any other financial product it deems "abusive." The "qualified mortgage" regulation involves the types of mortgages banks...
  • Basel III Cliff May Be Averted, But Dangers Still Loom For Main Street Banks

    January 7, 2013
    After numerous criticisms from U.S. community banks and lawmakers of both parties, the international committee in charge of the Basel III bank capital agreement just announced it is slightly revising the accord and delaying it for a couple more years. This action is welcome. If Basel had been implemented this year as written, it almost certainly would have thrown the U.S. and other economies into a recession more than going over the "fiscal cliff" ever would have. But although the "Basel Cliff," as I have called it, may be averted for now, dangers still lurk in its implementation in the years to come. This is both because of the accord's wrongheaded bias in favor of sovereign debt, and because U.S. regulators have rushed headlong to push it through before congressional action that is almost...
  • GM Stock Sale Doesn't End Damage Of Government Motors

    December 21, 2012
    Below is my statement released today on the government's planned 15-month sale of its remaining General Motors stock:
    On Wednesday, the government announced a plan to sell its remaining stake in General Motors at an estimated loss to taxpayers of $12 billion. If the losses on General Motors Acceptance Corporation (GMAC) are included, the total probably rises to nearly $20 billion. It is good news the government is winding down its misguided involvement in Government Motors. It has announced an 15-month plan to divest its stock. It also is good news the auto industry is expanding – though most of the growth has been enjoyed by foreign automakers who have built plants in right-to-work Southern states and had nothing to do with the bailout. But there is nothing new or remarkable about businesses...
  • Obama's Low-Quality College Bailout Will Fuel Skyrocketing Tuition

    December 12, 2012
    We wrote earlier about perverse federal financial aid policies that encourage colleges to jack up tuition. Recently, the Obama administration came up with something even worse. It announced a new financial aid policy that will effectively bail out low-quality, high-tuition colleges and especially law schools at taxpayer expense, and encourage colleges and professional schools to increase tuition even more. These changes are the product of a revised income-based federal student loan repayment program that will go...
  • The Hostess Bankruptcy And The Threat Of A PBGC Bailout

    November 20, 2012
    On Friday, November 16, Hostess Brands announced it was shutting down operations after the Bakers, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), which rejected the company's last contract offer in September, announced it would go on strike. (Today, the two parties entered into a last-ditch negotiation effort today to avoid liquidation.) The same day, the Pension Benefit Guaranty Corporation (PBGC), the federally created agency that insures private sector pensions, announced that its deficit had increased from $26 billion to $34 billion over the past year. Then yesterday, Hostess announced that  it would pass off its pension liabilities to the PBGC. If this looks like an...
  • The Basel Cliff -- Basel III's Poisonous Recipe For The Economy

    November 16, 2012
    As if the "fiscal cliff," with its prospects of looming tax hikes, were not enough, big and small banks—and in turn consumers and businesses who rely on their credit—also face the "Basel cliff." The Basel cliff is not a mountain in Switzerland. It refers to meetings in Basel and elsewhere by international banking bureaucrats to develop the Basel III agreement for harmonizing international capital requirements. And if implemented as planned, it will dramatically increase the costs of mortgage and small business loans while, according to many experts, actually making the banking system less stable. The Basel Cliff is part of what Sen. Rob Portman (R-Ohio) and others have called the "regulatory cliff." In the year leading up to the election, the Obama administration put hundreds of regulations on...
  • FEMA's Wasteful "Disaster Socialism"

    November 9, 2012
    In the Washington Examiner, Shikha Dalmia of the Reason Foundation notes that FEMA has been as slow after Superstorm Sandy as it was after Hurricane Katrina -- and that when it finally provides aid to residents of affected regions, it will be providing not life-sustaining aid, but loans, handouts and welfare benefits, some of which will flow to people who don't even legally qualify for them. People have this weird idea that FEMA helps people in the 48-hours after a natural disaster. It doesn’t. Instead, it lets state and local governments take care of their people in the immediate aftermath of a disaster, and then writes checks to residents of affected areas later on. Dalmia calls it "...

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