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OpenMarket: Subsidies and Bailouts

  • Obama Administration Learned Nothing from 2008 Financial Crisis, Mortgage Expert Says

    February 3, 2015

    Ed Pinto had a depressing and revealing op-ed in The Wall Street Journal Friday about how the Obama administration is artificially creating markets for risky mortgages, using the Federal Housing Finance Agency and the government-controlled mortgage giants, Fannie Mae and Freddie Mac. Not only will this put taxpayers at risk, but it will burden prudent homebuyers through “cross-subsidies” for risky borrowers “subsidized by less-risky loans.”

    Long ago, Pinto worked as an executive and credit manager at Fannie Mae before it began buying up massive amounts of risky mortgages to pursue short-run profits and meet federal affordable-housing mandates.

    As Pinto ...

  • Main Street Fights Dodd-Frank's Chipping Away at the Constitution

    January 30, 2015

    “Wall Street Chips Away at Dodd-Frank,” blared a recent front-page headline in The New York Times about bipartisan measures that have passed the U.S. House of Representatives and/or been signed into law that ever-so-slightly lighten the burden of the so-called financial reform rammed through Congress in 2010. “GOP Pushes More Perks For Wall Street...” reads the home page of The Huffington Post under the picture of establishment pillar, Jamie Dimon, CEO of JP Morgan Chase.

    Yet, what these articles don’t say is that the firms putting their resources on the line to challenge Dodd-Frank in court are the furthest thing from Wall Street high rollers. They are decades-old firms selling stable, time-tested financial products to everyday consumers.

    At first glance...

  • Obama Should Help Borrowers by Shedding Dodd-Frank, Not Pumping FHA

    January 8, 2015

    “If it keeps moving, regulate it. And if it stops moving, subsidize it.” So said Ronald Reagan in 1986.

    Reagan was describing the unintended effects of government policy. But for the Obama administration, this formula seems to be the modus operandi of its policy making.

    Take mortgages, for instance. After the Dodd-Frank financial overhaul was rammed through the Democrat-controlled Congress in 2010, the Consumer Financial Protection Bureau—a bureaucracy created by the Dodd-Frank to be unaccountable almost by design—implemented the law’s “qualified mortgage” (QM) provisions.

    The QM provisions were so costly and complex that community banks and credit unions—as far...

  • Liberals and Conservatives Challenge Overreach of Dodd-Frank's FSOC on MetLife

    November 18, 2014

    As CEI brings suit before the D.C. Circuit Court of Appeals tomorrow challenging the constitutionality of unaccountable bureaucracies created by the Dodd-Frank “financial reform” law of 2010, it looks like we may have some high-profile company in litigation against Dodd-Frank’s Financial Stability Oversight Council (FSOC).

    The FSOC is a secretive, unaccountable task force of financial bureaucrats of various agencies created to designate banks and other financial firms “systemically important,” or too-big-to-fail. In September, the FSOC preliminarily decreed insurer MetLife a “systemically important financial institution,” or SIFI.

    As CEI argues in our legal challenge to the Dodd-Frank Act (including the FSOC’s role of identifying risk), the SIFI designation confers on a firm a strong competitive advantage, as investors and...

  • Lesson from Ex-Im Fight: More Agencies Should Have Sunsets

    September 17, 2014

    Congress hasn’t voted just yet on the Continuing Resolution that includes the Export-Import Bank’s reauthorization. But we already know that it will pass this week, and Ex-Im will get a new lease on life, probably through June. We’ll have this fight all over again next spring and summer. But the fight has already taught an important lesson: more agencies should have automatically expiring charters. Ending or reforming Ex-Im would never have been a possibility if its charter didn’t have an expiration date. I make that point in a piece in Investor’s Business Daily:

    Institutions matter. The rules of the game have a lot to do with how people play it — imagine what basketball...

  • Dueling Ex-Im Commentary

    September 11, 2014

    A vote on the Continuing Resolution, which includes the controversial Export-Import Bank reauthorization was originally scheduled for today, but has been pushed back to next week. So the combat continues over how long the Ex-Im reauthorization will last, and what other conditions might included as part of the deal. In today’s Washington Times, National Association of Manufacturers President Jay Timmons and I have dueling op-eds, with Timmons favoring reauthorizing Ex-Im, and me wanting to end it. The Wall Street Journal also weighed in with an editorial this morning,...

  • Don’t Tie Ex-Im Renewal to Government Shutdown

    September 9, 2014

    It appears Congress will decide the Export-Import Bank’s short-term fate this week. There are several bills with different reauthorization terms, and Rep. Justin Amash and Sen. Mike Lee even have a bill that would shutter the bank altogether. None of the bills have made it out of the House Financial Services Committee, which is chaired by Rep. Jeb Hensarling, who opposes the bank. What will likely happen instead is that Ex-Im reauthorization will be included in a Continuing Resolution (CR), which Congress must pass by September 30 to avoid a government shutdown.

    The current battle isn’t whether Ex-Im will be reauthorized, it is how long the reauthorization will last.  There are two...

  • Ex-Im Update

    September 3, 2014

    Congress comes back from its annual August recess next week. One of the top items on its agenda is deciding the Export-Import Bank’s fate. Ex-Im subsidizes financing for U.S. exporters and their foreign customers. As I outlined here, Ex-Im subsidizes certain businesses at others’ expense. It is a pro-business policy, when what the economy needs are pro-market policies. Ex-Im will also be forced to shut its doors unless Congress reauthorizes its charter by the end of September, making for a golden reform opportunity for corporate welfare opponents.

    The merits of the issue are clear enough, but politics is getting in the way. A bill to reauthorizes Ex-Im’s charter would likely pass the Senate, but would have trouble getting through the House. This would ordinarily...

  • The Ex-Im Bank’s Unilateral Disarmament Fallacy

    August 12, 2014

    One of the weakest arguments against free trade is the "unilateral disarmament" fallacy--that a country should refuse to liberalize its trade policies until other countries liberalize theirs. If your opponent uses it, you almost automatically win the debate. The Export-Import Bank's defenders must be getting desperate, because they are now having to resort to the unilateral disarmament fallacy. Here's a letter I sent to the Cleveland Plain-Dealer setting the record straight:

    Editor, Cleveland Plain-Dealer:

    George Landrith’s argument that the U.S. should subsidize certain businesses because other countries subsidize some of their businesses is equivalent to saying the U.S. government should stop ripping off its citizens only when foreign governments stop ripping off their own citizens (“...

  • The Case for Closing the Export-Import Bank

    August 8, 2014

    Over at American Banker’s BankThink blog, I have a piece making the case for closing the Export-Import Bank, mostly on corruption grounds:

    The Wall Street Journal reported on June 23 that four Ex-Im employees have been removed or suspended in recent months, "amid investigations into allegations of gifts and kickbacks."

    Former Ex-Im employee Johnny Gutierrez allegedly accepted cash payments from an executive of a Florida-based construction equipment manufacturer that has received Ex-Im financing on multiple occasions. In a July 28 congressional hearing, Gutierrez chose to...

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