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OpenMarket: Subsidies and Bailouts

  • Understanding the GSEs' Role in the Mixed Economy

    October 20, 2008
    I'm not sure why Matthew Yglesias chose to adopt the unpleasant leftist tactic of beginning an argument with insult ("conservatives don't know anything about anything") in response to a recent Corner post of mine. Yglesias also engages in shifting the goalposts, because my "enthusiastic recommendation" of a Wall Street Journal leader column was not enthusiastic for the argument he chooses to highlight, but for its expose of the tactics Sen. Dodd and co are employing in the current debate. Let's leave all that irrelevance aside, however, and...
  • Bailouts Aggravate Economic Crisis

    October 16, 2008
    In the Washington Post, Peter Schiff describes how politicians spawned the current financial crisis.  "Our leaders irrationally promoted home-buying, discouraged savings, and recklessly encouraged borrowing and lending, which together undermined our markets."  "Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow -- until it could grow no more." "After the dot-com crash and the...
  • "One of The Great Success Stories of All Time"

    October 16, 2008
    While conservatives are angry about a number of things at the moment, they should be at least as angry that the Congressional Democrats who helped stoke the mortgage crisis are getting away with blaming everyone else for it. Today, Senator Chris Dodd, the prime recipient of GSE lobbying funds and proud holder of a sweetheart mortgage from Countrywide, is holding hearings where the witnesses will blame everyone but Dodd, Barney Frank and their cronies. Republicans asked to invite witnesses but were barred from doing so. The Wall Street Journal has more:
    In February 2004, while Republican colleagues warned of the systemic risks posed by Fannie Mae and Freddie Mac, Mr. Dodd pronounced the mortgage market "one of the great success stories of all time." A year later, the Connecticut Democrat voted against a...
  • Liberals Against Libertarians

    October 15, 2008
    That liberals wish libertarians to go away is, perhaps, not surprising. But the issue is much more serious than even Jonah Goldberg realizes. McCain's championing of "getting the monied interests out of politics" and Obama's pledge to eliminate their influence both amount to an attempt to eliminate economic interest groups (and, indeed, interest groups that are in any way allied with economic interests - such as independent free market groups) from politics. But, politics is about interest group influences. If economic interest groups are eliminated, only ideological groups are left - right and left groups driven by...
  • Unstoppable SuperState Stimulus, Part 2

    October 15, 2008
    Today's Wall Street Journal highlighted a new $300 political stimulus campaign. Keynesian demand-management has re-conquered economics as surely as Fall 2008 has cemented Alexander Hamilton's dreams for centrally managed governed finance. Today's global consensus: free markets cannot clear without government intervention. This year's dual stimulus “packages” foster political ends unrelated to actual economic recovery. Innumerable special interests benefit from an interventionist, mixed economy—and when things go bad, fundamental free-market reforms fly further off the table. As George Mason University's Richard Wagner points out, unconstrained democracy has a built-in bias toward deficit finance, so demand-side...
  • The New U.S. Economy

    October 15, 2008
    How do you find work as a financial wizard today?

    Binary Data
    My friend and former colleague Radley Balko posts a video that captures the new economic reality in America.
  • It wasn't bailout that caused Monday's market surge -- 3 other factors

    October 14, 2008
    Since the $700 billion bailout was first proposed, whatever the stock markets did, much of the press took that as a sign that the market wanted more government intervention. The markets sinking on Sept. 29, the day the House voted down the first bailout bill (although much of the sinking was before the bailout was defeated), was a sign that markets needed the bailout. Then, when it went up about 500 points the next day, it was somehow explained as anticipation of Congress passing a new bailout. The press was somewhat at a loss for words when the market tanked all last week, just after the bailout had been passed. But yesterday, when the Dow Jones Industrial Average zoomed up 900 points, the explanation was that the markets just loved the forthcoming global bailouts and partial nationalizations. Comedy Central's Stephen Colbert, as he so often does, cleverly mocked this conventional...
  • The international mark-to-market contagion -- sending global markets in a downward

    October 10, 2008
    Bailouts. Global interest rate cuts. More bailouts. Global government liquidity injections into banks. Direct government buying of commercial paper. And even more types of bailouts. But nothing seems to stop the downward spiral of equity and credit markets throughout the world that have been accelerating this week. But there is one intervention the governments of the world haven't tried yet: Standing up to the high priests of the accounting profession and suspending requirements of mark-to-market accounting for illiquid assets. Markets are more connected across the world than ever before, but, more importantly, so are accounting rules. Over the past decade or so the U.S. Financial Accounting Standards Board (FASB) and the European International Accounting Standards Board (IASB) -- private professional organizations that basically have a monopoly on setting the accounting rules that...
  • Obama denigrates Delaware in debate

    October 8, 2008
    Poor little Delaware. In every presidential election since 1992, she has been in the "blue" column voting for the Democratic candidate. She has long had a Democratic governor. Although she is represented at large by moderate GOP Rep. Michael Castle in the U.S. House, her Senate representation has been 100 percent Democrat since Tom Carper defeated the late Sen. William Roth in 2000. And of course, her other U.S. Senator, Joe Biden, is now the Democratic Party's vice presidential candidate. Yet this didn't prevent this bluest of blue states from getting a thrashing in Tuesday night's debate from none other than the Democratic Party front-runner, Barack Obama. In a strange, little-noticed tangent that Obama got onto in responding to a health care question and attacking opponent John McCain for being a deregulator in every policy area (...
  • In Goldman Sachs We Trust?

    October 8, 2008
    In the current issue of the Capital Research Center's newsletter Foundation Watch, Fred Lucas looks into the historically cozy relationship that finance giant Goldman Sachs has enjoyed with the highest levels of government, and the expanding influence the firm is poised to exert amid the present financial turmoil.
    In recent years the powerhouse bank Goldman Sachs has supplied Treasury secretaries to both Republican and Democratic administrations. A Goldman veteran serves as President Bush's chief of staff, while one runs the New York Stock Exchange and another lives in the New Jersey governor's mansion. Its politics skew left, and as the company's competitors on Wall Street go belly up, Goldman, a friend of Big Government, remains profitable and its infl uence grows.
    Lucas also...


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