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OpenMarket: John Berlau

  • Mizzou Tigers and the Other SEC

    January 3, 2008
    On New Year's Day, the SEC suffered a defeat, and I hailed it as a victory. Nothing unusual about that scenario, except this was not the SEC I usually write about.

    This SEC I'm talking about is not the Securities and Exchange Commission -- which burdens entrepreneurs with mandates from laws such as Sarbanes-Oxley. This was the SEC on many more people's minds yesterday: the Southeastern Conference of college sports.

    The SEC's Razorbacks football team of the University of Arkansas got creamed in the Cotton Bowl, and I rejoiced. Not because I have anything against Arkansas, but because of who defeated them. The victors were my alma mater, the Tigers of the University of Missouri, who had gone for about 30 years without being in any college football "bowl...
  • Friedman colleague to Fed: Stop throwing money at credit crunch

    December 28, 2007
    Anna Schwartz, longtime colleague of the late Milton Friedman and celebrated free-market economist in her own right, had some interesting things to say about the current credit crunch. In a story published on December 23 in the London newspaper the Telegraph, Schwartz told reporter Ambrose Evans-Pritchard that the buckets of money being thrown into the system by central banks in the U.S. and Europe were not getting to the root of problem. In fact, they were probably making things worse.

    “Liquidity doesn't do anything in this situation,” Schwartz said. “It cannot deal with the fear that lots of firms are going bankrupt.”

    Schwartz's comments are especially significant given that in her research with...
  • National Review nails it on Bush mortgage bailout

    December 16, 2007
    While much of the media attention has focused on National Review's recent editorial endorsing GOP presidential candidate Mitt Romney, another of the magazine's editorials may have been overshadowed. This is a pity, because it's of high significance in the credit and housing policy debate.

    In an editorial posted on NR's web site on December 11, the premiere conservative magazine came out squarely against the Bush administration's "voluntary" rate freeze for borrowers with resetting adjustable-rate mortgages (ARMs). The unsigned editorial hit all the right notes on how the bailout rewards irresponsibility, limits choices, and may send a terrible signal to international investors about America's upholding of its contracts.

    "For markets to work properly, imprudent actions must have...
  • I, Mortgage -- The case against Paulson's contract nullification bailout

    December 6, 2007
    “Wall Street Falls on Mortgage Unease” read the headline of an Associated Press story posted on Yahoo Finance just after the markets closed on Monday of this week. The headline was fairly typical of financial stories of the last few months, as the stock market has see-sawed due to mortgage woes and fears of a broader impact on the economy. The article noted that “the stock market's decline followed a week in which the Dow Jones industrial average made its biggest weekly point gain in more than four years.”

    But then the story noted something unusual. This day, the factor wasn't a new spike in foreclosures or a big bank's announcement of expected losses from mortgage-backed securities. Rather, the government's own announcement of an impending mortgage rescue plan may have reignited the market's nervousness....
  • Free-market groups fight mortgage nannyism

    November 26, 2007
    As the joke goes, there's good news and bad news. Which would you like to hear first?

    Upon hearing no answer from the readers of Open Market, I'll begin with the bad news. On November 15, the U.S. House of Representatives passed the "Mortgage Reform and Anti-Predatory Lending Act" as an answer to mortgage woes. This "absurdly patronizing government-knows-best bill," as my colleague Eli Lehrer called it in a CEI press release, goes beyond the goal of improved disclosure to ban mortgages that are, in the bill's words, "inappropriate" for borrowers.

    The borrowers, however, would not be deciding what is "inappropriate." That is left for the government to decide after the fact, and to punish lenders through penalties or legal judgments. Needless to say, not only would this limit mortgages choices, it would likely make home loans much...
  • Anti-choice mortgage bill on the House floor

    November 15, 2007
    Yesterday I had an article in National Review Online analyzing Rep. Barney Frank's answer to subprime woes. As I write, Frank's "Mortgage Reform and Anti-Predatory Lending Act," H.R. 3915, is on the House floor today. It's almost certain to pass; the only question is how many Republicans will vote with Frank.

    The vote doesn't guarantee ultimate passage of anything like this legislation, as the Senate counterpart to Frank's House Financial Service Committee has yet to put together a bill. Still, with the constant bombardment of headlines about all the issues rolled into the "subprime meltdown," there could very well be a legislative stampede that would make matters worse -- and cause us to lose a little bit more of our freedoms.

    As I say in the NRO piece, the terminology of some of the...
  • Credit markets: Lift antitrust and let 1000 "superconduits bloom"

    November 1, 2007
    Talk about the blind leading the blind! Superbank Citigroup Inc. was supposed to be a big player in Treasury Secretary Hank Paulson's "superconduit" to provide liquidity for the securitized debt instruments that had their valuation in question because of an unknown number of bad mortgages and other loans.

    But with an analyst report downgrading Citi to "sector underperform," as well as predicting it will have to raise about $30 billion by slashing its dividend and/or selling off its assets, other financial institutions will now be even more reluctant to follow Citi off a cliff of unspecified height.

    Let me pull back a minute, lest I sound like a doomsayer. This blog post is about the flaws of Paulson's concept of a...
  • California's Eco-Inferno -- Berlau in American Thinker

    October 29, 2007
    Today, I have a piece in American Thinker on how environmental regulations, much more than global warming, were likely a factor in the intensity of the California fires.

    Specifically, the article shows how the Endangered Species Act again hampered residents and city officials from reducing the fuel load from dry brush. This has happened before, as CEI adjunct fellow RJ Smith and former scholar Ike Sugg have documented, and was actually an issue in some Congressional races in 1994, when Southern California homeowners were forbidden from mechanically cutting brush because it might harm the habitat of the kangaroo rat. Many of those homes perished in fires. The GOP pointed to this as an example of big government's encroachment on property rights, but many in Congress then abandoned Endangered Species Act...
  • How antitrust worsens mortgage woes

    October 24, 2007
    Hans, excellent points about the folly of a government-organized bailout. Indeed the Dow had gone back to 14,000 the week before Paulson opened his mouth and proposed the bailout last week. Today, the Dow rose by more than 100 points when big mortgage bank Countrywide Financial Corp. announced, without any direct prompting by any government agency, that it would refinance or modify $16 billion in mortgages. Part of the rise in the Dow was probably due to the fact that investors knew Countrywide was making a decision that would help its bottom line, rather than responding to the "moral hazard" of a promised government bailout.

    The market has lots of incentives to smoothe out volatility. The problem is the...
  • Jennifer Marohasy's common sense Down Under on global warming and fires

    October 5, 2007

    Excellent points about the lack of correlation in Australia between global warming and forest fires.

    And, for an in-depth look at what's really causing the fires there, I would suggest this blog by one of CEI's great Aussie friends, Jennifer Marohasy. Jennifer is a senior fellow at the Melbourne-based think tank, the Institute of Public Affairs, which is fighting the good fight for the free market and sound science in Australia, and has had some impressive results in shaping the debate.

    Jennifer's blog and her site have some excellent refutations of environmental myths about how global warming is supposedly affecting Australia. She has some particularly good stuff on...


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