RON HART: Bailout bungling shackles the free market

Politics is more about deflecting blame rather than making good decisions.

Therefore, it is no surprise that Congress is blaming others, when the sub-prime/credit problems are their doing. Now they are scrambling to fix what they have screwed up, yet again, with our money.

As with most mistakes that we make as a nation, this one too begins with a false premise: that more government is the answer to this crisis, instead of the truth that government is the cause of the mortgage debt crisis.

Being a libertarian, I am philosophically against these bailouts.

The only thing that helps me rationalize them is that the federal government got us into this mess by pushing loans (mortgages) to low income and un-creditworthy buyers; therefore, government should work to get us out of it. The moral hazard of government doing this, however, worries me more than the near-term fix — borrowing to bail us out.

Free market capitalism is not to blame here.

The U.S. banking industry and Freddie Mac and Fannie Mae are the most federally regulated and closely tied to politics of all businesses in America. It is the opposite of free markets. Non-regulated companies like Wal-Mart, Coke and Caterpillar are doing fine.
The Feds should not bail out private business; they take the risk and should have both the upside and the downside.

The possibility of financial ruin or loss of money is as important to free market capitalism as the prospect of purgatory or hell is to religion. Truly, free markets punish with painful consequences the imprudent decisions made by managers of a business. So for the Democrats, and sadly now the complicit Republicans, it is easy to try to find blame for their own meddling rather than face harsh reality.

Barack Obama, besides being the second-largest recipient of Fannie Mae’s government-backed largesse, also had Franklin Raines as a financial adviser and Jim Johnson as head of his vice president search committee. Raines was the disgraced past head of Fannie Mae who was paid $90 million in six years to effectively run it into the ground. He resigned and headed right into politics, the only place where a failed businessman can thrive. Johnson also is a former chairman of Fannie Mae who was alleged to have received a favorable mortgage from Countrywide Financial Corp.

In short, under Clinton and not curtailed under the “asleep-at-the-switch” Republicans, Fannie Mae was encouraged to make loans — ones that you and I back with our tax dollars — to lower and lower-income Americans.

Lending money to those with the least prospect to pay you back is not a good business model. As a result, and because of greed by rogue mortgage companies that all but encouraged applicants to lie, these actions fueled an unsustainable boom in the real estate market. Wall Street fueled the growth by packaging these mortgages into pools.

It is the same basic economic house of cards as the S&L debacle of the 1980s.

Banks, with the full faith and credit in us the U.S. taxpayers, were able to issue CDs and fund themselves with cheap money. They then were allowed to take one dollar and borrow twenty from the Feds.

So what did they do? What would you do if you had, in essence, free money? You would go out and bet the hard eight in the craps game called real estate, further leveraging your bet, and hope that you roll twenty hard eights in a row. This, once again, is the theme of the federal government with its “oversight” and tax-spending stupidity.

As it turns out, people act with much more attention to detail when it is their own money at risk.

Continuing this theme, and on another sore subject of late, let’s look at oil.

A recent FBI sting operation caught the Interior Department’s Minerals Office being too close to the oil companies that it regulates. Interior Department staffers were given cocaine and other improper gifts, and had casual sex with a host of folks. I think they were charged with “Living in the 1980s.” Talk about drill here and drill now!

But there is good news for the economy.

Senate President Harry Reid admitted, finally, that he had no idea how to fix this and was going to adjourn the Senate for the rest of the year. With the Senate out of the way, the best and the brightest — not the politically connected and the slimiest — can begin to run America.

When presidential candidates tell us that they will run the economy better than the next guy, we should ask them not to and to please just get out of the way. Presidents do not “run the economy.” You and I do. Politicians do not “create jobs,” except in Washington and Iraq.

Remember, the only economies in the world run by their governments are Castro’s Cuba and Kim Jong Il’s North Korea.

Ron Hart is a Southern libertarian columnist who writes a weekly column about politics and life. His E-mail: RevRon10@aol.com