Tuesday, May 19, 2009
Monday, May 18, 2009
Fannie and Freddie by Ron Paul in 2003
Ron Paul in the House Financial Services Committee, September 10, 2003
Mr. Chairman, thank you for holding this hearing on the Treasury Department's views regarding government sponsored enterprises (GSEs). I would also like to thank Secretaries Snow and Martinez for taking time out of their busy schedules to appear before the committee.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.
I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.
One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.
The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.
The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.
Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.
Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.
No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.
Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.Dr. Ron Paul is a Republican member of Congress from Texas.
Sunday, May 17, 2009
Tuesday, May 12, 2009
Budget Gap Is Revised to Surpass $1.8 Trillion
WASHINGTON —
President Obama has lately begun pointing to optimistic
signs for the economy, but the continuing crisis still bedevilshis budget projections and his domestic agenda.
Skip to next paragraph
Brendan Smialowski/Bloomberg News
Peter Orszag, the budget director, who appeared with President Obama last week, disclosed the latest revisions in his blog.
The administration, in final budget and tax details released Monday, disclosed a double wallop of bad news from government number-crunchers. First, its Office of Management and Budget reported that the economy had added — both for this year and next — $90 billion to the historically high deficit estimates the administration issued just two months ago.
And the Treasury released revised figures showing that Mr. Obama’s proposal for financing fully half of his health care initiative over the next decade — a 28 percent limit on deductions for Americans in the top two income tax brackets — would raise $267 billion, or roughly $50 billion less than he initially projected. That further complicates the president’s struggles, together with Democrats in Congress, to pay for overhauling health care.
To fill the revenue gap, the Treasury outlined several new ideas for raising nearly $60 billion over 10 years, mainly from tightening rules for inheritance taxes but also from changes in taxing some types of life insurance and other products.
Separately, the chairwoman of the Council of Economic Advisers, Christina Romer, released a preliminary report standing by the administration’s claim that the $787 billion, two-year economic stimulus package that became law in February will save or create 3.5 million jobs by the fourth quarter of 2010, compared with what would have happened without the spending and tax cuts.
The budget office’s revised deficit projections bring the expected shortfall this fiscal year, which ends Sept. 30, to $1.84 trillion, from a February projection of $1.75 trillion. For the 2010 fiscal year, the new estimate is $1.26 trillion, up from $1.17 trillion.
Measured against the economy, this year’s shortfall would be 12.9 percent of the gross domestic product. Next year’s deficit would be 8.5 percent of G.D.P. Even before the revisions, the deficit projections were the highest in more than 60 years, since the end of World War II.
Economists generally agree a country’s annual deficits should not exceed 3 percent of economic output. Mr. Obama, in his 10-year budget outline in February, projected the United States would fall just below that level in the last months of his term, in the 2013 fiscal year. Many analysts consider his economic assumptions too rosy, however, which casts doubt on his deficit forecast.
The president’s budget director, Peter R. Orszag, disclosed the deficit revisions Monday in his blog on the budget office’s Web site. He said they were “driven in large part by the economic crisis inherited by this administration.” He cited Treasury estimates that revenue collections would be $30 billion to $50 billion less this year and next compared with February calculations, and higher-than-expected costs for bank bailouts.
Congressional Democrats echoed the reference to the inheritance from President George W. Bush. “It took eight years for the previous administration to dig this hole. It is going to take time to climb our way out,” Senator Kent Conrad of North Dakota, chairman of the Senate Budget Committee, said in a statement.
Congressional Republicans seized on the new deficit projection to tweak the Democratic administration for its boast last week that its “line-by-line scrub” of the federal budget had produced proposals to save $17 billion in the 2010 fiscal year.
The Senate Republican leader, Senator Mitch McConnell of Kentucky, said in a statement that “the administration acknowledged today that since the president took office, their projections for the deficit grew five times faster than the proposed cuts would save, and that’s assuming all the cuts are enacted” — which they will not be, members of both parties in Congress say.
Mr. Obama’s proposal to limit high-income Americans’ deductions had already hit a wall of opposition in Congress, with the Democratic chairmen of the House and Senate tax-writing committees, among others, objecting that it could depress tax-deductible contributions for charities, colleges and other recipients. The proposal was intended to raise $318 billion of a proposed $635 billion, 10-year reserve fund to introduce cost-saving changes into health care and to expand coverage to the uninsured; the other half was to come from Medicare savings.
Of the new Treasury proposals to raise $60 billion through 2019, more than $24 billion would come from estate and gift taxes that would affect less than three-tenths of 1 percent of estates in any year, according to a senior Treasury official, who spoke to reporters on condition of anonymity. The main change would affect how a taxpayer values property transferred to a family member either at death or during the taxpayer’s life.
Endless Wars? Yep. Still Got 'em. Where is the Change Obama
On Af-Pak: Stop "Helping"By Ron Paul
Published 05/12/09
While much of the country's attention is on other issues, a serious situation is developing in Pakistan that threatens to plunge us into another fruitless and bloody war. It is very frustrating to see that many who were so vehemently against the wars of the last administration have suddenly lost interest in foreign policy simply because we were promised change.
Those still paying attention know that nothing could be further from the truth. Very little has changed, except perhaps rhetoric, but what does that matter when the bombing missions are only getting deadlier? Rather than drawing down violent military interventions into the affairs of other countries, the new administration is escalating the foreign policy of the previous administration.
In Pakistan that entails the continuation and even escalation of military interventionism just across the border with Afghanistan. The targets are believed to be enclaves of Taliban militants, however, many innocent civilians have been caught in the deadly crossfire, severely damaging our image in the region. Many ordinary Afghanis and Pakistanis that never had cause to take up arms against us are being provided with motivation as family and friends are killed and maimed by our clumsy and indiscriminate bombs. Is it worth it for us to be involved in this way at such a high cost of blood, treasure and goodwill? Is there anything to be gained by this policy?
We are helping the Taliban and other enemies to actually gain numbers and strength, while driving them down from the mountains in the border regions deeper into Pakistan, where they have been making a menace of themselves. As our bombings follow them, beleaguered villagers have little choice but to leave their homes and join the swelling numbers of refugees or take up arms and join the fight against us.
Nonetheless, instead of recognizing the cascading unintended consequences of trying to deal with Pakistan's problems, all signs in Washington point to further escalation. Both the House and Senate have newly introduced bills to triple foreign aid to Pakistan, from $500 million to $1.5 billion, with every indication that the leadership in Pakistan is taking advantage of the situation with the Taliban to milk more aid from the US taxpayer. We are broke. This is money we don't have, and it is an insult to the American people to run up the national credit card for this type of military adventurism after many Americans thought they were voting for peace.
The bottom line is our involvement in Pakistan's internal problems is not making us safer. In fact, we are adding to the numbers of our enemies and increasing the threats to our security here at home. We are inciting the very terrorism and extremism we are trying to stop. Every dollar we send, even if it is for humanitarian purposes, frees up resources to make war and potentially prop up unpopular leaders. The factions and politics of the Middle East are irrational and dangerous. We play with fire when we meddle in their affairs, and we isolate ourselves diplomatically by making more enemies than friends. We need to bring our troops home, end all foreign aid, and maintain a neutral stance on the world stage. It, in fact, is the only foreign policy we can afford right now, and it would gain us more friends and trading partners than our bombs ever could. Besides, that's what the Constitution permits and our founders strongly advised.
Sunday, May 10, 2009
Friday, May 8, 2009
"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." Thomas Jefferson
Here are some good websites for recent articles on the economic collapse.
http://www.mises.org/
http://www.campaignforliberty.com/
http://www.europac.net/
http://www.mises.org/
http://www.campaignforliberty.com/
http://www.europac.net/
Wednesday, May 6, 2009
Monday, May 4, 2009
Good Article on The C4L Site
The War on Drugs Is a War on You
By Michael Boldin
Published 05/02/09
Printer-friendly version
The drug war is based on a repugnant assertion: that you do not have ownership over your own body; that you don't have the right to decide what you'll do with your body, with your property and with your life. The position of the drug warriors is that you should be in jail if you decide to do something with your body that they don't approve of.
This is an abomination of everything that America is supposed to stand for. As long as this country continues the drug war, you are not free. At the root, then, those that force the drug war on you are enemies to your freedom.
If you are concerned at all about liberty, the economy, the Constitution and the power of the Federal Government -- you cannot ignore the US government's longest and most costly "war" -- the War on Drugs.
But no matter how long it lasts, how much is costs, how many lives are disrupted, and how much it fails -- the war rages on.
Why? Well, because Federal "authorities" don't care what your local laws are, they don't care what your personal choices are, and they don't care what reason you have for your choices.
All they care about is their own power. Period.
In this ongoing drug war, you are always treated as a suspect and your neighborhood is much less safe. You are searched at airports and your bank accounts are spied on. While drug users who are no physical threat to anyone but themselves are put in jail, the prisons become more and more overcrowded, resulting in the early release of violent criminals on a regular basis.
If you love your freedom and you want your city to be safer, this psychotic war on drugs must be ended -- now.
Understandably, many Americans are afraid that ending the drug war will result in countless drug addicts, including children. In reality, though, that's just what we have now!
On top of it, we generally don't even consider the people who are addicted to federally-approved drugs to be drug addicts. According to a 2004 CDC report, almost one-half of Americans use at least one prescription drug. It should be obvious, then, that the drug war has done nothing to reduce Americans' use of drugs -- it's simply to control which drugs people use, and who can make a profit from them.
So what's really going to be different -- can our nation's addiction to drug use get any worse? It's doubtful that legalizing all drugs could make things any worse, but even if it does, then so be it.
People will always do plenty of things that are bad for them, and there's no reason to put them in prison for it. Think about all the things that you do which are bad for your own health and well being -- should the government outlaw those too?
People eat too much fast food and they forget to floss every day. They watch too much TV and they don't count their calories. They stay up too late and they spend too much. And, guess what else? People swallow, snort, shoot and smoke drugs that are both legal and illegal -- and it's not going to stop. A free society just wouldn't force you, under the threat of punishment, to be "good" to yourself all the time. That was the job of your parents -- unless, of course, you want the feds to be your new "daddy."
In all seriousness, though, if we are ever going to have a nation that respects the Bill of Rights, of which the Ninth and Tenth Amendments may be the most important, the DEA and the entire drug war must be eliminated.
If not, what's going to be next? Orwellian telescreens in our homes and a state-mandated morning exercise routine? That would most assuredly keep the cost down on the coming national healthcare system.
Won't that be nice?
Every day that the war on drugs continues is another day of injustice; another day of spending countless billions to lock people up that don't behave the way the bureaucrats want them to behave.
It's time to bring this multi-billion dollar attack on your liberty to an end.
By Michael Boldin
Published 05/02/09
Printer-friendly version The drug war is based on a repugnant assertion: that you do not have ownership over your own body; that you don't have the right to decide what you'll do with your body, with your property and with your life. The position of the drug warriors is that you should be in jail if you decide to do something with your body that they don't approve of.
This is an abomination of everything that America is supposed to stand for. As long as this country continues the drug war, you are not free. At the root, then, those that force the drug war on you are enemies to your freedom.
If you are concerned at all about liberty, the economy, the Constitution and the power of the Federal Government -- you cannot ignore the US government's longest and most costly "war" -- the War on Drugs.
But no matter how long it lasts, how much is costs, how many lives are disrupted, and how much it fails -- the war rages on.
Why? Well, because Federal "authorities" don't care what your local laws are, they don't care what your personal choices are, and they don't care what reason you have for your choices.
All they care about is their own power. Period.
In this ongoing drug war, you are always treated as a suspect and your neighborhood is much less safe. You are searched at airports and your bank accounts are spied on. While drug users who are no physical threat to anyone but themselves are put in jail, the prisons become more and more overcrowded, resulting in the early release of violent criminals on a regular basis.
If you love your freedom and you want your city to be safer, this psychotic war on drugs must be ended -- now.
Understandably, many Americans are afraid that ending the drug war will result in countless drug addicts, including children. In reality, though, that's just what we have now!
On top of it, we generally don't even consider the people who are addicted to federally-approved drugs to be drug addicts. According to a 2004 CDC report, almost one-half of Americans use at least one prescription drug. It should be obvious, then, that the drug war has done nothing to reduce Americans' use of drugs -- it's simply to control which drugs people use, and who can make a profit from them.
So what's really going to be different -- can our nation's addiction to drug use get any worse? It's doubtful that legalizing all drugs could make things any worse, but even if it does, then so be it.
People will always do plenty of things that are bad for them, and there's no reason to put them in prison for it. Think about all the things that you do which are bad for your own health and well being -- should the government outlaw those too?
People eat too much fast food and they forget to floss every day. They watch too much TV and they don't count their calories. They stay up too late and they spend too much. And, guess what else? People swallow, snort, shoot and smoke drugs that are both legal and illegal -- and it's not going to stop. A free society just wouldn't force you, under the threat of punishment, to be "good" to yourself all the time. That was the job of your parents -- unless, of course, you want the feds to be your new "daddy."
In all seriousness, though, if we are ever going to have a nation that respects the Bill of Rights, of which the Ninth and Tenth Amendments may be the most important, the DEA and the entire drug war must be eliminated.
If not, what's going to be next? Orwellian telescreens in our homes and a state-mandated morning exercise routine? That would most assuredly keep the cost down on the coming national healthcare system.
Won't that be nice?
Every day that the war on drugs continues is another day of injustice; another day of spending countless billions to lock people up that don't behave the way the bureaucrats want them to behave.
It's time to bring this multi-billion dollar attack on your liberty to an end.
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