Shire Network News #148

Shire Network News #148 has been released. The feature interview is with Australian writer John Birmingham, who has just published a book in which the Left gets it’s oft-stated wish that the world wakes up one day and America is simply not there anymore. It’s called "Without Warning", and we must warn prospective readers, it contains plenty of what  John Birmingham calls "explody goodness".  Click here for the show notes, links, and ways to listen to the show; directly from the web site, by downloading the mp3 file, or by subscribing with your podcatcher of choice.

Below is the text of my commentary.

Hi, this is Doug Payton for Shire Network News, fighting allergies and asking you to "Consider This!"

The story of the credit crisis in America has chased off just about all other story topics from the front page of newspapers worldwide.  The main reason for this is the sudden perceived worthlessness of what are called Mortgage Backed Securities; pieces of paper that give the buyer or lender rights to the payments and interest on one or more more mortgages.  Basically, an IOU used as collateral for another IOU.  And this was repeated over and over, wrapping our financial institutions into a Gordian Knot.  This knot hung in there as long as home values continued to rise.  And there’s the rub; they didn’t and now here we are.

One of the big things that got our banks into this mess was the choice of the Jimmy Carter administration to use government to increase home ownership among minorities.  The Community Reinvestment Act was ostensibly created with the high-minded intention of doing just that, but in order to fulfill that promise, banks were required to write a certain percentage of CRA loans.  Now, in order to do that, they had to come up with some more creative ideas for qualifying for the loan.  "Outdated" ideas like sources of income and, oh, down payments were thrown out.  They were just sooo 1960s.  They were there to limit loan defaults, but hey, the number of people getting a home was on the rise!  What could possibly go wrong with this well-intentioned big government program? 

Indeed.  But getting a home and paying the mortgage are two very different things.

Banks didn’t like this added exposure to risk, but they were required to do this or face penalties.  In 1995, during the Clinton administration, the CRA was strengthened.  Now, let me ask you.  Which lending institution led the way from here, writing up many of these higher-risk loans?  Countrywide, a bank who’s recent failure you may have heard about.  Who bought up many of these loans from banks that didn’t want them?  Fannie Mae and Freddie Mac, more names you’ve probably heard in the news just a little bit lately. 

I have a personal blog, "Considerettes", that is linked to in the show notes when I have a segment in the show.  However, I also run a Christian group blog called "Stones Cry Out", where I’ve been discussing this issue.  One of our commenters, a Christian from the left of the political spectrum, said that the CRA is "about justice, and, as such, is a good thing".  That, folks is a naive and dangerous idea.  This is essentially a case of the motivations justifying the means, and utterly ignoring the ends.  (Hmm, I gotta’ work on that phrase.  Needs to be snappier.)  My response to him was that "recession in the name of justice" isn’t a slogan that works for me.  That’s because "the road to recession is paved with good intentions and other people’s money".  (Nahh, that one’s awful, too.  It’ll never catch on.)

Essentially, and to get away from coming up with more slogans, this was a big government program, with good intentions, that was tweaked and tweaked by big government, until we were in such a mess that we had to be rescued by…big government!  Ironically, and sadly, the liberal representative who chaired the committee who oversaw all of this, called it a failure of…the free market! 

Ladies and gentlemen, boys and girls, children of all ages, that’s why voting matters.  More than that, political philosophy matters. I know, I know, it’s sound boring and irrelevant.  "Political Philosophy" isn’t the name of some must-see TV show, nor the latest boy band, nor the national championship team.  But political philosophy matters.  If you care about whether or not your country, the United States or somewhere else, slides into recession or worse, you need to care about it. 

The lessons to learn from this are legion.  Government programs never stay the same size; they get bigger.  Government programs never stay targeted; they get generalized.  Government programs never cost some amount X; they cost more, lots more.  And anyone who tells you that this or that government program will fix everything is mistaken.  It’s not that they are willfully lying.  But you can never know the harm it can cause down the road.  If it fails, it fails in a big way, for loads of people.

If you want to know why I want smaller centralized government and vote conservative, now you know.  That’s my political philosophy, and it matters.  Please…consider this.

("Consider This!" was brought to you by the letters C, R and A, and by the number 700 billion.)

Filed under: Economics • Government • Podcasts • Shire Network News

Like this post? Subscribe to my RSS feed and get loads more!