Trying Different Things unto Socialism

Yeah, I gotta vote “no” on this one:

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.

“Restore confidence” is another way of saying “promise public backing and rescue.” That’s exactly what created the environment in which Fannie and Freddie allowed things to get so out of whack.
If we’re not going to let the market be the market, then give a quick infusion of cash, with some strings ensuring repayment to the government, and leave it alone. You can’t cure a sickness with more of the same poison.

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Joe Six Pax
Joe Six Pax
12 years ago

WOW
There is NO mortgage foreclosure crissis in Canada.
You must prove that you have enough income to repay a mortgage
Those crazy Socialist Canadians
Canada\’s foreclosure rate is 10% of that
in the USA
Yes their banks are regulated

msteven
msteven
12 years ago

You are both exaggerating when it comes to how this refers to socialism.
Justin, I don’t think it’s fair to refer to the regulation of or even ownership of certain banks as socialistic. A vast majority of capitalistic countries still have business regulations in place. Yet it is more towards socialism that complete libertarianism, such as that advocated by John Stossel.
Joe, Canada is not a socialistic country — as opposed to China, Venezuela and Cuba.
It seems to me that the mortgage foreclosure crisis is both a result of poor regulation (lack of enforcement of the laws) and over-regulation (govt pressuring banks to lend to more people). In other words, it is complicated. That being said, it explains why both sides of the economic line have used this adverse event to justify their view.

Mike
Mike
12 years ago

Joe, Canada is not a socialistic country
Posted by msteven at October 10, 2008 4:26 PM
I think that was his point. Contrasting sensible Canada with the Democrat/Republican policies here.

Anthony
Anthony
12 years ago

Be careful of the “grass is greener on the other side” type of argument when it comes to Canada. Canadian banks tend to be well-capitalized but they’re having issues, too.
Jim Flaherty said today that Canada Mortgage and Housing Corp. is buying up to $25 billion in mortgage-backed securities from the country’s banks. That’s a fairly big amount for a country with Canada’s population.
We’re in the process of seeing a return to the big government ways of the New Deal and the Great Society. If Obama gets elected, he’ll have a Democrat Congress and we’ll see the third installment of Big Government policies.
It’s all somewhat ironic given that the left helped to create the subprime crisis in the first place.
I remember being criticized by some of my conservative friends when I suggested that Bill Clinton’s economic policies were more moderate than liberal. I suspect that they’ll see what true liberalism looks like if Obama wins.

Joe Six Pax
Joe Six Pax
12 years ago

MSteven
Canada, IS a Socialistic country
Anchor Rising and Dan Yorke says it is
FACT !!!
ANTHONY…
The 25 Billion that the Canadian government pumped in to their economy
was in reacttion to the freeze in lending by USA Banks
Yes…Socialist Canada,with their stupid anti-american bank regulations
have 10% of OUR bank foreclosures

OldTimeLefty
12 years ago

Socialism, schmocialism,

Words, words words. I get words all day through, first from him, then from you. Is that all you blighters can do?

Whether you want to call it socialism or not, one very clear result of the market downturn has to be a wholesale discrediting of Social Security privatization.
Even if you call today’s events a fear-driven overreaction that will self-correct, the Dow and other economic indices are likely to be lower than the day that Bush took office, in current dollars as well as in inflation-adjusted dollars.
Thank heaven and those of our representatives who defeated the attempt to privatize the SOCIAL Security system.
OldTimeLefty

Justin Katz
12 years ago

msteven,
Perhaps you’re a little anxious to capture a middle ground. (Didn’t take hints that you and I might be the same person too much to heart, did you? ;o)
My use of “unto socialism” in the title of the post was meant to indicated treacherous path toward socialism, as each modest step fails to have the desired outcome and more of the poison comes to look like a cure.

Monique
12 years ago

Exactly, Justin. Impelled by good intentions, Bush and Congress are taking us step by step down that road to Hades.
So despite some draconian and outrageously expensive measures, it looks like we’re getting the stock market crash AND some very undesireable restructuring.
Let me be among the first to call on President Bush and Congress to undo all this. It’s not helping and it’s changing us into something we really don’t want to be.

msteven
msteven
12 years ago

Justin,
I was going to comment about our commentary confusion but feared you might not take it well. 🙂
I don’t see myself as a middle grounder but more of a hole poker – to both sides of what I see as partisan rhetoric. I happen to agree with you and Monique that is not a good precedent, although I am still unsure whether it may be a necessary one to take at this time.
I happen to believe it is somewhat a result of the CRA but it’s also hard to prove that the less regulation would have prevented this. My point is still that this event is being used to discredit the results of both ‘more’ & ‘less’ government regulation. Take OTLs assertion that this is a wholesale discrediting of Social Security privatization. Ignoring the fact that 90+% of the time the market has outperformed the SS fund. Sort of like saying moving South has been wholly discredited due to the occurrence of adverse weather events. What he freely asserts, I can and do fully deny.

Anthony
Anthony
12 years ago

Joe Six Pax,
You’re absolutely right that the $25B infusion was in response to US banks freezing up credit. Canadian banks finance their daily operations on international credit markets. They’re heavily dependent on US banks.
My point was that Canada is experiencing significant economic issues as well.
No, Canada does not have the number of foreclosure that the US does.
It never promoted affordable housing policies that sought to bring greater numbers of subprime borrowers into the housing market.
Canada imposed government pressure to force its banks into lending money who were poor credit risks.
The Bush Administration attempted to impose greater regulation of Fannie and Freddie, but it went nowhere.
I’ve stated before that the government was not the primary reason for the crisis. The biggest reason involved people borrowing more than they could affort. Mortgage brokers looking to make a quick buck also played a role.
But to the extent that government was to blame, it was people like Barney Frank that were responsible for this problem.
We’re in a period of irrational fear. There have long been market ups and downs, but what’s interesting about this instance is that nobody is able to quantify the risk, so everyone is assuming the worst.

Anthony
Anthony
12 years ago

that should have read Canada NEVER pressured its banks…

Monique
12 years ago

“[Canada] never promoted affordable housing policies that sought to bring greater numbers of subprime borrowers into the housing market.
Canada never imposed government pressure to force its banks into lending money who were poor credit risks.”
Correct. But American president Bill Clinton (D) did do that.
“I’ve stated before that the government was not the primary reason for the crisis. The biggest reason involved people borrowing more than they could affort. Mortgage brokers looking to make a quick buck also played a role.”
This is one of the few times I disagree slightly with Anthony.
Individuals are expected to act, sometimes selfishly, for themselves. But government has an absolute obligation to work for the good of the country as a whole. Certainly all of those unqualified borrowers had an obligation to understand the terms of their loan and by failing to do so, they are unquestionably responsible for getting themselves into an untenable situation. However, in terms of the impact on the rest of us, if a governmental imperative, motivated by something other than the greater good, for banks to make bad loans had not existed, there would have been no opportunity to begin with for people to be tempted into a situation that has dragged us all down.

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