Tuesday, March 17, 2009

The Failure of Government to Learn

The Community Reinvestment Act, a policy originated in '77 under Jimmy Carter, essentially legislated banks, by means of employing pressure through the FDIC insurance group to force banks to lend to borrowers that posed a serious credit risk. However, the government's perpetuation of this program led to the housing crisis that we are all now privy to.

Would you believe that the FDIC is still, yes, currently using using this Act to tarnish the records of banking executives who were more careful with their lending? Insanity! See here in the Boston Business Journal, a bank executive who was careful, so careful with his lending that his bank is still turning a profit and presently holds no defaulted loans, while holding a top credit rating... Was he given the "Banker of the Year" award? Was he praised for using good judgment, for being faithful to do business well? No, his bank was slapped with the label "needs to improve" under the Community Reinvestment Act!

Why anyone would be ignorant enough, in light of the data so evident in almost every realm, to continue to believe the government is capable much less skilled in accomplishing anything productive is quite frankly, beyond me.

I am disgusted with America and infuriated at the imbeciles who continue to get re-elected, despite their complete stupidity and inability to accomplish anything.


dallasjg said...

And, what do you propose to be the better way of handling things? Self-regulation? Are you suggesting the "failure" of one part of a govt action in a small institution like this is worst than the absolute destruction of the economy with the laissez faire, deregulated, self monitoring system of economics of the past several years? What is the role of govt?...to resist evil/maintain order, do some amounts of good, to only wage war against enemies?

Rob G. Reid said...

Thanks for commenting. Firstly, your rhetoric regarding "the past several years" and "laissez faire" regulation sounds like repackaged Obama rhetoric from the campaign trail. Surely, regulation has not been what it should have been in many cases; however, this point cuts both ways. One of the central reasons we are in this financial crises, specifically the crisis relative to the housing market is because the government forced the hand of banks, starting back in the late Clinton years, to lend to high risk borrowers. Thus, in the name of "fairness" people who banks KNEW could not pay their mortgages got loans. That is insane. It was largely manufactured, in my estimation, by Barney Frank, Chris Dodd, Schumer, and other worthless suits. I personally believe they knew exactly what they were doing, but they were so beholden to lobbiest and special interests, and the fact that "surely the government will fix it when it blows up in our face."

Secondly, I am struggling with the role of government. More and more, I think government needs to get the hell out of people's lives, get the hell out of business (they can't even run their congressional cafeteria without a multi-million dollar deficit!), and spend their time ensuring that citizens have the right to exercise freedom and have some kind of order. Beyond that, nothing.

dallasjg said...

Okay, you react quickly an from talking points. "The last few years" was intentionally vague to not infer just the Bush/Cheney debacle, but in fact the whole of time, including the Clinton housing bubble (which I think had a positive purpose behind it...it's a good sign for a country when the leaders wish people like you and me well, and hope that we can afford a house of our own, but had negative consequences). However, if i had to point to something that was the precursor of this from a sociological and even theological lens, I would point to the Reagan years, when we were all taught that bigger, faster, more, and flashier is better. Consumerism is more than the individuals, and more than the sum of it's parts, but it's certainly not less. The practice of consumption doesn't just appear, but is more like an std: something you practice your way into.
Secondly, it is the attempt of government to do less and less regulation that got us into this mess. Your assertion that a few Senators had enough sway to plan the full downfall of an economy, and could predict with clairvoyant accuracy the economic policies of a not yet elected G.W. Bush presidency is unbelievably naive. I don't think even God knows that much about the future!
Thirdly, if you look at the history of governance, you'll see quickly that to, "spend their time ensuring that citizens have the right to exercise freedom and have some kind of order..." governments were most quickly developed around a common coinage, and an economy around which people could structure themselves. Not to mention the fact that the nature of law is supposed to protect the weaker from the stronger. Thus regulation on the multinational company in the 21st century is the natural development of laws protecting, or even developing, the rights of underprivileged to do such radical things as buy, own, sell, vote in and of their own status as humans. This is no small task accomplished by government "staying out," but rather by the direct intervention of governments to both restrain evil, and hold back anarchy from nihilists and Gordon Gekko.

dallasjg said...

sorry for the typos...the whole of time, was supposed to read, "the whole time since the major deregulation," which i think comes through in my rant about the 80's, and the first line should have the word, "and" instead of "an." i'm sure there are others as well. my fault.

Rob G. Reid said...

Dallas, again thanks for responding. However, I see more egregious errors than spelling! I find it ironic that in setting up a strawman, instead of my argument, and happily toppling it in the name of naivete, you also engage in reductionism in terms of my position. Or better, offering the benefit of the doubt, you don't understand my position or simply assume more than I have offered regarding the role of fiscal policy and regulation.

I find it fascinating that you decry deregulation as the incipient venom injected into the system that was the fountainhead from which today's crisis flows, yet my principal claim is that congress, beholden to their own personal interests and the interests of those with the most money and influence, are INCAPABLE of REGULATING. For instance, what the hell qualifies Barney Frank to chair the financial services committee? He has no background in business. He has spent his life in academia and law... which is to say, he has spent his life becoming a POLITICIAN. I credit him with being an outspoken civil rights advocate for LGBT issues, and for that I think Frank is a great guy. But, in the final analysis, what the hell does this guy have in his pedigree justifying that he should be involved in financial regulation policy? Oh, yeah....NOTHING. That is my point, regulation is not going to help anything because those regulating don't have the sense to get out of the rain. They make policy decisions predicated upon either a populist outcry (which may or may not make for good policy in the long-run depending on how informed it is [and moreover, it may be built upon a narrative woven by the media and its interests above reality]) or a strong lobby.

Or consider Chris Dodd, the medal winner for receiving more money than any other Senator from AIG, who wrote the Dodd amendment preserving executive bonuses, but surely he had no earthly idea. It seemed completely innocent to him, he wasn't influenced at all by either the administration or by those dollars in his coffers. Come on Dallas, who is really being naive here?

dallasjg said...

What "qualifies" any and all of these people to do the governing is the rule of law, free elections, the vote of the people, the tenants of democracy. Do I think they make the greatest decisions? Not even close. Do I wish to privatize the power between elites who are actually in the business they are supposedly regulating? Hell no. If you think that Chris Dodd go a kickback, can you imagine that situation? Oh wait, I'll be you can...It's called "what's been going on."
I honestly can't see your point moving any direction except totally anarchy, or totalitarian regimes -- the one following the other.

dallasjg said...

i should really edit before posting.

Rob G. Reid said...

I'm not sure I understood your last several sentences, about Dodd. Anyway, I think that people with a business and economics background are better suited to regulate the financial sector. As well meaning as the Community Reinvestment Act is, in mandating banks to loan to less qualified candidates, there is a reason that those candidates are less qualified (i.e. they don't gross enough income to pay the mortgage! Or couldn't sustain a mortgage if they lost their job and had to find a new one, pretty common sense). I want everyone in America to own a home. But I don't want the government to own everyone in America's homes in order for everyone to have a home! I don't want the government telling me how much electricity I'm aloud to use, if I pay the bill. I don't want the government telling me how much carbon I'm permitted to emit. What next, regulate how much air I can breath? How much carbon dioxide I can exhale?

LukeMiller said...


There's clearly a difference between regulating harmful, pollutant carbon emissions and regulating non-harmful oxygen. By allowing carbon emissions, in fact, the government is allowing less good oxygen for you to breathe. I don't know about you, but I actually think a chief role of the government is to protect its people.

Here's my issue with the "small government" argument. ("Governemtn IS the problem.") I think it's just a line, and few people have really thought through what the next four words, and the words after that.

If you could get a true small-government consensus going in this country, what would be its first steps. What do we cut? What do we do with the people who have lost their government job, and what do we do with the people who have lost an essential service?

Do you realize what a limited government would do to the geography of the united states? Is the world that such action would create really a better world to you?

Rob G. Reid said...

Thanks for taking the time to consider and post. While I appreciate your position, frankly, I don't buy that it is the government's job to acquire more power, by extending itself into yet another arena. I personally remain unconvinced by global warming fanatics. While I agree we should take steps to treat the environment better, I do not believe that cap n trade is either a realistic or appropriate response. Like any good theory, on paper, it sounds good. Secondly, I don't believe that the government should be in the industry of regulating carbon emissions. I was raised by two parents, but when I got older, I chose to make decisions on my own. I do not want the government being my nanny. Whether that means telling me not to go out in the street and play because I might fall down and bump my knee or telling me how much electricity I am allowed to use (smart grids) or by telling me how much carbon I can emit.

I realize this is a philosophic difference that we evidently don't see eye to eye on. I appreciate your perspective, but the longer I consider the current regime and the fact that through policy, the government is making yet another radical power grap, reminiscent of Bush/Cheney, albeit in another direction, I grow less and less comfortable.

When is bigger EMPIRE ever the solution? I am of the persuasion that imperial expansion and power over its denizens is not good for the populace, even if it floats into town waiving populace flags.

Rob G. Reid said...

I would respond to your other statements, but time is a factor right now. Sorry.

LukeMiller said...

I get what you're saying. You moved out of your parents' house, you don't need new parents. You don't need someone telling YOU what you can do. (The church term might be "spirit of rebellion"). Joke.

Should the government also not tell you how fast you should drive your car? Or where you can set open fires? Or that you can't date children?

These laws are not meant to restrict YOU. They are meant to protect OTHERS from destructive behavior.