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Monday, October 06, 2008

Klueless Klobuchar Ekonomics

In the Star and Tribune, Senator Klobuchar dutifully repeats the Democrat mantra of blaming President Bush and the lack of regulation for today's mortgage crisis. Either she doesn't have a clue or she is intentionally trying to deceive the public.

Klobuchar claims:
America's current financial crisis is an indictment of eight years of failed economic policies from the Bush administration and irresponsible business practices on Wall Street. The administration allowed Wall Street to operate like a Wild West gambling hall awash in funny money.
Convenient how she provides cover for Senator Chris "CountryWide" Dodd and her fellow Democrats who accepted campaign cash from Fannie and Freddie to look the other way and block Republican efforts to reign them in. Also convenient how she forgets about those Bush tax cuts that lifted the Dow from a post 9/11 low below 8,000 to just over 14,000 last year. Let's be clear. These tax cuts have given the economy the strength it needed to absorb this crisis.

Still, Klobuchar has her own theory of what happened:
...America's financial regulators have simply not kept up with the risky products and complex transactions in the modern financial markets...
She then argues for more regulation:
...we need to insist on transparency in financial transactions. ... Warren Buffett's investing maxim is that you buy what you know. But if the books are cooked, there is no way to know.
Hey Senator! What do you do about Democrats like Barney Frank and Chris Dodd who refuse take action when government managed enterprises are caught cooking the books with Enron recipes?

Klobuchar concludes:
...To protect the economic interests of all Americans, the federal government must supervise and regulate the markets so debt does not get out of scale.

As we work our way out of the worst financial crisis since the Great Depression, we must act now to update our regulatory framework so it is suited to the financial challenges of our times.
Either the Senator is indeed clueless or she is intentionally trying to deceive the rest of us. It was government regulation that got us into this mess. Government regulation forced private lenders to give away risky sub-prime loans. It also created the government sponsored Fannie Mae and Freddie Mac.

We don't need more regulation of the private sector, we need more regulation of government and its entities that mess with the private sector.

But, herein lies the real problem. Democrats set up Fannie and Freddie to give away more loans to those who could not afford them. They used the sub-prime loan give-away to buy more votes. Then they set themselves up to manage the government lenders – and accept campaign cash from investors and executives. While feigning outrage over executive pay, they secretly encouraged it. They didn't want to kill their campaign cash cow.

The big lesson here is the danger of giving Congress the power to regulate and engage in enterprise while also benefiting from it. Whatever the enterprise – from lending to health care – more government control does not equate to greater equity among the people. It only seeks to shift wealth from the private sector to government endorsed fat-cats – and to the lawmakers who prop them up.

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