Why Not For Himself?

Many heard John McCain’s acceptance speech Thursday, Sept 5, 2008 in St. Paul. There must have been some last-minute rewriting, for he had been upstaged by his vice-presidential choice, Sarah Palin. Palin gave a rousing, clearly moral high ground speech the night before, which electrified the audience. I could vote for her, but not for John.

So what does he do? He postures as the ultimate altruist! Since age 17 he has done nothing but public service. This is taken by most to mean taking the high road compared to the rest of us who only work for our own living. To assert that he did none of this for himself but only for country deeply offends me. And what the hell is wrong with private service?

To claim that no time of his working life was spent for his own sake is utterly irrational, it is evil, it is altruistic.

To me the ideal of America is the entrepreneur who creates jobs, the drug researcher who comes up with the new penecillin, the person who works and saves to invest in new ventures, the man or woman who goes to war for the money and believes they are good enough to survive it and fights without pulling punches.

My heroes do not include anyone who sacrifices his or her life for individuals or country. Sacrifice means giving up a greater good for a lesser one. That is irrational.

Altruism is to value someone else as more worthy to live than oneself.

Rational self-interest (the philosophy of Ayn Rand) correctly values oneself and secondly others who are of value.

McCain is selling us a package deal, combining military heroism with the scummy drag of a beast in the gutter demanding admiration for nothing but their need and utter lack of worth.

What has McCain done for me? Has he made government smaller, less costly and less intrusive? Has he created new products? Has he figured out a way of making anything better? Making anything cheaper? Kept foreign enemies from my door? Has he done his best taking care of his own life and his loved ones?

No, he has done none of that. But neither do I believe he has only lived his life for his country. He plans to live a long life. He has, under the premises of our current system, a good plan. If he wins the election he may only be president for four years but will come away with honorable mention in history books and a quite rich retirement, plus gratuities for years of speech-making.

He will also be loved by the political machine that he serves. He worked all his life for a cause.

Why Not For Himself?

Capitalism is the Way

Capitalism is not just a system that works

The government of China acknowledges that the principles of capitalism are required for a nation to do well economically. Russia has recently started to give up collective farming; no this is not 1990. It is fresh news. Russian agriculture is seriously behind in status and progress compared to Russian energy production and others also.

The growth of the populations of capitalist periods in various nations indicates that health and other things required for people to survive and live longer shows it works.

That is not good enough. With that admission you can still practice genocide, tyranny, legalized plunder, and all manner of bad government. You can still have bankers control things and suck the life blood from the economy. Capitalism works so well, that even with the banks doing that, through the ruling of the Federal Reserve, which has power over the U.S. government, pull out seven eighths of our wealth, and we are still better off than ever.

Capitalism is Right

Capitalism will never be allowed to succeed fully it cannot just be promoted because it works. Too many people have already demonstrated that capitalism will not be fully implemented if all you support it with is that it works. It needs to be recognized as the economic and political system that is right, as the only one that is right.

I am, by the way, talking about unfettered laissez faire capitalism. Many would object that capitalism cannot be allowed unless it is under many regulations and laws. I do not argue for a lawless society at all. However, I do argue that one set of laws for us all is sufficient. Laws against murder, bodily harm, fraud, property damage, breaking contracts, etc., ought to be sufficient to apply to all of us, investors, laborers, managers, owners, politicians, soldiers, policemen, judges and cleaning-persons.

Regulations are an illegal, unconstitutional kind of law. All laws are supposed to be created by legislators and congressmen. Most regulations are not. Breaking rules should always involve accusation, trial by evidence, confronting ones accuser in a court of law, resolution of the problem by set rules, objective processes and punishment, preferably making the victim whole through restitution. Breaking rules devised by regulators, however, involves self-reporting, not having clear knowledge beforehand of where the line of good behavior is drawn, and enriching the government rather than restoring the alleged (often missing) victim.

Consumers rely too much on government regulators, to get alleged wrongs done by corporations redressed. Consumer should instead demand (through consumer union type groups) full disclosure of product quality, and file suits when defrauded.

It is Time for Real Capitalism


Endorse full capitalism. Get the businessmen to stop going to Washington for favors. Demand that they stick to business, get out of politics, get out of "community service" and charity work. Just sell good products and services and make a profit. Remember also that your retirement fund does more for you if industry generates good profits.

For more information, go to Capitalism Magazine and Ayn Rand Institute

No Escape

Bankers and politicians were thought to be strange bedfellows. Why? I wondered recently. Banking is now a business that thrives, rather than making a few percent more on what it loans out relative to what it pays for your deposited savings. It is a business that relies on being able to lend what capital it has on the books several times, at as high a rate as possible. However, when the crunch comes (recent lending proves to have been disastrous), you and I cannot get a loan even if we prove we absolutely do not need it.

Politicians thrive, rather than on carrying out the mandate that the voters struck a deal for when they last voted, but on the advice of lobbyists. What do lobbyists have to offer that we the voters don't have? Influence that can get the politicians cushy retirements. Influence that gets them a get home card in the lobbying business or other lucrative field.

Politicians passed laws to make it mandatory to make certain amounts of loans in slums and poor neighborhoods. They put real teeth in the laws. They also jawboned the public and the banking industry to make this an "ownership society." And they, through the Federal Reserve Bank, lowered interest rates (during the nineties and during recent times also), so that many of us went first for the dot com boom, and after that collapsed, we went for home ownership. Now they are busy saving mortgage lenders, in the name of preventing foreclosures. How can you tell a politician is lying? Their lips are moving.

Practically every use we found for "our money" in the last decade or so has turned to shit! Let's face it, the money is not ours. The money belongs to the banking system, but the problem is ours. No investment is safe. It appears that government bonds are safe, but why the hell should we believe any longer in the "faith and credit of the United States?"

Buy gold!

Origins and Tragic End of Sub-Mortgages: It’s the Government, Stupid!

The “victims” of the real-estate bubble and sub prime mortgage crash, and the enemies of the free market would have us believe that “predatory lending” is the real problem. Guess again. Government and its regulations are behind it all.

What happens when government intervenes in order to create an “ownership society?” and curb “predatory lending?” The target of libertarians, a free market, recedes farther into the future.

“Shelter from the FHA

“As part of a continuing legislative reaction to the slide in the housing market and the sub prime mortgage problem, a bill to modernize the Federal Housing Administration has recently passed the House of Representatives.

“Similar legislation passed out of committee in the Senate, but the full Senate has not yet acted. Although the "Expanding American Home Ownership Act of 2007" promises to make it easier to own a home, some troubling factors may leave taxpayers on the hook for loans that cannot be paid back. Like many of Washington's policy initiatives, this is another bad public policy wrapped in the language of love.”

What exactly is Congress now preparing to fix?

It is hard to tell what bailouts and new regulations are coming. Obviously members of Congress include people who are commiserating with the people who lose their homes in foreclosures and/or angry with the lenders. Borrowers may not be smart enough to avoid bad loans, and lenders are, after all, dirty rotten scoundrels.

Something will be done; there are just too many foreclosures, too many crashing shares in the stock market, as well as "junkier" bonds.

Will the cure include un-doing what caused this all? Were interest rates lowered too far in trying to recover from the Dot Com Bubble bursting? Were other government actions also responsible for setting up this mortgage market crisis? Forcing lending to “communities of color” and other neighborhoods against which banks had allegedly been discriminating.

Remember the CRA?

The Community Reinvestment Act (CRA), enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e, is intended to encourage depository institutions [national banks] to help meet the credit needs of the communities in which they operate.

The CRA requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions. (See CRA Ratings) CRA examinations (see Exam Schedules) are conducted by the federal agencies that are responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).

Under these regulations, when the OTS rating of a lending/investing institution falls too low, the sanctions the OTS:

(1) May order that a bank's covered interstate branch or branches be closed unless the bank provides reasonable assurances to the satisfaction of the OCC, after an opportunity for public comment, that the bank has an acceptable plan under which the bank will reasonably help to meet the credit needs of the communities served by the bank in the host state; and

(2) Will not permit the bank to open a new branch in the host state that would be considered to be a covered interstate branch unless the bank provides reasonable assurances to the satisfaction of the OCC, after an opportunity for public comment, that the bank will reasonably help to meet the credit needs of the community that the new branch will serve.

(3) Penalties ranging from $5,000 to $1,000,000 per day.

What Did the Banks Do?

The CRA forced banks to lend to otherwise uncreditworthy consumers (read the article by Thomas J. DiLorenzo from 2007, who inspired me to research this topic).

In making loans of the types covered, including mortgages, the banks became creative and more liberal. The demand for mortgages was also causing an interest in making more profits in mortgages, due to the housing bubble.

There have been long periods in banking history during which the mortgages they let were kept on the books, rather than being sold. Borrowers with high qualifications could always be found by being selective. Further income after the closing on a mortgage could also be earned by owning the mortgage and processing it for its life, the greatest benefit would be the interest earned and the restoring of the cash capital.

Higher Rates for the Lower Grades. When faced with the “liberalizing” rules of CRA, other, less qualified borrowers had to be included. These mortgages were riskier. At first, the normal qualification process based on credit rating and ability to repay resulted simply in higher interest rates, to make up for the higher risk. Not enough loans resulted from this, as the clients in question often faced higher monthly payments than they could afford.

Further changes were required to meet CRA rules. Several other forms of lending resulted:

Adjustable Rate Mortgages (ARMs), whose initial interest rate was 1 or more points below the current standard rate. The “adjustable” feature kicked in after 2 or 3 years, with the interest rate then being “reset” to a certain number of basis points above one of the leading index rates such as the 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). The rate could then periodically move up (by set increments, up to a contractual maximum) or down in step with that standard rate. The hope of the client obtaining an ARM would be that his or her income would rise enough to cover the payments.

Options ARMs, on which the interest rate adjusts monthly and the payment adjusts annually (up to a contractual maximum), with borrowers offered options on how large a payment they will make. The options include interest-only, and a "minimum" payment that is usually less than the interest-only payment. The minimum payment option results in a growing loan balance, termed "negative amortization". Again, the hope is that income increases to meet the growing obligation.

Further Variations, including low or no down payment, “low-doc” or “no-doc” loans (where formal proof of ability to repay is lightened or omitted). Couple this with the borrower having pay cut or losing a job or the negative equity due to a falling real-estate market, and you have a house of cards (pun intended). A house with a falling value is sometimes abandoned, since even if the payments remain affordable, the financial incentive to make them is substantially weakened. The borrower walks away and defaults on the mortgage.

What Else Did the Banks Do?

The CRA changed the behavior of all of these national banks. What did they face? Keep doing sound banking, face unconscionable fines and closures, or accept losses due to defaults. I do not feel sorry for banks. I just demand justice. The government-banking complex bothers me. However, this was an anti-bank squeeze play; an injustice.

Mortgage defaults were bound to increase. Defaults would come in greater numbers than with the previous generations of loans. What did they decide to do? Just as in previous times, occasionally, to obtain cash for new lending, mortgages were sold to investors, now this made it convenient to avoid bearing the full burden of these defaults. The commissions and closing fees were kept by the originator, but a small amount given up in discounts on the mortgages sold.

Mortgage defaults results in not only the ending of the income stream of the monthly payments, but also taking a loss on repossessed homes. The market is not kind and considerate when you are in a hurry to sell unoccupied, possibly damaged property. The risk of carrying these riskier loans had to be mitigated. The legal way out, after having been forced to grant the loans, was to turn around and sell them. They might continue to service them, but they had to dump them.

The investment community probably bought these mortgages at a discount based on the grade of the loan. Now, not wishing to bear the full burden of this risky bundles of mortgages, these investors sliced and diced them and sold these in turn to large institutions, some of them foreign banks.

The banking system created mortgage-backed securities (MBS), collateralized debt obligations (CDO) and structured investment vehicles (SIV).

Then the Chickens Come Home to Roost

However, as the defaults on the underlying mortgages increases, many more people and institutions are hurt. They can no longer carry these investments on the books at cost. The derivatives values fall. MBSs are forced to be sold at fire sales. They must take write-downs.

32 sub-prime lenders that had become "defunct" since early 2006

Guess what happens to their stock values? Guess what happens to the CRA-controlled banks that started this? What happens to their ability to lend and what happens to their share prices?

Bust.

What Should be Done?

Repeal the laws that caused this all.

When the housing bubble bust ends, having a flexible lending industry will not do any harm. The public must be warned, however, should the same cycle begin again. But no bailouts should be made, no adding of “predatory lending” laws and regulations.

The investors of the nation deserve to be left alone. Their capital should be allowed to flow to where it will grow and work the most effectively. After all, in every legal free market exchange (including loans) both parties benefit, otherwise the motivation to make the exchange would be absent. Moreover, we know that government is the absence of that, absence of free market.

The whole CRA scheme should be abandoned. The taxpayers should not be on the hook for bailouts or regulations that are more burdensome. However, that is precisely what Congress will do to us, keep CRA, add more regulations, and take our money to bail out the losers. And cause more inflation by increasing the money supply (have you been paying attention to the credit market help coming from the Fed?).

Ben Bernanke is caught between the rock and the hard place, lowering rates to fight inflation versus a “stimulus package” to prevent a recession. But I do not feel the least bit sorry for him, for he (in his “private” central bank) and his cohorts in the government sector have caused this stagflation, credit crunch and recession.

Biblical Constitution?

January 16, 2008

If Mike Huckable were to be elected president, would he place his hand on the constitution and swear to uphold the bible? Hell no, but he would proceed to make the bible our constitution.

Justice would be an eye for an eye, tooth for tooth, and every 49 years all debts would have to be cancelled. To be blessed would mean you sell all of your posessions and give the proceeds to the poor. If you want to inherit the earth, you would have to become meek. If you are spanked on one cheek, turn the other for the next smack.

What did Huckabee say yesterday morning?

"I have opponents in this race who do not want to change the Constitution," Huckabee told a Michigan audience on Monday. "But I believe it's a lot easier to change the Constitution than it would be to change the word of the living god. And that's what we need to do – to amend the Constitution so it's in God's standards rather than try to change God's standards so it lines up with some contemporary view." Find the whole thing at Raw Story. But on the contrary, “front-runner” now turns to crack-pot.

I cannot think of a single candidate who would not want to amend the constitution in one way or another. They know various amendments they can think up would not get passed, and they would probably work on another way (appointment of their favorites to the supreme court?) to have the constitution applied the way they want.

Suddenly being a Latter Day Saint is sanitized, if not made heroic. Oddly, Romney is the candidate that NBC’s Today show quizzed about this matter. Weird.

If there were a god, surely “god is love” would suggest the libertarian path. There would be standards, true, but standards of inclusion rather than what anti-abortion and anti-gay rules. Let’s have less of this “anti.” Let’s be more inclusionary and liberal.

He drew a circle that shut me out--

Heretic, rebel, a thing to flout.

But Love and I had the wit to win:

We drew a circle that took him in!

"Outwitted" by Edwin Markham (complete poem)

Of course, I am not saying we include Huckabee any more. We want to, but he is now a “goner.”