Friday, December 03, 2010

The Moral Hazard Of Bailing Out Banks/Wall Street But Not U.S. Unemployed

They call them the "99ers" - those unemployed who have received benefits for 99 weeks, more or less. The conservative congress, which I campaigned for, probably will not extend the benefits further. Somewhere along the line we have to say "no" to additional spending, but it is impossible for the fedgov to offer a valid excuse for how it can bail out the Wall Street and banks - home and international - with the trillions of dollars (according to CNN) that the entire bailout job may cost.

Larry Kudlow first mentioned "Moral Hazard" way back in 2008. George Bush was for it, however, his Republicans in Congress voted against the infamous TARP. The Dems were in a majority voting for the massive measure that would assuredly "rescue" the country from financial destruction. Kudlow merely asked the question which defines Moral Hazard - "How can you bailout banks and Wall Street, and NOT bailout every other business or citizen that sinks into a financial abyss?"

It was the fedgov in the first place, under the auspices (shaking down) of Jesse Jackson and Barney Frank which pushed for the guarantee of practically free housing for every American through Fannie May and Freddie Mac. Private brokers, lenders, hedge funders and other traders all assumed that there were government backed guarantees to the mortgage backed securities and other packaged CDOs, etc. No job? No income? No credit record? Then, you may own a house.

The glut of demand for (free) home ownership pushed the prices of homes into astronomical heights, before they fell to earthly depths, thus killing the U.S. economy for quite some time. The higher cost of fuels - again, thanks to the fedgov's interference with the production of evil fossil fuels - also helped nudge us toward the eve of destruction beginning in 2007 after which a barrel of oil surged to over $130.00 per barrel in 2008. Remember? Don't forget as world global warmists gather in Cancun at this very time in order to devise even more devious ways of cutting the U.S.'s use of energy of all kinds.

Even if banks and GM did pay back all that was loaned to them (but how would we know since the Federal Reserve has henceforth not opened its books for examination), why not "lend" just enough money to survive to those who have been unemployed for nearly two years? Talk about owing your soul to the company store.

Meanwhile, Bernanke is doing something he said he would not - infusing hundreds of billions of borrowed money into the system ie., Quantitative Easing. According to this report, the Fed will have to print/borrow 4 trillion dollars to pay off the previously borrowed debt which resulted from the 2008 financial crisis.

As the Congress looks at massive Deficit Reduction in the midst of a housing and general economic crisis we should not fall into another Moral Hazard by increasing the taxes for the rich who contribute, by far, the majority of revenue to the federal coffers while the lower earners pay nothing, yet receive the lion's share of the federal and state benefits. When the evil rich's tax rates are increased, federal revenues fall. God had it right in the Old Testament when He required the rich to pay only one tithe, and not two or three tithes - as the poorer Israelites would also pay, only, a tithe. Also, the poorer Jews were commanded Not To Covet the goods of their richer brethren - something we will never hear quoted in Democratic Party platforms. "Covet Thy Neighbor's Goods," is their mantra.

The Federal Government, beginning under President Bush and continued exponentially under President Obama, has played favorites by gifting Wall Street and the banks with outright grants worth trillions of dollars and with loans at virtual zero interest rates. Uncle Sam has no valid explanation why he cannot so generously subsidize every other citizen/business of the United States - who fails. That is Moral Hazard.

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