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Opinion

Opinion

Capitalist system promotes change

February 5, 2012

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In the basement of the newspaper where I worked during the summers of my youth was a prodigious printing press, a rumbling monster that looked like the engine of a Mississippi River steamboat. Pressmen, their faces and hands smeared with ink, swarmed over it with screwdrivers and wrenches to keep it running. On the floor above them, operators typed at keyboards to produce the actual metal type from which the paper was printed. Those jobs and the printing press itself are gone now, destroyed by technology. Newspapers — and journalists themselves — are also endangered species, their existence threatened by the Internet.

High school nerds in those days brandished devices known as slide rules, which facilitated mathematical calculations. Electronic gadgets have made slide rules obsolete, depriving nerds of their symbolic weapons and slide rule makers of their jobs. The Manor Bread man, who delivered baked goods to our house in a horse drawn van, is also gone, and so is the milkman, gone the way of the dodo. (The gallows and the guillotine have yielded to the gas chamber and the electric chair, though some might not call that progress.)

Numberless trades and businesses have vanished in my lifetime, throwing millions out of work. Where have the makers of buggy whips gone? For that matter, whatever happened to Studebaker, Packer, Nash, Hudson, Stanley Steamer, Kaiser, Frazier and all the other automobile makers who drove buggy makers out of business and are now themselves defunct? Why didn’t the government bail them out as it recently bailed out GM?

“Capitalists quite often invent the technology that destroys their own business,” according to an essay in “The Economist.” Kodak, which built one of the first digital cameras and was “the Google of its day,” has filed for bankruptcy. President Obama recently grieved over the loss of bank teller jobs to the ATM machine. The average life of American businesses is supposedly forty years. Jobs are destroyed, and new jobs are created. That’s progress. But it’s also part of the “creative destruction,” which gives capitalism a bad name.

Which brings us to poor Mitt Romney. He couldn’t possibly have picked a more unfortunate profession than “private equity manager” to decorate his resume for a run to the presidency. Job Destroyer! Vulture Capitalist! Predatory Corporate Raider! To top it off, he blurted out, “I like being able to fire people.” He might as well have said, “I enjoy watching children starve to death.” What gaffes might he issue from the Oval Office: “I like to drop bombs on hospitals”?

Regardless of how many jobs Romney created or destroyed at Bain Capital, no matter if he was engaged in charity on behalf of mankind, there’s just no way to sell the benefits of capitalism to the tender-hearted American public. “Voters and politicians don’t believe jobs should ever be destroyed,” one writer observed. If jobs were protected from destruction, we’d still be making buggy whips and enjoying a mirage of “social justice” — along with a lower standard of living. But wouldn’t buggy whip jobs help solve the unemployment problem? Sure, just like the “green jobs” our entrepreneurial government has promised to pull out of its magical hat.

I have no opinion on Romney’s fitness for the presidency. But I am certain that none of the candidates, including Obama, has any intention of addressing our economic problems, including our Byzantine tax code, unsustainable entitlements and regulatory briar patch. Politicians aren’t going to reform anything — and we would howl if they did. Reform would cost the politicians votes and endanger our precious entitlements. We’d rather console ourselves with promises that can’t be kept than face the music and tighten our belts.

Not to worry, though. Global competition will do for us what we lack the courage and unselfishness to do. Either we undertake the changes necessary to survive and prosper, or we go the way of the buggy whip, the slide rule and the dodo.

Comments

Ron Holzwarth 2 years, 10 months ago

The problem is that in a democracy, almost no one votes for an honest candidate.

Ron Holzwarth 2 years, 10 months ago

Ding, ding, ding, a winner! That's an original, google can't find any other instance of anyone ever saying that before!

cato_the_elder 2 years, 10 months ago

"Politicians aren’t going to reform anything — and we would howl if they did. Reform would cost the politicians votes and endanger our precious entitlements. We’d rather console ourselves with promises that can’t be kept than face the music and tighten our belts."

Passing meaningful term limits would change much of this. The time for term limits is now. Instead of whining about the Citizens United decision, go to termlimits.com and get behind the Term Limits movement.

just_another_bozo_on_this_bus 2 years, 10 months ago

The primary effect of term limits would be to increase the power of unelected staff members. And without campaign finance reform, term limits would have absolutely no effect on the ability of big money to buy control over politicians.

That's not to say that term limits is a bad idea, just that by itself, it wouldn't help anything.

cato_the_elder 2 years, 10 months ago

It wouldn't be a complete cure, but our system would be vastly improved if we gave it a shot.

There's no reason to knock it when it's never even been tried.

just_another_bozo_on_this_bus 2 years, 10 months ago

"There's no reason to knock it when it's never even been tried."

There's been term limits on the presidency for many years, and big money is still the prime determiner in who gets either the Republican or Democratic nomination, and hence, the presidency.

cato_the_elder 2 years, 10 months ago

It's never been tried with the U.S. Congress, Bozo, and that's where the problem lies. The many professional, virtually life-long political careers we have witnessed for many decades would remind the Founders of this Nation of the British House of Lords.

emceelean 2 years, 10 months ago

Wow. Look at you two agreeing to disagree but finding some common ground in between. Beautiful.

voevoda 2 years, 10 months ago

Term limits just mean that the politicians trade jobs. As soon as they're not eligible for one job, they run for another, using the political capital they've built up.

cato_the_elder 2 years, 10 months ago

And someone new gets to serve in public office. Thanks for making my point.

just_another_bozo_on_this_bus 2 years, 10 months ago

No one can deny that capitalism promotes change. But that change isn't always for the good, and sometimes, it can't promote the changes we really need.

Raw capitalism did not bring about the changes in civil rights over the last several decades. It thrives on the military-industrial complex, and will resist any attempts to rein it in. And when it comes to seriously addressing global warming, capitalism's only contribution is full-out denial and obstructionism.

Getaroom 2 years, 10 months ago

And many more well respected scientists, who actually do have expertise in Climatology, wrote a challenge to that WSJ article and dressed them down for giving the gang of a mere 16 a platform to stand on. Tit for tat man. I can name names too, important names in the filed of climatology study. No points proven, global warming denier.

jhawkinsf 2 years, 10 months ago

Visa via the problems you mention, capitalism does not appear to be a common factor. Military industrial complexes happen in countries with capitalism as well as is counties without capitalism. Global warming, as reflected by environmental destruction, again happens in countries whose economies are capitalist as well as countries where they are not. Civil right exist is capitalist societies to varying degrees, the same as in countries that are not capitalist.
Capitalism does not appear to be a common denominator in the examples you provided.

just_another_bozo_on_this_bus 2 years, 10 months ago

That those phenomena exist elsewhere does not change the fact that they also happen in this capitalist system, and that it is/has been ill-suited to deal with them. To the contrary, capitalism often sustains them.

jhawkinsf 2 years, 10 months ago

What sustains them is greed, envy, hatred, etc. Those are outside the bounds of any economic system.

just_another_bozo_on_this_bus 2 years, 10 months ago

Political and economic systems do not exist in isolation from each other. They are inextricably intertwined.

tomatogrower 2 years, 10 months ago

And we don't and never have had capitalism. How is subsidizing the oil companies in our modern times, when they are making record profits, capitalism? Taxpayers are paying for the jobs they create, so they aren't even "job creators". Poor rich oil companies. We can't let them fail. Of course, we could let GM fail, right? When no company gets any subsidies from the government, you can talk to me about capitalism, but until then quit being a hypocrite.

tomatogrower 2 years, 10 months ago

And what history book did you read. Back in the days of child labor and no days off? Great for rich, not so good for the people who made their riches possible. Or did some of those people go out and dig the coal and make the steal? Not. They would have to get their hands dirty. Hard to count money when your hands are greasy.

tomatogrower 2 years, 10 months ago

Yes, everyone's life dramatically changed after the unions stepped in to change them, after the government stepped in and regulated them. I doubt if a child whose life was ruined because they worked themselves into an early grave felt much improved. I doubt if those seamstresses who died in that factory fire thought that life was much improved. The so called "capitalists" of that day really only cared about improving their own lives and didn't like to be told how to treat their employees, but public opinion, the government and the unions changed that. And how is having more stuff made anyone happy? Mostly we are owned by our stuff, instead of the other way around.

kochmoney 2 years, 10 months ago

You load sixteen tons, what do you get Another day older and deeper in debt Saint Peter don't you call me 'cause I can't go I owe my soul to the company store

Peacemaker452 2 years, 10 months ago

Could you provide an example of how we are “subsidizing the oil companies in our modern times”?

As a reminder, the definition of “subsidy” from dicionary.com: A direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like.

thebigspoon 2 years, 10 months ago

OK, let's start with the depletion allowance. This is money paid to the producing oil company to compensate for the depletion of the supply of oil they pump. Next.

Peacemaker452 2 years, 10 months ago

The depletion allowance is a tax deduction, not a subsidy. No money is paid to the company.

Feel free to post any proof you might have to prove otherwise.

Care to try again.

Peacemaker452 2 years, 10 months ago

I don’t consider it splitting hairs. Calling the special tax treatment “subsidies” is intended to raise the emotional attachment people have to the issue and is not intended to promote rational debate. We routinely see calls on this web site for people to quit repeating things that they know, or should know, are not true. I am only asking for the same treatment of this issue. I don’t support the special tax treatment that the oil companies (and most corporations) get, in fact, I don’t support the existence of the legal entity that we call “corporations”, but if you are going to have an intelligent dialog about an issue you have to use words correctly.

Richard Heckler 2 years, 10 months ago

Campaigns commence way too early,spend too much corrupt special interest money which now demands substantial and strict campaign guidelines set in stone to end the corrupt system.

Truth in advertising requires 24/7 monitoring before the fact and what cannot pass the test goes to the trash can!

Want term limits? Go to the voting booth without fail and vote in the low spending candidate.

Richard Heckler 2 years, 10 months ago

Voters memory seems short at times which is to say when voting for candidates, history of an entire party must be considered.

Let's take a look at some history for which a pattern might well be in place and should avoid repeating. There is logical reasoning behind this thinking.

  1. Republicans mismanagement of the home loan system TWICE in 31 years could this be truly coincidence? Let's have some prosecution democrats.

  2. 1980's opened the door wide to outsourcing backed by USA tax codes... how to change this nonsense? Null and void the tax codes.

  3. Someone was asleep at the wheel 9/11/01 which put a big dent in USA spending thus killed jobs hmmmmmmmmm

  4. Free Trade which in real life is USA jobs going abroad with USA jobs being the chief export A. Clinton's NAFTA was republican thinking ----- why are we still putting americans out of work?

  5. The constant attack on Unions and Union wages reduces economic growth,wages and benefits. Now really how much sense does it make to reduce wages across the board which will be the end result if Unions disappear..... most all of us will be working for less.

  6. The big banks are sitting on the tax dollars that Pres G W Bush shelled out to them thus compromising job growth and stagnates growth in the small business sector. Let's team up, take those tax dollars back and put those tax dollars to work making money for all of us.

Food for thought...

Banks to big to fail hold the world economy hostage = time to break them up cuz they only got bigger.

Corey Williams 2 years, 10 months ago

ROFLMAO Thanks for that. Rush's replacements aren't nearly as funny as he is.

jayhawklawrence 2 years, 10 months ago

We have had a good run over the last century in regards to scientific discovery, engineering and product development. We have done a great job compared to the rest of the world, but we had the benefits of a large and rich new country to exploit and inspired and talented people from all over the world.

It appears that our economy is being ceded to larger and more powerful corporate interests and there are fewer and fewer opportunities for a young "Henry Ford" or "Thomas Edison".

The ladder of upward mobility is getting more and more difficult to climb as more and more wealth is concentrated in fewer and fewer individuals.

Politicians are taking sides in a game where the one with the most money ususally wins and news celebrities are making millions aligning themselves with either a "conservative" or a "liberal" bias and pretending to actually care.

It is an interesting time to be a regular American, not rich, not poor, just trying to survive in a changing world.

I think there is something called the silent majority. I think they want some payback and come election time, it could be hard to predict how they will vote.

George Lippencott 2 years, 10 months ago

Good opinion piece. IIMHO we are not just focused on preserving the status qua we are for selectively preserving the status qua. Coal fired power plant operators find themselves on the wrong side of the mob while winter generation of crops on a small scale finds itself on the good side.

Perhaps an understanding of this aspect of human nature might have been behind the founding fathers efforts to constrain the role of government so that mob rule does not prevail.

just_another_bozo_on_this_bus 2 years, 10 months ago

"Perhaps an understanding of this aspect of human nature might have been behind the founding fathers efforts to constrain the role of government so that mob rule does not prevail. "

That makes no sense.

Flap Doodle 2 years, 10 months ago

"Republicans mismanagement of the home loan system TWICE in 31 years could this be truly coincidence? Let's have some prosecution democrats...." Before you start calling for show trials, consider that Democrats played a major role in leaning on banks to make loans to people who couldn't reasonably qualify for home loans. (from many, many, many, many, many sources)

just_another_bozo_on_this_bus 2 years, 10 months ago

It was never government policy to encourage liar/subprime loans. Not that I expect you to quit repeating the lie that it did.

Flap Doodle 2 years, 10 months ago

You must never have heard of Chris Dodd.

Ron Holzwarth 2 years, 10 months ago

Snap, he never knew or heard of my brother in law either. He scored about $2 million in real estate in southern California. Any old loan got approved.

It's too bad that he had no clue how to manage money, and is bankrupt today.

Ron Holzwarth 2 years, 10 months ago

The most insane thing that was done in southern CA was to approve loans when the borrower's income was barely high enough meet the minimum payments on a reverse amortization loan or one with a teaser rate, such as 2%, that would only be in effect for two years.

As long as real estate prices kept rising, the scheme worked. You just had to sell your house and get another one every two years. In a way, it was nothing but a very sophisticated Ponzi scheme.

I flat out told my sister they should sell their house for $650,000 in 2006 when they could get that much, and would they listen to me? No, they thought I was stupid.

Then the music stopped, and at the foreclosure sale a few years later, the house sold for less than $200,000.

just_another_bozo_on_this_bus 2 years, 10 months ago

So the massive and conscious efforts by the banks and Wall Street to give out loans to borrowers they knew were unqualified under terms that guaranteed default, and then fraudulently packaged them up for sale to unsuspecting buyers was a "liberal" conspiracy?

jafs 2 years, 10 months ago

If you're referring to the CRA, you're correct in that it was designed to stop banks from discriminating against minority applicants for home loans.

However, it also clearly states that any loans made must be compatible with safe and sound operations of the banks, so it was obviously not intended to encourage unsafe loans.

Also, of course, it was created in the 70's, and many other things happened in between then and the housing meltdown recently.

Mike Ford 2 years, 10 months ago

I love how some people misconstrue the immigrants who told off England and refused to pay their fair tax share after England spent much money making sure these immigrants would still speak English instead of French after the Seven Years war. These same immigrants who argued over the Virginia versus New Jersey Plan and created the mythology of the Articles of Confederation that rural anti civil rights people still hold onto today even though they could never raise enough money to create state armies and the like because they still don't want to pay their fair share. The infrastructure failure of the Confederacy during the US Civil War is proof of this. The constitutionalists refuse to acknowledge the point where Benjamin Franklin observed the speakings of the Onandaga Sachem Canassatego stating on behalf of the Iroquois Confederacy laying down the framework of government infrastructure that Franklin would take in and suggest in the Albany Plan in the 1750's. Bruce Johansen speaks of all this in his book Debating Democracy, Native American Legacy of Freedom, which I own. Not long after the US Constitution was enacted, the US Congress was given plenary power over Indian Affairs in the Indian Non Intercourse Act of 1790 which prohibited states from entering into land treaties with tribes without an act of the US Congress. Every colony had treaties with tribes to get land without an act of congress and got away legally with this malfeasance from 1790 to 1973 when the immunity from prosecution for land theft was pierced and destroyed by the Oneida and Cayuga tribes of New York. Tribes from Maine, Connecticut, and Massachusetts later reclaimed lands due to the actions of the Oneida and Cayuga in the 1970's and 1980's. In short, capitalism is not about rules....it's about exploitation. The high ground that many of these fairy tale hallowed ground revisionists speak about as they try to create this Glenn Beck like quasi reverence is shuhka anumpa (hog talk or hogwash) in my Choctaw language. You stole to get what you have and escape feudalism and being paupers in Europe. There's nothing really enlightening about land theft even if it's wrapped in sanctified justificiation as it was by the Pilgrims after the fall of the Pequot and Wampanoag peoples in the mid 17th century. If these founding fathers were religious as the dimwits state.....why did they advocate the separation of church and state to stop another situation like the Anglican Church in England and the Catholic Church over the rest of Europe??? doing my part to upset the apple cart.....

camper 2 years, 10 months ago

Capitalism is not your friend, and it is not your enemy. It can be the thing that earned you good money as a horse carriage manufacturer, but in later life unemployed. During the mid nineties it may have helped you in a promising career as a computer programmer, but now an unemployed one whose job has been outsourced to cheaper labor.

Capitalisim is the best economic system all told, in my opinion. I respect it, but I don't worship it and consider it as something holy. It can be tempered by monetary and interest rate policy. It can be stimulated by government intervention and/or guidance (the Keynesian approach as far as stimulatiuon, and the Japanese approach as far as guidance). Tweaking capitalisim and having safety nets is there to temper the cruel nature that sometimes can be capitalism. It is not a move toward Socialism, it is merely to minimize the downswings, the bubbles, and speculation that can and have proven to deal big blows to Capitalism.

camper 2 years, 10 months ago

I think we can agree that Hoover tweaked things badly and mostly the opposite way they should have been done (he raised taxes and interest rates). I think most economists agree that the contractionary monetary policy during the Hoover administration made things much worse. You had low demand, deflation, and not enough money in circulation. Hoover had the wrong prescription for sure.

voevoda 2 years, 10 months ago

Hoover's "tweaks" made the economy worse; Roosevelt's made it a lot better. Only radical anarcho-capitalists believe that all regulation is bad regulation. Only radical anarcho-capitalists and communists believe that having the right economic system in itself will heal all the ills of society. For them, these are articles of faith, and no data and no argument will ever dissuade them from their views.

Mike Ford 2 years, 10 months ago

many sources.....american history from high school and college and debating democracy by bruce johansen.....oh, I forget....some people don't read or research....listening to cal thomas, george will, or charles krauthammer is enough fact???? for them....

Ron Holzwarth 2 years, 10 months ago

The concept of capitalism is very old. It is literally as old as spoken language itself.

In fact, some say it dates to the very first time a woman said to a man, "You wanna?" And at that very moment, the world's oldest profession was born.

yourworstnightmare 2 years, 10 months ago

Good article.

However, food for thought:

Mr Gurley's great great grandson, 100 years from now, posting on the Cerebral Direct brain feed: "Without capitalism, we would still be making internal combustion engines and coal fired power plants to burn fuels that have long since been depleted and that destroyed our planet."

George Lippencott 2 years, 10 months ago

OK Bozo let us reason together for a moment.

The federalist system established by the founders tried to limit the role of the federal government to those matters specifically prescribed. That meant that no matter what the presumed “majority” wanted (I use the term mop) they could not impose it on the minority (like federal income tax payers now that they are essentially in the minority).

Requiri8ng that those taxpayers fund those impacted by "change" IMHO falls into that category. For example you bought a home you could not afford betting on the continued escalation of prices and low and behold that did not happen and now you are underwater and cannot afford the payments - so those who were more cautious and did not get themselves in that predicament get to pay for your foolishness.

Yes, some people lost their jobs and got had but that has been happening since we formed the Republic. All of a sudden it becomes the responsibility of productive taxpayers to accommodate the change (federal underwriting of high risk mortgages) because a presumed majority (non-taxpayers) demand it. As was recently noted we cannot afford to underwrite with federal largess all the “bad” things that can happen in a capitalist society -there is simply not enough money!

Change happens. The government is now a big time agent of change. Like the market the government is not always a positive agent for that change

George Lippencott 2 years, 10 months ago

Comment: If you're referring to the CRA,

Moderate Opines:

The problem therein was that goals were set. The mortgage industry responded to those goals because they had no risk in the game. They had no risk because the “government underwrote the mortgages through Fanny and Freddy.

I guess you could be narrow minded and find the mortgage providers guilty but I personally hold the government guilty because of the incentive the government provided (guarantees) coupled with the goals set.

The leaders of both parties knew or should have known the likely results and provided the necessary oversight to flag the mess that ensued. They did not because IMHO they all made a bunch of money on the game and left the rest of us holding the bag when housing values tanked.

Yes, I am very distrustful of government because the leaders are just like the rest of us and have mostly their own interests in the game. The old notion of “Mr. Smith” goes to Washington probably never was real and certainly is not real today. The more power you give them and the more fraud waste and abuse there will be. Simple human nature – what is in it for me.

Mike Ford 2 years, 10 months ago

life in the bubble of denial is good.....right liberty....why argue with you when live in the bubble?

voevoda 2 years, 10 months ago

Liberty_One, Please read your own posting to heart.

jafs 2 years, 10 months ago

Again, the CRA mandates that all loans are to be made consistent with safe and sound operations of the banks.

That clearly is not intended to encourage unsound loans, no matter how many times those on the right repeat that.

camper 2 years, 10 months ago

Here is a bumper sticker I read the other day "Only Idiots Need to be Governed".

Unfettered Capitalism would be like playing a sport without any rules or referees. While I prefer Capitalism, I have concern about its flaws. For one, I do not think it values long-term sustainability or conservation of resources. I also do not believe that all of societies needs fit nicely into a profit and loss model. Capitalisim does not address this. That is why I like it, but to me is not the one size fits all answer for everything.

yourworstnightmare 2 years, 10 months ago

20th century liberalism was defined by managed capitalism, and was the policy of every 20th president with the possible exception of GWB.

The energy industry right now is a mess. Capitalism has not been allowed to work. Oil has been subsidized to keep its price low for 80 years, Thus, it is difficult for an emerging market, say wind, to get a foot hold in this subsidized oil market.

It would be interesting to remove subsidies for both oil and green energy and see which one would dominate the market in 50 years.

Peacemaker452 2 years, 10 months ago

Could you provide an example of how “Oil has been subsidized to keep its price low for 80 years”?

As a reminder, the definition of “subsidy” from dicionary.com: A direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like.

thebigspoon 2 years, 10 months ago

See my 10:46 above, and I repeat: Depletion Allowance. Look it up.

Peacemaker452 2 years, 10 months ago

See my reply.

Feel free to prove me wrong.

I will freely admit I'm wrong if you can provide any proof of the government paying the oil companies cash to cover the "depletion Allowance".

thebigspoon 2 years, 10 months ago

Semantics. One can always narrow any argument to the ridiculous. The fact remains that the oil comanies gain a tremendous advantage and can sell their products for huge profits and still get government handouts.

Peacemaker452 2 years, 10 months ago

So, using the actual definition of a word is now narrowing any argument to the ridiculous?

The oil companies do not get government handouts. Please quit telling that lie.

I am not denying that the oil companies get a lot of tax breaks that you and I don’t, but an argument against the tax policy should stand on its own, not lean on an intentional misuse of the word “subsidy”.

yourworstnightmare 2 years, 10 months ago

What would you call 50 years and trillions of dollars in foreign policy and military operations to keep the Persian Gulf and Saudi Arabia safe for American and other oil companies?

Yes, "subsidize" does not come close to describing how the US government has spent trillions to ensure a steady flow of oil.

Peacemaker452 2 years, 10 months ago

If you are going to make an argument, don’t rely on intentional misuse of words, form your argument on facts.

Yes, the oil companies (along with many others) have benefited from some foreign policy decisions, but that is not a subsidy.

Mike Ford 2 years, 10 months ago

you know....whether or not you realize it BAA....and I don't think you do... the backbone of a concerned society is it's ability to lift everyone up like religiously concerned people do. You don't sound concerned or religious....you sound selfish....I'm a Democrat....have been one since 1988....would've voted against Reagan in 1984 if I was 18 and not 14. No Democrat has ever redestributed my earnings. However....Republicans rerouted my earnings to two unnecessary wars and tax cuts for the rich and intentionally confusing Medicaid Part D that costed more than Mr. Obama's stimulus plan and intentionally ran off many seniors due to the donut hole and the intentionally confusing plan options. My father was a minister for forty years and got a liver transplant at 64 years of age. The younger people who got liver transplants in their fifties are financially killed by Medicaid Part D due to the costs of the medicines they need to keep their bodies from rejecting their transplanted organs. You people are soooo selfish and full of it....

George Lippencott 2 years, 10 months ago

Ok, somebody made risky loans. Ok we use the term wall street to cover the large number of mortgage providers that are nowhere near Wall Street.

I continue to maintain in the face of all sorts of people demanding more government involvement that such involvement must come with a policing element to make sure that what is intended actually occurs.

The government offers internal classes on implied incentives and a key aspect of that is to make sure your goal will not be undercut by an unintended incentive. Creating a goal to make loans to people with marginal incomes while providing protection to those making such risky loans is a case in point.

If the government is trying to implement social policy through the mortgage market it behooves the government to police the outcome. Now I maintain that the failure to police was a bi-partisan intent so that the members of congress in oversight positions could benefit from the lack of such oversight.

That is exactly why I oppose most increases in government responsibilities because the lack of such oversight seems to be rampant.

It is disputable to argue that all fault in the financial disaster that occurred falls on the back of “wall street” which of course on its face is wrong since the mortgages were made by countless entities (and a few big ones the party in power refinanced after they got caught off base).

Admit it people, there is a down side to giving the federal government ever increasing power as much smarter people than I have observed that power corrupts and ultimate power corrupts ultimately

yourworstnightmare 2 years, 10 months ago

Capitalism is a powerful agent of change.

In this regard it is ultimate anti-conservative engine.

The market forces of human economics crushes all ideologies before it, whether those are religious, economic, or social in nature.

Yes, God says to not eat pork, but we just love it so much!

jafs 2 years, 10 months ago

Did you read the actual quote?

Do you think that the document penned in the 1700's is the best/right model today for a nation trying to develop a constitution?

jafs 2 years, 10 months ago

Exactly.

It's a very different world today, and we are living with many things that the founders had no experience of, as well.

camper 2 years, 10 months ago

Increasing shareholder wealth is becoming a flaw for capitalism. This is because owners and mangers are not necessarily making the right decisions for the long term health of corporations. Upper level managers are often compensated by stock options, and many shareholders are hands off and are really only looking at the stock price. So in effect, corporate decisions are more often based on short term appreciation of stock. This is not good stewardship.

Take GM for instance. They went on a agenda of buying back stock to drive up share price. It is estimated that a bailout of GM would have been covered if instead these monies were kept in retained earnings. Corporations often inflate earnings by reducing employee costs, because this is often easier than increasing revenues. This definitely has short term benfits, but downsizing can lead to poorer performance and a shortage of good employees who are really assets. Anyone who has worked in a downsized office or one where functions have been outsourced overseas knows what I'm talking about.

Good employees should be viewed as stakeholders, because they are invested in the company by the work and dedication they provide. Shareholders are often unseen stakeholders who are usually not involved or are only interested in short-term returns.

I prefer capitalism if it is not corporate. Paartnerships and small business, is a better form of capitalism.

Armstrong 2 years, 10 months ago

If intelligence is a requirement the lefts list can't be started.

Flap Doodle 2 years, 10 months ago

All power to the soviets! (from a source)

jayhawklawrence 2 years, 10 months ago

There is a problem with falling into the trap of making Capitalism itself appear to be under attack. I think this is very interesting because the hard right wants us to believe that Socialism is threatening the survival of our nation.

The next step in the logic is to convince people that everything left of hard right is Socialism and must be wiped out.

Social safety nets or help for the mentally ill falls into the category of Socialism and is therefore, "evil" and it is the anti-thesis of the sacred "Capitalism" as it is defined by people who are actually not true capitalists at all when they pay off politicians and hire politicians to sit on their boards and vote on legislation that they themselves write.

George Lippencott 2 years, 10 months ago

Argument: The CRA mandates that all loans are to be made consistent with safe and sound operations of the banks.

Moderate Responds. If I had a nickel for every such statement made by government and business I would be wealthy beyond imagination. The government makes such statements and then sets specific goals for mortgages that are not safe and sound (individuals with low incomes and loans with no money down to mention a few inconsistencies). You then protect the mortgage lender with a government guarantee. Stupid beyond belief. Only ideologically inspired liberals would hold such government action as “harmless”.

jafs 2 years, 10 months ago

None of the people who've argued that the CRA is responsible for this mess have provided any evidence of that whatsoever.

And, the language is clear and concise.

Without any evidence to the contrary, I have concluded they are simply wrong, and that banks did not make unsafe loans in order to comply with the CRA.

George Lippencott 2 years, 10 months ago

It never ceases to amaze me how intelligent people fall for sound bites. I guess because the government said there was WMD in Iraq- there was.

If no one incentivized the mortgage lenders to make sub-standard loans why are there sub-standard loans. Without government guarantees they would have lost their shirts. You can not be called greedy if you do something counter to your own interests

Sometimes poof comes in the form of logic applied to real events.

jafs 2 years, 10 months ago

There are a variety of different issues here.

One is the CRA - I stand by my position on that. Anybody who feels differently can provide some evidence.

Government guarantees for sub-prime loans are a different matter. I agree that those are a problem, and expose us to too much risk.

The obvious incentive, also, to make those loans, is that the mortgage lenders were able to sell, bundle, and securitize the loans, helped by rating agencies that were paid by the issuers to sell them as AAA securities, which was clearly not warranted.

In fact, the rating agencies are a lynchpin of the whole scheme, without with it could not have happened - the conflict of interest involved when securities issuers pay the rating agencies should be obvious to everybody.

The fact remains that sub-prime loans, being risky, do not fit within the CRA guidelines, and anybody who says that banks made such loans to comply with it is simply wrong.

George Lippencott 2 years, 10 months ago

Well I guess once again we are in violent agreement on a number of points. For one the CRA did not mandate substandard loans – directly. When the government sets goals and there are perceived consequence for not meeting those goals people may take shortcuts – particularly when there is no consequence to them.
It is not the CRA per see but the link between it, the overall government involvement in the financial services sector and government loan guarantees that removed consequences from specific risky actions. Just why would we be packaging substandard loans into investment grade products that were sold to Fanny and Freddy among others when anybody with a brain understood the risk underlying the transaction. I continue to maintain that government leaders of both parties were aware of the potential consequences and elected to ignore them. I tend to believe it was self-gain and not a desire to help- people find homes that drove that issue although the latter became an easy excuse for the industry (and government leaders) to do what they did.

So back to my argument that both parties are responsible for this mess by mixing a desirable government goal with a guarantee of products without regard to risk – and then not providing adequate oversight.

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