Friday, September 26, 2008

LARRY ELDER OP-ED: Is Capitalism On The Ropes?

Asks the libertarian Republican commentator: "An indictment of greed! A case for more government intervention! Worst financial crisis since the Great Depression! Failure of capitalism! This list includes the 'lessons' of the recent turmoil in the financial markets. Nonsense. Down with greed! Someone please produce the gun held to the temples of borrowers who put little or no money down, took out 'teaser' rates, and then pleaded ignorance or victimhood when the lender -- as stipulated in the contract -- jacked up the rate. Lenders and borrowers expected government/taxpayers to somehow, someway, step in and shield them from the consequences of their decisions. This creates 'moral hazard' -- behavior based upon the knowledge of protection from the bad consequences of reckless or irresponsible behavior. Decisions entail risk, whether personal or financial ones.

We need more regulation! We have it -- lots of it. Ever hear of the Office of Federal Housing Enterprise Oversight (OFHEO)? This agency, which employs 200 people, exists for one thing and one thing only -- to 'oversee' Freddie Mac and Fannie Mae, the 'government-sponsored entities' that own or guarantee 40 percent of the nation's residential mortgages."He continues his commentary: "We are experiencing 'the greatest financial crisis since the Great Depression'! Even if this were true, we aren't even close to that catastrophic event. At the Great Depression's nadir, 25 percent of adults were unemployed, including nearly 50 percent of urban black adults. Economist David Wheelock, of the Federal Reserve Bank of St. Louis, says that by the dawn of 1934, nearly half the urban homes with mortgages were in default, and 7.3 percent of housing structures had been foreclosed. Today 6.4 percent of mortgages are delinquent, 2.75 percent are in the foreclosure process, and 0.6 percent of all housing units are bank-owned.

But what about since the Great Depression? Take the recession of 1980-81. In 1980, inflation averaged 13.58 percent, unemployment increased from 6.3 to 8.5 percent, and the prime loan rate reached an astonishing 21.5 percent. According to the Mortgage Bankers Association, today's delinquency rate is only a little higher than in 1985. And in 1999, the foreclosure rate set records. According to the FDIC, in the almost two-year period of 2007 and 2008, 15 banks failed. Similarly, during Clinton's last two years in office, 1999 and 2000, 15 banks also failed. In the recession-free years of 1988 and 1989, there were 1,004 bank failures. And since the Great Depression, the average number of yearly bank failures has been 94."Mr. Elder discusses the lack of capitalism in America: "This exposes the failure of capitalism! What do you say we actually try capitalism, where private actors reap rewards and assume the risk? 'Capitalism,' says Kenneth Minogue, professor emeritus at the London School of Economics, 'is what people do if you leave them alone.' People want 'hands off' until, that is, they want 'hands on.' People want homes, many preferring that option even when renting may be more prudent. Many want rent control to shield them from leasing at fair market rates.

Democratic presidential candidate Barack Obama promises 'world-class' education -- with taxpayers paying for it. And the federal government, in dramatic contradiction with the limited-government intention of the Constitution, involves itself in health care, guaranteeing private-sector retirement accounts, disaster relief, welfare, unemployment compensation benefits, retirement benefits, etc. The Federal Reserve Bank, in effect, prints money to pay for things that voters demand -- but their taxes cannot cover. The proposed bailout of financial institutions enables the Fed to create hundreds of billions of dollars out of thin air. The cost is greater inflation -- a stealth tax on us all. Government, meanwhile, grows and grows."And more: "In 1930, before Franklin Delano Roosevelt's New Deal, taxpayers paid about 12 percent of their income to all three levels of government -- state, local and federal. Today we pay approximately 40 percent -- even more if you attach a value to unfunded mandates, such as those issued by agencies such as OSHA. So, yes, our recent financial turmoil does suggest failure -- a failure to truly practice capitalism and a failure to accept and believe in the value, appropriateness and morality of a limited government and maximum personal responsibility."


Hershel Daniels Junior said...

Your premis is wrong - it was not regulation

Our national organization the National Community Reinvestment Coalition ( has met with Fed Chairman this past Monday. Know when he ended meeting. We have met with his predecessor for 5 times and him once before this.

When he was checked on the history of crisis, he ended the meeting with him, three FOMC members and the Feds Chief Counsel. What we said was for 5 years we have been telling you they been stealing us blind and now you see it was us?

Those who made loans under the law including the Community Reinvestment Act are not in trouble. Those who created products through subsidiaries or new enterprises to write paper are in trouble. The housing market is 55 trillion dollars. We are having tom write down by at least 40% most troubled loans. By this December we will have 4 million people in foreclosure. Not because of regulation but because we had to little.

Facts: 50 years ago we in America started a new home loan product series. My dad a FHA agency employees then was part of that transformation and I got to see it fist hand.

We in Ohio are looking to create a new product that has built into it some unique feature like LEED qualification requirements and wireless broadband built-in.
If you want to participate in the change from a Black Conservative Perspective like our Chairwoman Wanda Lloyd Daniels at We are developing for Ohio a demonstration that works within the agreement being worked out, join us if you wish to be in the mix.

Bianca said...

It was regulation or lack thereof if we don't have regulation/oversight anarchy is bound to happen...And another reason is greed. There were no oversight therefore no cap on what these businesses did so there is our downfall in a nutshell...Corporate Greed+ Deregulation= 700 billion dollar bailout

HD Notes said...

It was the lack thereof make no mistake. For info goto Now our I am married to a woman who met the current President of the United States this past October and supports John McCain!!!

She is Cincinnati Change's Founding & Current Chairwoman Ky. Col. Sister (IBEW) Wanda Daniels. Thanks Fred and Robert for serving in this post while we retool.

She also founder of the Cincinnati Hamilton County Black Republican Forum and Lay Leader of Keys of the Kingdom UMC. Now I am working with her because the President, another Methodist, just got administrative control of, not only, over 5 trillion dollars in Fannie and Freddie assets but the whole mortgage industry with AIG and his $250 billion dollars from the 700B authorized.

She has just met with the Gov. yesterday and Lt. Gov. Steele the other day - the party line it was the no good Democrats. Remember it was under Clinton that Citigroup spearheaded the change in the law that allowed banks and insurance companies to merge, again, Last time was before the great depression. It was everyone in the mix, we have been in the circle folks.

When the Black man [Fannie] came in a told us [NCRC] he was going to do 2 trillion dollars in home mortgages we never through they would buy paper that had no doc's behind it, but they did - cause those regulators of the banks said this is what we are producing and your job is to make a market for this. Are you not GSE's, make my day. They did, now we pay for it.