florida ramblings

Thursday, October 02, 2008

H.R. 1424 remains step toward socialism

Dear Representative Keller,

Thank you for taking the time to listen to your constituency. I’ve written previously about the “bailout” legislation for the financial markets. Specifically, I’ve been decidedly against any such legislation.

I want to reiterate that I remain so. I am a small investor, a postal worker who lives frugally and saves and invests about 20% of my gross income. I have a pretty fair exposure to the markets and have in the past year watched the value of my investments go down considerably.

The negative reaction, some would say temper tantrum, of the markets the past few days has in no way changed my take on the so-called “Emergency Economic Stabilization Act.” I remain convinced that government intervention in the private markets is dangerous and ultimately will have negative repercussions in the US economy.

Because of the nature of politics, government cannot intervene without distorting the marketplace to try to gain some political advantage for one party or the other. It’s the nature of the beast.

The current legislation sent over from the Senate remains a piece of legislation that I think if approved will one day will be looked upon as the day the United States took a great leap into socializing the US financial markets and industry as a whole.

Still, I know that the art of politics is compromise. If there is anyway that this bill can be stripped of it’s socialist underpinnings while keeping the legislative changes insuring troubled assets (Sec 103 ), Mark to Market (Sec.132), FASB 157 (Sec.132), and increases in FDIC insurance to $250,000 (Sec.132) it has the makings of a decent bill that addresses the problems that created the stagnation in the financial markets.

I would also like to see repeal of some of the provision of the Community Reinvestment Act that have resulted in a situation where many who truly cannot afford the responsibilities of home ownership are now finding themselves strangled with unaffordable mortgages. The result of which is the sub-prime “meltdown” we are now seeing.

Sec. 124 addresses some changes in the HOPE program, but I have neither the resources nor the expertise in legislative language to cross-reference and discover the implication of these changes.

I am glad to see codified in the legislation that all proceeds from the sale of the purchased assets will be returned to the Treasury for the purpose of reducing the public debt. I can only hope that future administrations and Congresses will not find a loophole around this provision.

The inclusion of sunset provisions for the aforementioned legislative changes is distressing. If we recognize that the original adoption of these provisions was a precursor to the current situation, that we would even consider returning to them a some future time demonstrates an amazing lack of foresight and stewardship with the public trust.

The addition of “sweeteners” to this legislation makes it even more distasteful to me. Inclusion of important legislation on energy issues, a plethora of random tax provisions and Title V Subtitle B are acid to me. They should stand on their own without being thrust though on the coattails of H.R. 1424.

The provisions of Title V Subtitle B alone will most likely result in further increases in health insurance costs, for benefits many would not opt for, during a time when costs are escalating on their own at intolerable rates.

While I don’t support this bill in it’s current form, it’s preferable to the original legislation defeated on Monday. I am concerned that with a new administration coming, depending on their political leanings may migrate more towards the provisions of Sec. 101 rather than those of Sec. 102. That would be a tragedy for the American people and the long-term health of US economy.

Download H.R. 1424 as passed by the Senate October 1, 2008 from FoxNews

"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson

Labels: abuse of power, capitalism, financial crisis, legislation, mortgage crisis, Ric Keller, taxes

Steve Montgomery Thursday, October 02, 2008 0 comments

Tuesday, September 30, 2008

Congressional statesmen hold the line for the people.

An open letter to Florida Rep. Ric Keller:

Thank you for your vote against the flawed Emergency Economic Stabilization Act of 2008 - H.R.3997. It was and remains deeply flawed and fails to address the fundamental problems underlying the current weakness in the credit markets.

It seems that many in Congress have the mindset that the only solution to a problem is to “throw” money at it. You cannot fix is problem caused by bad legislation with more bad legislation.

There is a much better solution that will be less costly to the American taxpayer. According to William Isaac the Fair Value Accounting rules, better known as mark to market, are a prime culprit in the current crisis.

According to Isaac, “This is contrary to everything we know about bank regulation. When there are temporary impairments of asset values due to economic and marketplace events, regulators must give institutions an opportunity to survive the temporary impairment. Assets should not be marked to unrealistic fire-sale prices. Regulators must evaluate the assets on the basis of their true economic value (a discounted cash-flow analysis).”

One Rep. John Linder has said that were this rule returned to mark to par almost every financial institution that is now in trouble would be back on solid footing. Mark to par served our nations financial institutions well for 220 years. FAS 157 and mark to market has resulted, in conjunction with other flawed legislation such as the Community Reinvestment Act, in the current crisis in our financial markets.

The CRA requires banks and lending institutions to make loans to that were otherwise fiscally indefensible. Many of the loans made under CRA form the basis of the current sub-prime mortgage foreclosure problem.

Community organizers have used CRA to force banks to make loans they otherwise would not have extended. A.C.O.R.N., for one, is well know for its methods of “shaking down” lenders and requiring them, under the auspices of CRA, to make “exotic” loans to unqualified applicants.

Contrary to assertions by Democrats, deregulation by Republicans has not been a factor in the current crisis in the financial markets. To the contrary, Sarbanes-Oxley, voted into existence by a Republican Congress in response to Enron, WorldCom, Tyco, et. al., was a buzz saw where a scalpel was needed.

This should be revisited and repealed in part or, better, in whole.

Additionally, updating F.D.I.C. insurance to cover up to $250,000 in deposits will ensure small businesses that the money they need for payrolls and operating expenses will be there when needed despite the turmoil in the credit markets.

I’m not financial wiz, but I do understand that when government gets involved in the private sector, the primary result is chaos and disruption. There is a place for prudent regulations and laws to punish abusers.

But government manipulating the private sector for the purpose of advancing “progressive” policies that fly in the face of common sense and good business practice must stop.

Further reading: