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September 16, 2008

McCain: The Economy Is In Crisis

Yesterday the ‘fundamentals were strong’ but that didn’t play well, so now it’s a crisis.

I get the politics of this, honestly I do, but I hate this kind of stuff. Does anyone think the current problems are caused by too little federal intervention and regulation of markets?

I’m not a financial expert but I haven’t seen anything laying the failure of Lehman Brothers or the troubles at AIG, Merrill Lynch or the rest blamed on illegal practices. They simply made poor choices and their positions went south.

As harsh as it may seem and as politically poisonous as it is, failures like that are a feature not a bug of the system.

What exactly is McCain going to reform on Wall Street? Will he outlaw dips in the business cycle? Will he no longer allow bad decisions to be made? What exactly is he going to protect people from? Poor investments?

Next up…rainbows and unicorns for everyone!

In fact, it may come as a surprise to some that federal intervention into places it doesn’t belong actually might do more harm than good.

The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make homeownership more affordable for lower-income Americans and those with a poor credit history,” the DC Examiner notes today. “Those steps encouraged riskier mortgage lending by minimizing the role of credit histories in lending decisions, loosening required debt-to-equity ratios to allow borrowers to make small or even no down payments at all, and encouraging lenders the use of floating or adjustable interest-rate mortgages, including those with low ‘teasers.’”

If McCain really wants to help the economy, start by cutting spending and taxes. That would be a real reform that would help. Of course that’s not on the agenda, is it?

Yes, I know that McCain wants to cut earmarks and pork but given that non-defense discretionary spending makes up about 18% of the budget, that’s not going to get the job done.

If McCain wants to fight bad business practices, he can start by trying to prevent the government from keeping the Fannie May and Freddie Mac liabilities off the books. Out in the real world, people go to jail for that kind of thing.

Like I said, I get the politics but it’s just damn stupid to think getting the government more involved in the markets is going to make things better.

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posted by DrewM. at 04:35 PM

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