Posts Tagged ‘TARP’

Left-wing Think Tank Acknowledges Failures of TARP, But Advocates Wrong Ammendments

November 21, 2009

The Center for Economic and Policy Research, a “progressive” (liberal) economic advocacy group’s director, Dean Baker, criticizes TARP, but for the wrong reasons[1]. Instead of criticizing the practice of malinvesting taxpayer money in failing companies, the testimony focuses on advocating restrictions on the few aspects of the banking industry not controlled by government. However, such restrictions would only cripple the financial market further.

The CEPR suggests a rule that would force banks to allow people to live in foreclosed homes as “renters”. Presumably, the way this would work is that the homeowners would have their houses foreclosed but they would have a right to continue living in the same house, and so the banks would not be able to auction off the real estate. Besides the fact that this would drive up home values due to a decreased supply of cheap foreclosed housing, such a regulation would limit a bank’s ability to pursue profit, and banks would experience more losses. And bank losses began the financial crisis.

Another suggested regulation on the financial industry was a cap on executive pay. Because such a cap would only apply to our country and because executives can afford to move, it is likely that this would cause the best of the executives to seek working in foreign markets. Because this regulation, as currently proposed, would only affect the financial sector, the best executives would leave the financial sector in search for higher pay elsewhere. The CEPR does not understand that there is a competitive market for effective executives, in the interest of company profit.

The CEPR also mistakenly asserts that bank executives decide their own pay. This is absurd. If the bank is a corporation, then a board of trustees decides executive pay. If the bank is owned by the executive, then executive pay is determined entirely by the profit of the bank. Else, the executive is an employee whose way is determined by his/her employer. The wages of an executive are not a drain on the company, but a necessary investment. to ensure the efficiency of a company.

The CEPR also mistakenly asserts that regulations are not interference with the market. Any regultion is an interference with the market if it has any effect at all.

The CEPR is correct in asserting that banks are not forced or pressured into making loans it would otherwise make, because such loans would constitute a loss. However, when we cross apply this premise to some of the policies they advocate, such as expansionary monetary policy, the contradiciton is certain. Expansionary monetary policy necessarily encourages banks to give out loans because the Federal Reserve interest rate decreases and more loans become profitable. The bubble is then formed which the CEPR next criticises as the cause of the recession. If this bubble was most certainly the cause of recession, and it was, and this bubble was caused by expansionary monetary policy, and it was, shouldn’t the CEPR change their advocacies?

The CEPR will not change their advocacies because they are dedicated neokeynesians who believe that individuals are incapable of effectively and efficiently controlling their own actions in the pursuit of their own welfare. This is absurd, for the only thing that keeps individuals from doing this is the hand of government.

This article refers to http://www.cepr.net/index.php/publications/testimony/the-failures-of-tarp/.

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“Atlas Shrugged”

April 15, 2009

I attended a local teaparty, one of apparently thousands across the United States. The newspaper estimated that 500 people would attend our protest; 5,000 people attended.

The atmosphere was wonderful. People all around me, all frustrated at the continuous growth of government and the direct and indirect taxation of our people. They were frustrated at the growth of the public debt. They were frustrated with government waste.

Kevin Brady, our congressman, spoke at our teaparty. He told us  of the greatness of lowering taxes and of limited government. Ironically, he had voted for TARP last year. Many of us were yelling at him, “Why’d you vote for TARP?”, or “Why’d you vote for the bailouts?” Justice was served, and our voice was heard.

As this ripples throughout the country, we shall see what effect this will have in the long run. Many networks have given this protest little or no time, even though it is the largest single-day protest in the history of the United States. CNN and MSNBC in particular have shown bias with their apathy towards these protests. FNC, on the other hand, had featured this nationwide protest.

TOverall, the teaparties were a necessary step in the direction of revolution, or atleast the change we need.