George Will And Don Quixote

Subsidized windmills in Spain cost more than just failing to create substantial "green jobs."

Calzada, 36, an economics professor at Universidad Rey Juan Carlos, has produced a report that, if true, is inconvenient for the Obama administration's green agenda, and for some budget assumptions that are dependent upon it.

Calzada says Spain's torrential spending -- no other nation has so aggressively supported production of electricity from renewable sources -- on wind farms and other forms of alternative energy has indeed created jobs. But Calzada's report concludes that they often are temporary and have received $752,000 to $800,000 each in subsidies -- wind industry jobs cost even more, $1.4 million each. And each new job entails the loss of 2.2 other jobs that are either lost or not created in other industries because of the political allocation -- sub-optimum in terms of economic efficiency -- of capital. (European media regularly report "eco-corruption" leaving a "footprint of sleaze" -- gaming the subsidy systems, profiteering from land sales for wind farms, etc.) Calzada says the creation of jobs in alternative energy has subtracted about 110,000 jobs elsewhere in Spain's economy.

Free market advocates have been warning for years that subsidizing industries deemed environmentally friendly by politicians that pander to environmentalists will not create enough jobs to justify the taxpayer expense. Clearly, from the Spanish example cited above, the result of government investing in "green" jobs has not panned out as the rhetoric claimed. Obama rode to the White House on the promise and hope that government "investment" in green industries would spur a wave of green collar jobs. Spain has tried "green investment" and it has turned out to be a very expensive fantasy. Why should we try the same expensive and fantastical experiment?

How government stoked the mania---more from Russell Roberts

Russell Roberts (professor of economics at George Mason University) has a great article on the housing collapse and the financial mess that has reared its ugly head in today’s Wall Street Journal . The simple-minded meme from the Left these days is that all of this has to do with deregulation and the voracity of the free market. It seems to be a popular, if not populist, argument. The issue is far more complex than we are being told.

Kling on Freddie and Fannie and the Recent History of the U.S. Housing Market

Quite possibly one of the most educational podcasts that I have listened to regarding the debacle of Fannie Mae and Freddie Mac is this one on Econ Talk with Russell Roberts and Arnold Kling. The discussion covers all the intricacies and mechanisms between government and these large congress-created behemoths. If you don’t believe that government had a hand in the collapse of these two GSE’s (government sponsored enterprises), take some time and listen in.

More on the financial crisis and the big government cronies that caused it

From Charles Krauthammer:

The mob is agitated, but hardly blameless. While the punch bowl -- Alan Greenspan's extremely low post-9/11 interest rates -- was being held out, few complained about cheap loans and doubling home values. Now all of the sudden everything is the fault of Wall Street malfeasance.

I have little doubt that some, if not many, cases of malfeasance will emerge. But what we conveniently neglect is the fact that much of this crisis was brought upon us by the good intentions of good people.

For decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac -- who in turn pressured banks and other lenders -- to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity.
Read More

How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable

I found this great article on the housing crash and the root of its cause:

One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

The answer is: President Clinton wanted it that way. Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be. While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process.

After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended. Addressing the National Association of Realtors that year, bluntly told the group that "more Americans should own their own homes." He meant it. He saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.

Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, he ordered Robert Rubin's Treasury Department to rewrite the rules in 1995. Read More

From Terry Jones at Investor Business Daily

How the housing debacle really happened

HT: Liberty Pen

Hank Paulson wants oversight.

It would have been nice if all the regulatory agencies (The Federal Reserve, SEC, the Comptroller of the Currency, FDIC) and the government approved rating agencies would have done their job before the current financial crisis. Of course, I think it’s ridiculous that the very people that helped drive Fannie Mae, Freddie Mac and all of the investment banks to ruin are sitting around grilling Paulson--for example, Chris Dodd.

The Bailout Cometh

Oh, it’s gonna cost us, dear taxpayer. We will rue the day that we allowed the government to take hold of the economy to the extent that it has over the last week or so. The bailout will cost roughly $6,500 per family or $2,000 per person. Ho, ho, ho, Merry Christmas to us! The Liberal hounds are howling their tortuous tune of how regulation would have saved us from all this. All I hear all day on lefty talk radio is the Glass-Stegall act and how it was wiped out by the evil free-market conservatives. “Oh, look what it has wrought!” Poor fools. This country is going to go down the wrong road and we will regret it later on with more government intervention. Sorry to break it to liberals but all of this is due to the government and it’s whacked regulatory bureaucracy. With this crisis and the populist call to have the feds take control, we get closer and closer to collectivism and more government control of our lives and economy. Progressives must be so happy.
Despite the bipartisan touchy feely-ness of the last couple of days, it looks like there is going to be a lot more ideological tugging and pushing rearing its ugly head. Does anyone want to doubt that our political class will screw this entire episode up?

More on Fannie and Freddie

Even so-called financial experts didn't know if "Frannie" were private companies or quasi-public. That's how much of a bureaucratic mess had grown around these behemoths. They're relationship with the Federal government should have been severed long ago.

HT: Liberty Pen

A lesson from Milton Friedman

The lessons of the Fannie and Freddie bailout are going to be very expensive for Americans. When a corporation is singled out by government for special favors and incentives in the name of the public good, in the case of Fannie and Freddie it was housing for the masses, the situation quickly becomes prey to crony-capitalism. Here is a clip from Milton Friedman on this very subject.

HT: Liberty Pen

Fannie and Freddie go KABOOM! And Taxpayers get screwed.

Well, it finally happened just as fiscal conservatives and small government advocates warned that it would; Fannie and Freddie Mac have been taken over by the federal government—the largest bailout EVER! That means, dear reader, that you and I are stuck with a massive tax bill. Ka-Ching! Congratulations to us…the suckers.

For decades, libertarian think tanks like the Cato Institute, have sounded the alarm on the potential hazard of having giant government sponsored enterprises (Fannie and Freddie) continue to operate too cozily to the federal government. Of course, calls to completely sever the two GSE’s from any Federal protection and advantage were always met with resistance from the left side of the political spectrum. No surprise there. Fannie and Freddie were therefore encouraged to reckless expansion as they took on more and more risky bundles of mortgages from lenders in order to swap them for mortgage-backed securities. But so what right? They’re doing it for the public good and people need housing even if they can barely afford them. Besides, the federal government has their back.

The hapless figure in all of this is Treasury Secretary Henry Paulson who a while back had offered the beleaguered GSEs and their patrons in Congress a blank check signed by the taxpayers promising potentially unlimited funds to backstop the lenders. House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd thought that this was a wonderful idea. Mr. Paulson has obviously acquiesced to the Democrats and the mindset that exists in Washington about “doing something.” Unfortunately, President Bush will go along will all of this.

All of this is the latest example of the waste, crony-capitalism, political trading, and bureaucracy that has gripped Washington for decades. Americans really need to come to understand that government is a poor substitute for free-markets. Until that happens, we will see more waste of taxpayer’s funds and more problems with government largesse.

Fannie and Freddie: Ron Paul called it in 2003

The whole ugly mess that has slowly revealed itself over the last week regarding GSE’s Fannie Mae and Freddie Mac were carefully foretold by Ron Paul in 2003:

The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.

While Dr. Paul wasn’t the first or the only one sounding the alarm on Fannie and Freddie, it sure is nice to know that there is someone in Congress that is sharp enough and honest enough to see a train wreck in the making.