Bailouts


WASHINGTON—Prices that consumers pay for poultry and other meats are rising, and could go higher still, as the U.S. government prepares to step in and buy excess chicken from farmers.

The meat industry in America has an ace card that few outside the farming and livestock sector can count on when profits are down: the government’s willingness to swoop in and buy up surpluses during a glut. The government doesn’t buy up candy, shoes, clocks, calculators or microwave ovens if manufacturers overshoot demand, but it will step in to help meat producers clear out storage facilities.

So the excess inventory arises as a result of fewer chickens being bought. Cronyism, hello? Isn’t it up to the farmers to dispose safely of excess inventory of chickens? Here.

Mona Charen as quoted by Mark J. Perry:

In their new book “Reckless Endangerment,” authors Morgenson and Rosner offer considerable censure for reckless bankers, lax rating agencies, captured regulators and unscrupulous businessmen. But the greatest responsibility for the collapse of the housing market and the near “Armageddon” of the American economy belongs to Fannie Mae and Freddie Mac and to the politicians who created and protected them. With a couple of prominent exceptions, the politicians were Democrats claiming to do good for the poor. Along the way, they enriched themselves and their friends, stuffed their campaign coffers, and resisted all attempts to enforce market discipline. When the inevitable collapse arrived, the entire economy suffered, but no one more than the poor.

Fannie Mae lied about its profits, intimidated adversaries, bought off members of Congress with lavish contributions, hired (and thereby co-opted) academics, purchased political ads (through its foundation) and stacked congressional hearings with friendly bankers, community activists and advocacy groups (including ACORN). Fannie Mae also hired the friends and relations of key members of Congress (including Rep. Barney Frank’s partner).

“Reckless Endangerment” includes the Clinton administration’s contribution to the home-ownership catastrophe. Clinton had claimed that dramatically increasing homeownership would boost the economy, instead “in just a few short years, all of the venerable rules governing the relationship between borrower and lender went out the window, starting with … the requirement that a borrower put down a substantial amount of cash in a property, verify his income, and demonstrate an ability to service his debts.”

“Reckless Endangerment” utterly deflates the perceived history of the 2008 crash. Yes, there was greed — when is there not? But it was government distortions of markets — not “unregulated capitalism” — that led the economy to disaster.”

UPDATE: Helpful graphs of mortgage data.

These folks have their facts mixed up. Stock markets go up and down, not in direct correlation to the economy. Sometimes the markets rallies while the economy is still weak, for example. So when the writers say:

The soaring costs have been largely triggered by stock market losses during the depths of the recession in 2007 and 2008.
. . .
The huge contribution increases – and those forecast – are primarily a result of stock market losses from the financial crisis of 2007 and 2008.

The writers are do not understand the relationship between financial markets and the economy. That’s understandable because most people do not, myself included. But to blame “Wall Street” or “bankers” for the pension problems problem misses the point. Even if the financial mess did not take place, the stock market would still go up and down.  Here is a cause of the pension shortfall:

At the time, fund administrators dropped employer contribution rates to near zero. Had the state kept contributions at a higher rate, there would likely be a cushion now in tougher times, experts say.

“It was irresistible for state and local officials to say, ‘Let’s pocket that money and use it to replace our contributions so everyone can feel good about it,’ ” said James Parrott, chief economist at the Fiscal Policy Institute, a Manhattan-based liberal think tank. “It was a stupid fiscal move.”

Here.

Here. By planning the use of ARRA stimulus tax dollars, the Vice President is forcing Americans to subsidize his commuter service between Washington, DC and Delaware.

The Veep goes by a lot of names, sheriff, for one as the above article explains. I have another one. How about Choo-Choo Joey, after the 1960’s cartoon commercial Choo-Choo Charlie? Only instead of Joey’s train being powered by Good and Plenty candy, Joey’s train runs on Americans’ tax dollars.

$257 billion in the hole and counting, and counting, and counting.

Good idea, if that is their only goal. But it is not:

“This is a plan for fundamental reform — to wind down the GSEs, strengthen consumer protection and preserve access to affordable housing for people who need it,” Geithner said in a statement accompanying the report.

Their plan is a bait-and-switch. Out with the old, unpopular GSEs (government-sponsored-enterprises), and in with some other soon to be unveiled government bureaucracy.

Congress has made “progress” in reigning in risk-based compensation on Wall Street, a top Democratic legislator told CNBC Monday.

Rep. Barney Frank (D-Mass.), co-author of the Dodd-Frank law, said legislative efforts succeeded in discouraging the “perverse incentive” of the past by prompting companies to provide “more compensation in stock that is not going to be paid out for awhile.”

He has cause and effect backwards. The cause of the problem is that government guarantees of bailouts create the “perverse incentive” for people to take risks.  Frank, and most other politicians, would rather keep the bailout guarantee in place because it gives them more responsibility. Here.

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