The Democratic Attack On Capitalism

Photo courtesy of Chez Eury

Capitalism: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

The continued bailout frenzy by the Obama administration went on quietly after the markets closed last Thursday when the Treasury lifted the $200 billion dollar cap on allocated funds to Freddy Mac and Fannie Mae, in doing so congress gave the two agencies carte blanche in an effort to fix the failing giants.  Obama’s economic handlers are nothing if not consistent in that they believe throwing  money at failing free market lines of business is the only way to avoid a total economic melt down.  The latest move to shore up the GSE’s is being spun as an effort to kick start the housing market by freeing up liquidity. Once again Obamas attachment to Keynesian economic methodology is his modus operandi in fixing any problem.  But like all other attempts at moving markets by increasing the money supply, the bill eventually comes due and with substantial compounded interest, further increasing our national debt.

Both Fannie and Freddys failure in September 2008 were prior to Obama being elected and can be tied to the overall housing bubble bursting under the Bush administration, but it is important to note the only action to correct the problem by both Geithner and Obama has been to increase the ceiling from the original CBO estimate of 25 Billion in 9/2008  to 200 billion prior to last Thursday, and as of now the latest increase of no limit.

Two issues are blatantly obvious, first, the Obama team had no plan to stop the bleeding at the government “sponsored” (not owned or run) housing agencies, and second by not addressing the housing market early on and in a decisive manner,  the mole hill is now a mountain.

The current situation is so bad at Fannie and Freddy,  the newly (Obama) appointed CEO’s structured their golden contracts to be paid in cash, IE; not stock since neither Michael Williams nor Charles Haldeman have any confidence that the stock will have any value. But don’t fret, both CEO’s were given annual pay raises to 6 million each for their deft management of the failing housing giants. It is also being reported that the remaining managing executives are being paid a paltry 2 million each, hey it’s just paper right?

It is clear that the housing market was dismissed by the current administration for “greener” pastures, like health care, the stimulus plan, cap and trade, and for kicks a couple of car companies. It is also clear that nobody in the administration quite knows what to do with Fannie or Freddy, which if ignored further run off of equity and mounting foreclosures are sure to follow.

A possible reason for not addressing the GSE issue, is it does not serve, unions, the disenfranchised, or the far left political agenda that has a deep seated hate for “greedy Wall Street bankers” of which Tim Geithner was cut from the same cloth oddly enough.   Even though there is a large remaining balance in the boondoggle stimulus bill, the debt for keeping housing alive will be passed to the taxpayer.  Our bill as of today is 60.9 billion for Fannie Mae, and 50.7 billion for Freddy Mac, does anyone have change for a trillion?

The fundamental issue with Obama’s current policy is that it rewards the weak and punishes the strong, or in other words, bail out companies that are deemed to big to fail regardless if they failed on their own accord, and bail them out by using the tax base, the exact opposite of free market capitalism.

America was built on the pillars of trade and free enterprise, our country has excelled in this environment to where we as a nation are one of  last remaining superpowers. This is not by chance it is due to the innovation and freedom allowed to its citizens, if government continues to step in and bailout failing business by sticking its hand in the pockets of small business and entrepreneurs, our economy will be dictated by the massive debt we owe making our share all that smaller.  Not exactly the vision I had for our youth.

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