Monthly Archives: October 2007

How Not To Fix The Subprime Mortgage Crisis, Part III

Economics, Politics

Liz Mair reports that Congress is now considering a new round of bankruptcy reform in response to the crisis that has developed in the subprime mortgage business. As with most of the government regulation that’s been suggested in this area, it takes exactly the wrong approach to the problem.

Earlier this month, Republican Senator Arlen Specter of Pennsylvania introduced the Home Owners’ Mortgage and Equity Savings (HOMES) Act, which seemingly takes a balanced approach to dealing with the crisis. However, the Specter legislation has already provoked criticism on both sides of the debate. It may ultimately be too interventionist for the taste of banks and yet too timid to win the approval of Democratic Senator Dick Durbin of Illinois, who is pushing for a much more radical overhaul of the bankruptcy code.

The most controversial elements of the HOMES Act are its provisions allowing bankruptcy judges to delay, prohibit, or roll back increases in mortgage interest rates, to waive early repayment penalties (so as to enable desirable refinancing), and to write down principal on a mortgage where the lender agrees. The law would apply strictly to borrowers who took out mortgages before September 26, 2007—and only if they sought relief within the next seven years.

Even that limitation though would bring within the laws reach millions of homeowners who entered into these high-risk loans because it was all they could qualify for and now find themselves in financial trouble not so much because their circumstances have changed, but because the loan has reached a point where, by its terms, the payment must go up. This is the loan that these people signed up for, and yet Specter would have Bankruptcy Court judges the authority to rewrite the terms of the loan; although, strangely, his proposal requires the lender’s consent, which it would seem would almost never be given.

Even Specter’s proposal isn’t enough for some in Congress. Mair reports that Senator Dick Durbin would propose a law that allows Bankruptcy Judges to rewrite the terms of the mortgage loans as well as other changes to the law that would fundamentally alter the nature of the relationship between debtors and creditors.

As I’ve noted before, even Specter’s timid proposal misses the point. Politicians see what’s happening in the real estate industry and assume that it’s their duty to fix it. In reality, what’s happening is the market reasserting reality after a prolonged period of what was called in another context “irrational exuberance.” The days of real estate values increasing by double digit percentages, or more, on an annual basis are gone because they weren’t realistic and weren’t going to be sustained over time. What’s happening now is simply the market’s way of readjusting

Given that, there’s really only one thing the government should do, nothing:

Rather than delaying the inevitable, the government needs to let this “crisis” play itself out. Yes, it will be painful. People will lose their homes and the housing market will remain depressed for another year, if not longer. But, quite honestly, this is the price to be paid for nearly a decade of an irrationally-rising real estate market and people who bought houses that, notwithstanding the great no-interest loan they could qualify for, they really could not afford.

The likelihood of that happening ? Pretty much zero.

Previous Posts:

How Not To Fix The Subprime Mortgage Crisis
How Not To Fix The Subprime Mortgage Crisis, Part II

Doug Mataconis
http://www.belowthebeltway.com

Federal Election Laws Become Even More Absurd

Government Regulation, Politics

There’s little doubt that pretty much everyone in America who’s paying attention realizes that Stephen Colbert’s recently announced run for the White House is an elaborate joke. A well-played, funny, timely joke that is already pointing out the absurdity of the political system, but, still, a joke.

Well, everyone that is except perhaps the people at the Federal Election Commission:

Federal law bars corporations from contributing to candidates, either through donations or in-kind contributions such as free use of goods or services.

Media organizations are permitted to feature presidential candidates in covering campaigns.

But no precedent exists for a television network promoting and fostering a candidacy of one of its own talk-show hosts, said Lawrence M. Noble, a former general counsel for the Federal Election Commission. And comedian Pat Paulsen’s 1968 candidacy predated current campaign finance regulations.

“The real problem comes in the fact that he actually has his own show, talking about his campaign, paid for by a network,” Noble said. “These are the kind of things on slow days you’d debate until the late afternoon at the FEC, but there are serious questions that come up. In theory, he could end up having some campaign finance problems.”

While he has talked about his candidacy publicly only in character — as the combative faux-talk-show host who favors “truthiness” on “The Colbert Report” — Colbert is taking formal steps that are consistent with an actual presidential candidacy.

He has begun collecting signatures to get himself placed on both the Democratic and Republican presidential primary ballots in South Carolina.

And while he has said he’s in the race to run, not to win, he has talked about trying to win delegates to the Democratic National Convention.

“I think a lot of people are asking whether — they say, ‘Is this, is this real,’ you know?” Colbert said Sunday on NBC’s “Meet the Press.” “And to which I would say to everybody, this is not a dream, OK? You’re not going to wake up from this, OK? I’m far realer than Sam Brownback, let me put it that way.”

(…)

The FEC could consider Colbert’s entire campaign satire, which may allow corporate backing under the exemption that allows media organizations to report and comment on candidates as they choose.

But Colbert’s continued candidacy makes it more likely that he’ll actually have an impact on the election — which makes him difficult to ignore, Noble said.

“Everybody is very cautious, not wanting to take this too seriously, or to say that campaign finance laws are going to stop satire, or what is clearly a joke,” he said. “But he’s trying to get on the ballot, and he could in fact affect the election.”

If the FEC actually does start regulating Colbert’s campaign, then it would point out even further the absurdity of campaign finance laws. It’s already been well-established that the laws themselves do nothing to limit actual campaign fundraising — the first Presidential election after McCain-Feingold passed was, by all accounts, the most expensive in American history and the 2008 election looks to surpass it easily. The limits themselves serve no purpose other than to encourage people to find ways to circumvent them,  such as making donations in the name of their children in order to get around the limit on individual contributions. And every time a loophole is closed another one is found.

The solution isn’t more government regulation of campaign donations. Instead, we need to eliminate those requirements completely except for one — the requirement that all candidates for Federal office make complete disclosure of all donations received. That way, we will all know where everyone’s money comes from and can judge the candidates accordingly. Putting more power in the hands of the regulators just creates a system that is more friendly to incumbents and not at all helpful to voters.

H/T: James Joyner

Doug Mataconis
http://www.belowthebeltway.com

Red State Bans Ron Paul Supporters

Election '08, Politics

The conservative blog Red State decided earlier this week to ban Ron Paul supporters from the blog:

Effective immediately, new users may *not* shill for Ron Paul in any way shape, form or fashion. Not in comments, not in diaries, nada. If your account is less than 6 months old, you can talk about something else, you can participate in the other threads and be your zany libertarian self all you want, but you cannot pimp Ron Paul. Those with accounts more than six months old may proceed as normal.

Now, I could offer a long-winded explanation for *why* this new policy is being instituted, but I’m guessing that most of you can probably guess. Unless you lack the self-awareness to understand just how annoying, time-consuming, and bandwidth-wasting responding to the same idiotic arguments from a bunch of liberals pretending to be Republicans can be. Which, judging by your comment history, you really don’t understand, so allow me to offer an alternate explanation: we are a bunch of fascists and we’re upset that you’ve discovered where we keep the black helicopters, so we’re silencing you in an attempt to keep you from warning the rest of your brethren so we can round you all up and send you to re-education camps all at once.

While it is their website, and their decision to ban someone, or an entire group of people,  is theirs to make, it strikes me as a monumentally stupid decision to make. As Ed Morrissey, a conservative blogger who doesn’t support Paul but also doesn’t support the idea of banning his supporters, notes, the decision seems to be largely based on Red State’s belief that most supposedly libertarian supporters of Paul are actually leftists in disguse:

I disagree with Leon’s assumption that these Paul supporters are all or mostly cryptoliberals. Plenty of libertarian-leaning Republicans exist in the party, along with the former Buchananites and isolationists of the GOP. Instead of cutting these people off, it might be better for Redstate to keep engaging them. After all, Paul will not be in the race all that much longer, and we need those voters to stay in the GOP when Paul disappears. There are worse impulses than libertarianism.

Michael van der Gailen agrees:

We have written about Ron Paul on several occasions, and although there certainly are / were some Paul supporters who added a lot to the comment sections at this blog, there were sadly also quite some who spammed our comment sections with “go ron go” and that was it. Such commenters add nothing, and I mean nothing, to the debate, which is why I understand Red State’s decision to ban all of them. Having said that, we won’t change this into a ‘no Paul-zone.’ Paul is a phenomenon and to ignore this phenomenon is silly. Furthermore, as said, quite some of the commenters do add something and do have something to interesting to say.

I take this as a sign that at least some Republicans are willing to listen to the libertarian wing of the party, even if they don’t entirely agree with us. That’s not much if your goal is a revolution, but revolutions don’t happen very often in American politics; change is slow and gradual, and sometimes you have to start with the baby steps.

Doug Mataconis
http://www.belowthebeltway.com

Quote Of The Day: Winston Churchill Edition

Quote of the Day

I heard this one at a legal seminar I attended today.

It’s from Winston Churchill in 1943, but it seems especially appropriate to America in 2007:

[T]he great privilege of habeas corpus, and of trial by jury, which are the supreme protection invented by the English people for ordinary individuals against the State . . . —The power of the Executive to cast a man into prison without formulating any charge known to the law and particularly to deny him the judgement of his peers—is, in the highest degree, odious and is the foundation of all totalitarian governments . . . Extraordinary powers assumed by the Executive with the consent of Parliament in emergencies should be yielded up, when and as, the emergency declines . . . This is really the test of civilisation.

—Winston S. Churchill, Cable to Home Secretary Herbert Morrison from Cairo (Churchill responds to critics over the decision to release accused Nazi collaborator Oswald Moseley), Nov. 21, 1943. Reproduced in The Second World War: Closing the Ring (1952)

Doug Mataconis
http://www.belowthebeltway.com

Clinton and Executive Power

Constitution, Privacy, The Surveillance State

Hillary Clinton said she give up some expanded executive powers:

If elected president in 2008, Democrat Hillary Rodham Clinton would consider giving up some of the executive powers President Bush and Vice President Cheney have assumed since taking office.

In an interview published Tuesday in Guardian America, a Web site run by the London-based Guardian newspaper, Clinton denounced the Bush Administration’s push to concentrate more power in the White House as a “power grab” not supported by the Constitution.

Asked if she would consider giving up some of those powers if she were president, Clinton replied, “Oh, absolutely … I mean, that has to be part of the review that I undertake when I get to the White House, and I intend to do that.”
[…]
“There were a lot of actions which they took that were clearly beyond any power the Congress would have granted, or that in my view was inherent in the Constitution,” Clinton said. “There were other actions they’ve taken which could have obtained Congressional authorization but they deliberately chose not to pursue it as a matter of principle.”

My initial thoughts when I first saw this article were…since when did Hillary Clinton start caring about Constitutional limitations on government? The answer to that is….she doesn’t. And, if Congress approves some action that is constitutionally questionable, like sneak-and-peek or the NSA wiretapping program, does that justify it? The answer to that is…no. There is a process to amend the Constitution. Legislative action without the required Constitutional changes should be scrapped by the Supreme Court, especially one that claims to follow an “originalist” philosophy. But when a court uses the judiciary without textural support to justify the position of the executive branch, which is just as much a case of judicial activism as any liberal judge undercutting those “family values” that I can’t seem to find anywhere in the Constitution, conservatives seem to be perfectly fine with that.

I’ve already posted this article, but Radley Balko makes the case that Hillary Clinton will continue the same course that Bush has taken with regard to expanded executive powers, and argues that she will continue to seek expansion

:What about secrecy and executive power? It’s difficult to see Hillary Clinton voluntarily handing back all of those extra-constitutional executive powers claimed by President Bush. Her husband’s administration, for example, copiously invoked dubious “executive privilege” claims to keep from complying with congressional subpoenas and open records requests—claims the left now (correctly, in my view) regularly criticizes the Bush administration for invoking.

Hillary Clinton herself went to court to keep meetings of her Health Care Task Force secret from the public, something conservatives were quick to point out when leftists criticize Vice President Cheney’s similar efforts to keep meetings of his Energy Task Force secret.

“I’m a strong believer in executive authority,” Clinton said in a 2003 speech, recently quoted in The New Republic. “I wish that, when my husband was president, people in Congress had been more willing to recognize presidential authority.”

That jibes with a February 2007 New York Times article on Clinton explaining her refusal to back down from her vote for the Iraq war: “Mrs. Clinton’s belief in executive power and authority is another factor weighing against an apology, advisers said… she believes that a president usually deserves the benefit of the doubt from Congress on matters of executive authority.”

Such is why President Bush has recently had some nice things to say about Hillary Clinton, leading some to speculate that Bush sees her as the Eisenhower to his Truman—a candidate from the opposing party who criticizes his foreign policy during the campaign, but will likely pursue a very similar policy should she be elected.

Clinton is just more of the same…you’d think hawkish conservatives would love her as much as they love Rudy Giuliani.

Jason Pye
http://jasonpye.com/
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