http://www.townhall.com/columnists/JerryBowyer/2008/04/06/how_community_organizers_like_obama_created_the_subprime_crisis
How 'Community Organizers' (like Obama) Created the Subprime Crisis
By Jerry Bowyer
I wrote to you previously (Meet Barry Obama, 'Fair Housing' Lawyer) about the Community Reinvestment Act, a law which compels banks to make home loans in minority neighborhoods to people who were poor credit risks. Although the CRA is well known in the financial industry, political pundits and reporters often know very little about finance and so have missed this extremely important aspect of the story.
Ignorance of economics doesn't help much either. The political class seems blissfully unaware of the concept of unintended consequences which is the idea that laws which are designed to make our lives better often make our lives worse.
On a recent edition of Kudlow and Company, I debated Vermont Senator Bernie Sanders on precisely this point. He seemed not only to disagree with my point that if congress compels banks to make Subprime loans, then they share responsibility for the crisis that results when the borrowers default; he seemed not to understand it. For him once we identify the target group as bankers, nothing else matters - they're bad and he's good, no more reasoning is necessary.
It's not just Congress that's responsible. Yes, they forged the weapons, but some army needed to wield them. That's where guys like Barry Obama came in to the picture. When Barry (who was gradually changing his name to Barack around this time) graduated from Columbia, he took a brief stint as a researcher writing for a corporate consulting firm. According to his memoirs he thought of himself as 'a spy' who was dropped 'behind enemy lines'.
Shortly thereafter, he left the enemy territory of corporate America and moved to a job about which he could feel proud - he went to work for the New York branch of the Public Interest Research Group. PIRG is one of those left of center activist groups who, among other things, uses the legitimate concept of 'fair housing' to force banks into making bad loans. PIRG has actively lobbied for a stronger (yes, you guessed it) Community Reinvestment Act.
According to his bio, and accounts from friends, Obama became an expert in real estate law and fair housing while working as a community organizer and public interest lawyer. This is especially the case during his Chicago period.
After graduating from law school Barack worked for various community groups which were attempting to get black churches politically involved in left-of-center causes. He was hired because the Developing Communities Project, which was headed by two older Jewish gentlemen, was having trouble making headway in the black community.
By then, the name change to Barack was complete and so was the shift to an Afro-centric identity. Barack was a natural. He was able to play upon crowds' sense of racial identity, castigating black audiences for their failure to embrace the right policies, but offering hope to them in the form of his own leadership. He joined a prominent Afro-centric church at this time, headed by Rev. Jeremiah Wright.
Eventually Barack joined the civil rights law firm, Miner, Ballard and Galland, where he specialized in fair housing. That's where he did work for the (now indicted) Syrian-born entrepreneur Tony Rezko. Rezko was a very powerful and politically connected urban real estate developer who did quite a lot of business with the government. Rezko helped Barack go from public interest lawyer to State Senator. And Rezko didn't just help Barack into the upper legislative house, he helped him into his family house as well. One wonders to what degree Rezko was helped by low-income-sub-prime-lending-fair-housing-industrial complex of urban Chicago. For all the details we may need to wait for the Rezko trial.
One thing, however, is perfectly clear already. Obama spent his pre-elected career working right in the middle of the complex of law firms and activist groups which use law and regulations to push banks into vastly increasing their lending to Subprime borrowers right in the middle of the golden age of the expansion of the Subprime industry.
_____________________________
Mr. Bowyer is chief economist of BenchMark Financial Network and a CNBC contributor.
Showing posts with label Jerry Bowyer. Show all posts
Showing posts with label Jerry Bowyer. Show all posts
Monday, April 7, 2008
Wednesday, January 9, 2008
HUGH HEWITT'S MITT ROMNEY PROBLEM
"Hugh Hewitt, a reputation is a terrible thing to waste."
Hugh Hewitt of Townhall.com is a person with a well-earned reputation as a talk how host and blogger. However, he is spending his reputational capital in much the manner of McCain's overly indulgent sailor.
When it comes to candidate Mitt Romney, Hugh quite literally "wrote the book." That is, he has a financial interest in Romney's doing well -- and perhaps even winning the presidency.
As a responsible political analyst, Hugh has an obligation to look at any candidate -- including his beloved "Mitt" -- in at least a mildly objective way. That means examining the canidate's pros and his CONS. It means outlining where a candidate is weak -- and where he's strong.
In fact, Mitt Romney is not a strong candidate. In some polls, his "negatives" come close to equalling those of Hillary Clinton. In both Iowa and New Hampshire, Romney squandered big early leads in the polls and ended up finishing a distant second. In national polls, he's been stuck in the low teens. There's no evidence he could come close to winning in a national election against Senator Clinton or Senator Obama.
American voters generally look at Mitt Romney as too rich (and pouring big chunks of his vast fortune into the campaign), too slick, too liberal (in liberal states), too disingenuous (in conservative states), and much too quick to "go negative," hurting his own campaign and that of others'.
Hugh, I appeal to you: stop the cheerleading, and stop the gushing about "Team Romney," which is a losing "team." Hugh, you're looking like a political "Johnny-One-Note." Your readers are now making fun of you, and that's not a good situation.
On this blog, I note the candidate(s) I favor and don't fail point out their warts. Romney is spending a lot more money than his opponents, and his performance is not good. It would strengthen Hugh's credibility if he showed some basic signs of balance, which he doesn't when it comes to Mitt Romney.
So, Hugh Hewitt, stop compromising your reputation -- and invest your time instead on giving a clear-eyed analysis of the many fascinating political developments. I've done that on my own blog, and in this case the teacher (you) needs to learn from the student (me).
steve maloney
FAIR-TAX A NON-STARTER?
http://www.townhall.com/columnists/JerryBowyer/2008/01/09/questions_for_the_fair_tax_crowd
Questions for the Fair Tax Crowd
by Jerry Bowyer
Why do you think that a sales tax is less prone to corruption and complexity than an income tax?
When the income tax was originally promoted by William Jennings Bryan and other populists it was labeled as being fairer, since it would not hit the poor. When initially implemented it was very simple. However, over time special interest groups were able to lobby for exemptions, deductions, and other special treatment. Why would a sales tax not undergo the same process? Does the fair tax somehow magically abolish selfishness?
Are sales taxes, where they are currently in operation, simple and free from special interest lobbying?
The Europeans have a sales tax, called the VAT, which is extremely complex. Why wouldn’t that happen here? States have sales taxes, which, even despite their low rates still have long lists of items which are exempt or not exempt, and they still have people who cheat on them. If this happens at low rates, why wouldn’t it happen at much higher rates? Does moving the concept from Europe to the U.S., or from the State level to the national level, somehow render the legislative process more pure? If so, why is our income tax so riddled with complexity and special pleading to begin with?
Does it apply to non-profits? [And if not, why not?]
If so, then they’ve become taxable and it would discourage charity. Also, wouldn’t churches become taxable? Aren’t there constitutional issues here? If not, then the tax advantage of non-profits disappears. If they’d be taxed the same way as businesses, wouldn’t this remove a great deal of tax encouragement for non-profit enterprise and shift talent and treasure away from that sector?
Are used goods, non-taxable?
If so, this means less goods production, more yard sales, eBay stuff, etc. Won’t this hurt traditional retailers and goods producers? Why wouldn’t this encourage evasion through rehabilitation? After all what exactly constitutes New vs. Used? If I repair a car, it’s used, but what if I upgrade it? New engine, but old chassis, is that new or used? Computers, too. New hard-drive, but old CPU; is that new or used? How does this not get complicated?
What about the transition period?
Before the sales tax takes effect, won’t there be a buying binge? Afterwards, won’t there be a buying drought? If so, doesn’t that cause a debt spike to finance purchases before the ‘sale’ ends? The implications for banking and currency policy are way too complicated for me to foresee.
[Other big questions follow]
Isn’t it true that the rate is not really 23% but 30% at least, because it’s tax-inclusive?
And even this does not count dynamic effects in which changed behavior and evasion narrow the base and raise the rate.
How do we determine the interest portion of mortgage payment?
If non-specified, business will simply give big discounts on price and then make up for it in the interest calculation, as interest is deemed non-taxable. These calculations are highly malleable and can become very complex. Homes will be financed with low-ball prices and high interest rates, and sup-prime mortgages will skyrocket.
If a cap is put on excludable interest, then at what rate? Federal rates?
That makes the Fed a tax-setting agency and hyper-politicizes monetary policy.
______________________________
Mr. Bowyer [of Allegheny County, PA] is chief economist of BenchMark Financial Network and a [frequent] CNBC contributor.
Hugh Hewitt of Townhall.com is a person with a well-earned reputation as a talk how host and blogger. However, he is spending his reputational capital in much the manner of McCain's overly indulgent sailor.
When it comes to candidate Mitt Romney, Hugh quite literally "wrote the book." That is, he has a financial interest in Romney's doing well -- and perhaps even winning the presidency.
As a responsible political analyst, Hugh has an obligation to look at any candidate -- including his beloved "Mitt" -- in at least a mildly objective way. That means examining the canidate's pros and his CONS. It means outlining where a candidate is weak -- and where he's strong.
In fact, Mitt Romney is not a strong candidate. In some polls, his "negatives" come close to equalling those of Hillary Clinton. In both Iowa and New Hampshire, Romney squandered big early leads in the polls and ended up finishing a distant second. In national polls, he's been stuck in the low teens. There's no evidence he could come close to winning in a national election against Senator Clinton or Senator Obama.
American voters generally look at Mitt Romney as too rich (and pouring big chunks of his vast fortune into the campaign), too slick, too liberal (in liberal states), too disingenuous (in conservative states), and much too quick to "go negative," hurting his own campaign and that of others'.
Hugh, I appeal to you: stop the cheerleading, and stop the gushing about "Team Romney," which is a losing "team." Hugh, you're looking like a political "Johnny-One-Note." Your readers are now making fun of you, and that's not a good situation.
On this blog, I note the candidate(s) I favor and don't fail point out their warts. Romney is spending a lot more money than his opponents, and his performance is not good. It would strengthen Hugh's credibility if he showed some basic signs of balance, which he doesn't when it comes to Mitt Romney.
So, Hugh Hewitt, stop compromising your reputation -- and invest your time instead on giving a clear-eyed analysis of the many fascinating political developments. I've done that on my own blog, and in this case the teacher (you) needs to learn from the student (me).
steve maloney
FAIR-TAX A NON-STARTER?
http://www.townhall.com/columnists/JerryBowyer/2008/01/09/questions_for_the_fair_tax_crowd
Questions for the Fair Tax Crowd
by Jerry Bowyer
Why do you think that a sales tax is less prone to corruption and complexity than an income tax?
When the income tax was originally promoted by William Jennings Bryan and other populists it was labeled as being fairer, since it would not hit the poor. When initially implemented it was very simple. However, over time special interest groups were able to lobby for exemptions, deductions, and other special treatment. Why would a sales tax not undergo the same process? Does the fair tax somehow magically abolish selfishness?
Are sales taxes, where they are currently in operation, simple and free from special interest lobbying?
The Europeans have a sales tax, called the VAT, which is extremely complex. Why wouldn’t that happen here? States have sales taxes, which, even despite their low rates still have long lists of items which are exempt or not exempt, and they still have people who cheat on them. If this happens at low rates, why wouldn’t it happen at much higher rates? Does moving the concept from Europe to the U.S., or from the State level to the national level, somehow render the legislative process more pure? If so, why is our income tax so riddled with complexity and special pleading to begin with?
Does it apply to non-profits? [And if not, why not?]
If so, then they’ve become taxable and it would discourage charity. Also, wouldn’t churches become taxable? Aren’t there constitutional issues here? If not, then the tax advantage of non-profits disappears. If they’d be taxed the same way as businesses, wouldn’t this remove a great deal of tax encouragement for non-profit enterprise and shift talent and treasure away from that sector?
Are used goods, non-taxable?
If so, this means less goods production, more yard sales, eBay stuff, etc. Won’t this hurt traditional retailers and goods producers? Why wouldn’t this encourage evasion through rehabilitation? After all what exactly constitutes New vs. Used? If I repair a car, it’s used, but what if I upgrade it? New engine, but old chassis, is that new or used? Computers, too. New hard-drive, but old CPU; is that new or used? How does this not get complicated?
What about the transition period?
Before the sales tax takes effect, won’t there be a buying binge? Afterwards, won’t there be a buying drought? If so, doesn’t that cause a debt spike to finance purchases before the ‘sale’ ends? The implications for banking and currency policy are way too complicated for me to foresee.
[Other big questions follow]
Isn’t it true that the rate is not really 23% but 30% at least, because it’s tax-inclusive?
And even this does not count dynamic effects in which changed behavior and evasion narrow the base and raise the rate.
How do we determine the interest portion of mortgage payment?
If non-specified, business will simply give big discounts on price and then make up for it in the interest calculation, as interest is deemed non-taxable. These calculations are highly malleable and can become very complex. Homes will be financed with low-ball prices and high interest rates, and sup-prime mortgages will skyrocket.
If a cap is put on excludable interest, then at what rate? Federal rates?
That makes the Fed a tax-setting agency and hyper-politicizes monetary policy.
______________________________
Mr. Bowyer [of Allegheny County, PA] is chief economist of BenchMark Financial Network and a [frequent] CNBC contributor.
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