January 2012

Obama Wants to Extend PATRIOT Act

by Ryan Young on September 16, 2009 · 1 comment

in Bailout Watch, International, Legal, Nanny State, Personal Liberty, Stimulus to Nowhere

People are often surprised to hear how similar President Obama’s policies are to President Bush’s. They shouldn’t be. One may be a Republican and the other a Democrat, but make no mistake. Bush and Obama are two peas in a pod:

-Bush signed a $700 billion bank bailout bill. Obama continued the policy. And he extended it to other sectors, such as the automobile industry.

-Bush tried fiscal stimulus twice while in power. With some help from the Bush team, Obama oversaw the largest fiscal stimulus bill in history. There is occasional talk of another.

-Bush started two land wars in Asia. Obama could end them. Instead, he is committing more troops to Afghanistan.

-Bush oversaw Medicare part D, the largest expansion of government’s role in health care since 1965. Obama also would like to expand government’s health care presence.

-And now, we have the PATRIOT Act. The bill was perhaps the largest expansion of executive power in seventy years, and the Bush administration’s signature legislation. Now that Obama happens to be the executive with all these cool powers, turns out he likes the PATRIOT Act, too. So he wants to extend some of its expiring provisions.

Predictable. Still disappointing.

Bastiat on the Stimulus Package

by Ryan Young on September 15, 2009

in Economy, Stimulus to Nowhere

“Public spending is always a substitute for private spending, and that consequently it may well support one worker in place of another, but adds nothing to the lot of the working class as a whole.”

-Frederic Bastiat, Selected Essays on Political Economy, p. 16 (emphasis in original)

Again, U.S. Wireless Market is Intensely Competitive

by Elizabeth Jacobson on September 15, 2009

in Tech & Telecom

More evidence that the wireless communications industry is highly competitive: Motorola is looking for more carriers for its new CLIQ smartphone. The CLIQ was launched this week exclusively for T-Mobile, but could be available through other wireless service providers early next year.

If Motorola can find another company to sell the CLIQ, T-Mobile (the 4th largest wireless carrier in the U.S.) may not see the boost in subscriptions they were no doubt hoping for. And consumers on other networks will benefit from an expanded portfolio of smartphones to select from. Most importantly, though, it would show that no governmental rules were needed to force “universal access” to the CLIQ. As I’ve written before, the wireless industry is already extremely competitive. Consumers are currently benefiting from fierce competition between manufacturers and carriers, which leads to lower prices, better quality, more features and services, and continually improving technology. To paraphrase Adam Smith:

“Give me that which I want, and you shall have this which you want, is the meaning of every offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the cell phone manufacturer, mobile application developer, or the wireless communication provider that we expect our cellular service, but from their regard to their profits.“

Solis Tells AFL-CIO: “I am proud and humbled to be your humble servant…”

by Ivan Osorio on September 15, 2009

in Economy, Labor, Politics as Usual, Regulation

The AFL-CIO, at its recent convention in Pittsburgh,  had much to celebrate, including the fact that a Labor Secretary showed up to pay tribute to her biggest supporters when she campaigned for Congress. Reports Investor’s Business Daily:

Late last Friday, the White House decided to slap a 35% import tariff on Chinese tires. In doing so, the administration sided with the United Steelworkers despite the risks of a trade war with China, the largest holder of Treasuries at a time of record U.S. deficits.

That’s only the most recent example of Washington’s union friendliness.

The auto industry bailout — though painful for all parties — largely preserved unions’ generous wages and benefits at the expense of creditors and taxpayers.

Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., sent the convention videotaped hellos with effusive praise. “I look forward to working with your leadership team in the future,” Pelosi said.

Labor Secretary Hilda Solis echoed Pelosi in her speech Monday. She also called Sweeney “my good friend and colleague” and “our president.”

“I am proud and humbled to be your humble servant as labor secretary,” she told the convention. She said the department was adding 670 labor law investigators. [Emphasis added.]

Maybe those new investigators will look into abuses by union officials, as well, as employers, but such talk from a Cabinet secretary  and the Obama administration’s recent actions are not encouraging.

For more on the Obama administration’s and Congressional Democrats’ fulfillment of Big Labor’s wish list, see here.

Obama Financial Regulations Make Things Worse, Promote Risky Loans, Destroy Banking and Lending Options

by Hans Bader on September 15, 2009

in Deregulate to Stimulate, Legal, Politics as Usual, Precaution & Risk, Sanctimony

President Obama is now pushing financial regulations that reinforce the worst features of the status quo.  They would actually increase regulatory pressure on lenders to make the risky, low-income loans that helped spawn the financial crisis.  At the same time, they would worsen the credit crunch by shutting down banking operations in retail outlets like Target, known as “industrial loan corporations,” that are convenient for consumers.  Earlier, Obama backed a new law that is wiping out many credit-card rewards programs and rebates, and leading to the return of annual fees on some credit cards.

Even though Obama’s proposals would lead to even more junky loans in the future, both he and Senate banking chairman Chris Dodd (D-CT) claim that his proposals would fight the “status quo.”  But they are part of the status quo.  Dodd is famously corrupt, having received sweetheart loans from the reckless, bankrupt subprime lender Countrywide, and having received a massive gift from a crook, Edward Downe, in the form of a luxurious “cottage” in Ireland he purchased in a “cut rate real estate deal” for hundreds of thousands of dollars less than fair market value.  Obama was the third biggest recipient in Congress of campaign contributions from the government-sponsored mortgage giants Fannie Mae and Freddie Mac, which went broke, costing taxpayers perhaps $200 billion.  (Fannie Mae was a corrupt bully that engaged in massive accounting fraud and used intimidation to fight reform).

Banks will now be pressured to make even more risky, low-income loans. Obama has sent to Congress his proposal to create a politically-correct entity called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”

Government pressure on banks to make low-income loans was a key reason for the mortgage meltdown and the financial crisis. Yet Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.  The Community Reinvestment Act was a key contributor to the financial crisis.

The mortgage crisis was also caused by the reckless government-sponsored mortgage giants Fannie Mae and Freddie Mac, and by federal affordable-housing mandates.

But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

Worse, Obama’s plan is “largely the product of extensive conversations” with two lawmakers responsible for the corrupt status quo, Chris Dodd and Barney Frank, and it expands the reach of regulations that have been used by left-wing groups to extort pay-offs from banks

The Front Lines in the Global Warming War

by Julie Walsh on September 15, 2009

in Energy, Environment, Global Warming

The EPA, supposedly the Environmental Protection Agency, has become the Economy Poisoning Agency. In the name of preventing a global warming apocalypse, President Obama’s EPA is on the verge of declaring carbon dioxide a pollutant and then controlling our entire economy through energy regulations. This would result in huge increases in our energy bills and virtually everything we buy. Yet to do this, of course, EPA had to ignore science. In fact, EPA was found in June to have suppressed a report by one of its own senior analysts that concluded that EPA’s global warming “science” was incomplete and out-of-date. EPA has tried to spin its way out of this fiasco, even proposing to shut down the office in which its whistleblower works!

The EPA’s possible economy-crushing activities have prompted a grass-roots email campaign to pressure EPA into changing course on its pending “Endangerment” proceeding, the rulemaking underlying all EPA global warming proposals. CEI and Freedom Action, a new organization affliliated with CEI, urge concerned citizens to join the fight by writing EPA with an easy form to tell EPA to put their regulatory plans on hold until they clear up this scandal and reveal ALL of the science.

Another Hoover on trade?

by Fran Smith on September 15, 2009 · 1 comment

in Economy, International, Trade

President Obama’s slapping of tariffs on tires imported from China is the latest in a series of protectionist moves by the U.S. that threaten the world trading system, risk retaliation by the U.S.’s largest foreign creditor, and ultimately harm consumers.  A Wall Street Journal editorial today titled “A Protectionist President” points out that Obama’s trade stance could be following in the disastrous footsteps of President Hoover.

The reality is that without the U.S. leading by example, the world trading order is likely to deteriorate into every country for itself. This is especially dangerous amid a global recession in which world merchandise trade volume fell by roughly 33% from the second quarter of 2008 to June 2009. Reviving trade flows is crucial to restoring global growth.

Mr. Obama may not intend to start a trade war, but then Hoover didn’t set out to pick one either. His political abdication is what made it possible, however, and trade passions once unleashed can be impossible to control. On his present course, President Obama is giving the world every reason to conclude he is a protectionist.

The Chinese have said they may retaliate on the tire tariffs by restrictions on U.S. chicken and auto parts.  That indeed could escalate to the detriment of U.S. manufacturers and producers and the jobs they maintain.  But U.S. consumers, especially lower-income consumers, could face immediate and substantial increases on lower-cost tires, many of which come from China.  Some tire distributors estimate that the cost of a $50 tire could rise to $85.  Since U.S. manufacturers mainly produce higher-priced tires, this protectionist move will do virtually nothing  for U.S. jobs in the tire industry, except perhaps appease the trade unions, especially the United Steelworkers, which have been clamoring for more protection.

Beer for my Horses

by Iain Murray on September 15, 2009

in Bailout Watch, Economy, Energy, Environment, Global Warming, Regulation, Stimulus to Nowhere

The global-warming industry would probably still be solely owned by assoted cranks and romantics (and the odd vice president) if it weren’t for a bunch of CEOs taking a leaf from Enron’s playbook and attempting to monetize the issue. Playing the bootleggers in a classic bootleggers and baptists alliance, these businessmen have realized that they can get the government to increase their profits by means of “cap and trade” and similar regulatory interventions, at the expense of other businesses and the paying public. Ordinarily, such shenanigans would have the corporate watchdog groups in arms, but by getting the “baptists” of the green movement on their side, they have shielded themselves from public disgust.

This has to stop, and the good folks at Junkscience.com are at the forefront of calling foul. They are releasing a series of “Wanted” posters for six corporate fat cats who want to grow fatter by means of the Waxman-Markey Bill. Junkscience describes the six and their crimes as:

* Exelon CEO John Roe, the “carbon bandit,” who stands to make billions of dollars at taxpayer expense from Waxman-Markey’s free carbon allowances;

* General Electric CEO Jeff Immelt, the “carbon schemer,” who would rather profit from lobbying for Waxman-Markey than innovating products that consumers actually want;

* Duke Energy CEO Jim Rogers, the “carbon betrayer,” who is lobbying for higher energy prices and against his own customers and shareholders;

* Dow Chemical CEO Andrew Liveris, the “carbon extortionist,” who threatens to send American jobs overseas unless Congress pays him off with free carbon allowances;

* Caterpillar CEO James Owens, who can only be considered as “carbon clueless” since he is lobbying against the coal industry, one of his biggest customers; and

* John Deer & Co. Chairman Robert Lane, the “carbon crapshooter,” who seems to be betting that he can wreck the economy and profit simultaneously.

Form that posse and go get ‘em, guys.

Regulation of the Day 51: Mandatory Hand Sanitizing

by Ryan Young on September 15, 2009

in Deregulate to Stimulate, Regulation, Regulation of the Day

In Jersey City, New Jersey, the school district is requiring students to “sanitize their hands when they walk into the class in the morning, before and after lunch, and after each restroom visit.” That’s a requirement. As in, not optional. The district will be providing hand sanitizers at a cost of about $100,000.

Obama scolds Wall Street, but targets Main Street with regs

by John Berlau on September 15, 2009

in Bailout Watch, Culture, Deregulate to Stimulate, Economy, Mobility, Nanny State, Odds & Ends, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation, Zeitgeist

 One year after the Wall Street meltdown, President Obama is touting new regulations he says are urgent for preventing a crisis like this from ever happening again. 

 

 “Obama challenges Wall Street to support his regulations,” reads the headline of a story from McClatchy Newspapers on Obama’s Monday speech at Federal Hall, opposite the New York Stock Exchange. In the address, Obama asked the audience of Wall Street traders ”to embrace serious financial reform, not fight it.”


But “embracing” Obama’s planned regulation may be easier for the Wall Street audience than meets the eye. This is beause a closer look at new rules Obama is proposing shows that the bulk of them do not go after the Wall Street culprits, but instead Main Street entrepreneurs that had nothing to do with the crisis.

 

The regulatory “white paper” issued by the Obama administration in June would shower mounds of red tape around job-creating venture capital firms, discount brokerages and the small investors who use them, and the limited banking operations of everyday businesses from discounter Target Stores to motorcycle maker Harley-Davidson.
 
Meanwhile, many of the flawed government policies at the root of the crisis from government-sponsored enterprises Fannie Mae and Freddie Mac to mark-to-market accounting mandates still have not been fully addressed. He should go after these reforms rather than putting in rules that would burden legitimate investors and entrepreneurs.
 
Among the mandates in Obama’s regulatory reform that would hit Main Street are.
 
1.    The forcing of businesses such as Target and Harley-Davidson to sell off their limited banking operations, or industrial loan corporations
 
For decades, nonbank businesses have been able to set up limited banking operations to issue credit cards and make loans to consumers. These operations, called industrial loan corporations (ILCs) are subject to most of the same as well as some more stringent rules for safety and soundness. Some of the most respected businesses, including Target Stores, Harley-Davidson and Toyota Motor, have set up these ILCs to help lower costs for consumers. Even House Financial Services Chairman Barney Frank recently told Bloomberg News that these weren’t a factor at all in the financial crisis — rather the big banking conglomerates were.

 

 

Yet Obama’s plan not only continues the unwise moratoriums on new ILCs it would force the existing one to be dissolved or sold off. As Coleman Drake and I write in the Washington Times, such a drastic action could have a dramatic effect in reducing access to credit and jobs in a still fragile economy.
 
2.    Putting an “investment adviser” fiduciary duty on discount brokerages that serve self-directed investors.
 
The Obama plan would put a “fiduciary liability” on many brokerage firms equivalent to the current standard on investment advisers. Many brokers would have to guarantee that investments are “suitable” for certain types of investors and be sued if they are not. But the hallmark of many discount brokers such as Fidelity and Charles Schwab Corp is that many of its customers don’t really want investment advice. They are self-directed investors make their own decision what to buy and sell, and then trade and click on their laptops.
 
Yet the fiduciary standard of care in Obama’s plan could apply even to advice incidental to trading – such as discount brokerage call centers. Charles R. Schwab, the founder of the firm that bears his names and has taken on old-line brokerages to provide discounted trading to individual investors, warned in a Wall Street Journal op-ed that the logical outcome of this mandate “would be that individual investors would be constrained to a small set of plain-vanilla investments – Treasuries for all – or would be forced to pay us a fee to manage their account.”
 
This rule would also miss the mark in terms of preventing fraud. It does not go after those who clearly offer investment advice. Bernie Madoff was a registered investment adviser, yet he passed SEC examinations with flying colors. This could also have the unintended effect of investors doing less due diligence on their investments, which could leave them at greater risk.
 
3.    Venture capital firms could be subject to mounds of regulation for the “systemic risk” they have not been shown to contribute to:
 
Under broad regulations proposed for hedge funds, other investment pools for sophisticated investors could be burdened with red tape. Among these are venture capital firms of the type that gave the crucial seed money to Apple, Google and other Silicon Valley startups that are now among today top tech firms. And these pose less risk than many other investment vehicles.

 

As James Freeman has written in the Wall Street Journal, “Even if one wishes to be paranoid about systemic risks, it’s hard to imagine how tiny tech companies could be ground zero in a future credit bubble. Fannie Mae and Freddie Mac don’t provide cheap financing to VCs.”
 
Conclusion: Wall Street deserves a lot of blame, but so do outdated big-government policies from Washington that were going strong despite the myth of the era of deregulation (I’ve outlined the main factors in this article that ran in Stocks, Futures & Options magazine.).

 

As CEI President Fred Smith has long urged, President Obama and Congress should sell off and break up the government-backed Fannie and Freddie, which new research shows were not only buying subprime mortgages directly but labeling other subprime mortgages as prime.

 

They should continue the progress in reforming mark-to-market accounting, which exacerbated the crisis by forcing financial firms to mark down even performing loans and lose capital to lend with. The small mark-to-market reforms put in place in April of this year have helped bring stability back to the banking sector, but the quasi-private Financial Accounting Standards is threatening to re-impose the flawed standard, something lawmakers need to stop.

 

Also, policymakers should pare back the costly Sarbanes-Oxley Act of 2002, the accounting mandates of which did virtually nothing to prevent the financial crisis and are now preventing smaller firms from going public to get the financing they need to build new businesses and new jobs.
 
Policymakers should observe the anniversary of the meltdown on Wall Street by pursuing pro-growth policies that will lead to a rebirth of entrepreneurship on all American streets.

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