January 2012

LibertyWeek 90: Jerry Brito’s Surprisingly Free

by Richard Morrison on April 26, 2010

in CEI Projects, Features, Podcast, Zeitgeist

Richard Morrison, Jeremy Lott, and Jerry Brito bring you Episode 90 of the LibertyWeek podcast. We take a look at immigration in Arizona, expanding finance regulations, myths about green energy, porn at the SEC and Jerry’s Mercatus Center technology project, Surprisingly Free.

“Economists: The Stimulus Didn’t Help”

by Hans Bader on April 26, 2010

in Bailout Watch, Economy, Employment, Politics as Usual, Sanctimony, Stimulus to Nowhere, Trade

“The recovery is picking up steam as employers boost payrolls, but economists think the government’s stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday” by the National Association of Business Economics.   “Economists: The Stimulus Didn’t Help” is the headline from CNN Money.   The vast majority of economists shared that conclusion.  Nobel Prize winning economist Gary Becker says that President Obama’s policies are delaying economic recovery.

Obama falsely claimed that the $787 billion stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run“ by driving up the national debt.  The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.

Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  As the Washington Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent . . . The reality is that it passed 10.3 percent.”

“How is stimulus money allocated? Unemployment isn’t a factor, but politics is,” found George Mason University researcher Veronique de Rugy in a recent study.

Districts where people are struggling and unemployment is high are not receiving any more money than those in which unemployment is low, even though a stated purpose of the $800 billion stimulus package was to help the unemployed.  But politics mattered in doling out federal funds.  And “Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts.”

There are three trillion dollars in tax increases in Obama’s proposed budget, yet it would still borrow 42 cents on the dollar, resulting in colossal deficits.

Obama’s policies would raise the national debt by $9.7 trillion, noted the Congressional Budget Office.

Earlier, one of Obama’s own advisers worried that the “barrage of tax increases” in his budgets could harm the economy and prevent a “sustained” economic recovery.

In 2008, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

Michael Specter and The danger of market denial

by Fred Smith on April 26, 2010

in Agriculture, Environment, Odds & Ends, Zeitgeist

Michael Specter, a journalist who’s also an excellent speaker, appeared at the last TED conference.  Specter is technologically optimistic but has accepted many of the eco-catastrophe myths.  He favors GMOs, worries about micro-nutrients, says nothing about perfumes or clothes or other status items, makes fun of the organic food movement (sort of) and so on.  Like many modern intellectuals Specter likes technology (or, at least, the right type of technology – the Bright rather than Dark Side of the Force).  And here is the problem – he fails to discuss the institutional framework most appropriate to guide technology in human- friendly directions.   Should innovation be “guided” by markets or by politics?  His condemnation of nutritional supplements would suggest that he’d favor laws banning or taxing the “wrong” consumer choices. 

Specter does not seem to recognize that institutions-not science per se- is the key factor.  He says (in this clip, at least) nothing about the critical link between R and D (he doesn’t really discuss D in any meaningful sense).  No allusion to markets and profits as ways of stimulating innovation.  And, of course, ignores the reality that absent property rights, markets are a grand illusion.

CEI Weekly: Horner Talks “Power Grab” on Fox News

by Charles Huang on April 26, 2010

in Economy, Energy, Environment, Features, Legal, Regulation, Zeitgeist

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the Weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.


CEI Weekly
April 23, 2010


>>Chris Horner Talks “Power Grab” on Hannity Show on Fox News
CEI’s Chris Horner appeared on Fox News to talk about the Obama administration’s use of climate change as a means to increase government power of his new book, “Power Grab: How Obama’s Green Policies Will Steal Your Freedom and Bankrupt America.” Watch the interview here.


>>Shaping the Debate
The FDA Should Get Real
Gregory Conko’s op-ed in Forbes.com

The Hidden Tax That’s More than $1 Trillion
Wayne Crews and Ryan Young’s op-ed in FoxNews.com

Military leads fight against climate change: Pew
Marlo Lewis’ citation in Scientific American

President Barack Obama wields executive clout on green policy
Myron Ebell’s citation in the Arizona Republic

The Department of Defense Should Assess the Security Risks of Climate Change Policies
Marlo Lewis’ On Point study at CEI


>>Best of the Blogs
Taxpayers Take Another Hit from Obama; Administration Panders Yet Again to Big Labor
by Hans Bader
Taxpayers will pay billions more due to an executive order signed by President Obama that effectively restricts federal construction contracts to the minority of construction firms whose workers are unionized.  That will encourage them to jack up their prices, by shielding them from having to compete with lower bids from non-union construction firms. As the Examiner notes, “President Obama signed Executive Order 13502 directing federal agencies taking bids for government construction projects to accept only those from contractors who agree in advance to a project labor agreement that requires a union work force.

Obama-Dodd financial bill would further enrich Goldman Sachs
By John Berlau (As Featured on the Drudge Report)
The SEC charged giant investment bank Goldman Sachs with more than $1 billion worth of securities fraud for its dealings in the subprime mortgage market. Ironically, at the same time the SEC is seeking justice for Goldman’s alleged victims, President Obama and Senate Banking Committee Chairman Chris Dodd (D-Conn.) are pushing a bill would reward the firm with potentially billions of dollars by instituting a so-called “resolution authority” that would, in practice, be a permanent bailout fund.

Earth Day Agriculture and Sustainable Intensification
by Greg Conko
What’s the most sustainable way to grow the food we eat? The answer environmentalists give is always “local and organic.”  But, increasingly, the answer from the scientists who’ve studied the question is the exact opposite.  A study from England’s Royal Society issued last October concluded that genuinely sustainable agriculture must embrace the use of science and technology for producing more food on less land.


>>LibertyWeek Podcast
Episode 89: Tax the Sin, Love the Sinner
Richard Morrison, Jeremy Lott, Marc Scribner and Lee Doren bring you Episode 89 of the LibertyWeek podcast. We chew over sin taxes, enviro attacks on Al Gore, free booze, Eric Massa’s $40,000 payoff and the recent Tax Day Tea Party protests in D.C.

>>Support CEI

Like what you read?

The Competitive Enterprise Institute’s 25-year record of success is made possible by our over 3,000 supporters. Make sure to stop by www.cei.org/support and make a donation to continue your support or become a supporter. Curious about all the possible ways to donate to CEI? Contact Al Canata at acanata@cei.org or 202-331-2280 to find out more.

Charles Huang

Web and Media Associate

Competitive Enterprise Institute

chuang@cei.org

http://www.cei.org

http://www.openmarket.org

202-331-1010

The War of the SEIU Succession Is Over, or Is It?

by Ivan Osorio on April 26, 2010

in Economy, Labor

The battle over who would succeed outgoing Service Employees International Union (SEIU) President Andrew Stern (picture above, next to President Obama) appears to be over, as several key locals lined up to support challenger Mary Kay Henry against Stern’s handpicked successor, Anna Burger, who served as Secretary-Treasurer during Stern’s presidency. The story got largely buried because it broke at the start of a weekend, but Liberty Chick, at Biggovernment.com, has some useful background on Henry.

Mary Kay Henry’s history with SEIU began in 1979, as she rose through the ranks and became a leader and chief healthcare strategist, then was elected to the International Executive Board in 1996.  Today, Henry serves as International Executive Vice President of SEIU, a step beneath Anna Burger.  Henry’s efforts have been very focused in the health care sector and on building labor coalitions and partnerships with hospitals and health care facilities.  That said, we can probably expect to see SEIU’s stronghold on this sector continue to grow stronger.

In addition to her posts at SEIU, Mary Kay Henry has also been a labor adviser to and member of the Subcommittee on Catholic Health Care of the U.S. Catholic Conference of Bishops, an organization that in itself has become a major political force, having brokered deals with the likes of Nancy Pelosifor crucial votes in the eleventh hour of major bills, most notably on health care reform.  Additionally, she is a member of the executive board of Families USA, a left-leaning non-profit group that serves as a think-tank for most of SEIU’s and other progressive organizations’ research and reports to support universal health care.

In other words, we should expect a change in style — mainly in not antagonizing other labor leaders as much as the Stern-Burger duo did — rather than substance.

For more on Stern and SEIU, see here, here, and here.

UPDATE: Outgoing SEIU boss Andy Stern isn’t giving up the fight for Anna Burger to replace him; he said today that the selection of his successor is not over. However, the Huffington Post reports that, “Aides at SEIU didn’t dispute that Henry, owing to support of local affiliates in New York, Los Angeles, Oregon, and Washington State finds herself in a strong position to take over for Stern.”

Arlington County Board Raises Taxes 10 Percent To Go On A Spending Binge In The Middle Of A Recession

by Hans Bader on April 26, 2010 · 1 comment

in Odds & Ends

The Arlington County Board raised taxes nearly ten percent yesterday in order to increase County government spending even further.  Real estate taxes will go up from a rate of 87.5 cents to 95.8 cents per $100 of assessed value, costing the typical Arlington County homeowner at least $500.

Although inflation has plunged to almost zero in the recession, and private sector employees are tightening their belts and taking pay cuts, “County employees will receive merit-based raises” and other increases under the County’s annual budget.

County spending “has more than doubled” since the start of the housing bubble, and shows no sign of decreasing now that the bubble has ended.  Arlington County’s all-liberal board has barely disguised its contempt for fiscal watchdogs who have questioned wasteful County spending.

County employees are paid better on average than the residents who pay their salaries.  Even teachers, far from the best paid public employees, typically receive compensation of around $100,000 per year in Arlington, even assuming they don’t work in the summer.  (A couple years ago, when their compensation was slightly lower, Arlington teachers’ salaries averaged $71,148, and their pension and other benefits averaged about $27,636, for a total compensation of about $100,000.  The value of their benefits has since increased.)

SAT scores are lower in Arlington than in neighboring Fairfax and Loudoun Counties, even though Arlington spends twice as much per student as Loudoun County and much more than Fairfax County.  (Unlike Arlington’s one-party government, those Counties have competitive political systems where incumbents risk losing reelection if they raise taxes, which gives them an incentive to reduce wasteful spending.)

In nearby Montgomery County, where public employees have a similar death-grip on County government, the County Council last year allowed public employees to collect inflated pensions based on non-existent earnings.  This was too much even for the liberal Washington Post, which has not endorsed a Republican for president since 1952, and a Post editorial today suggests that the County may be watering down this concession to the public employee unions as the County’s tide of red ink grows.

As the Post notes, “Montgomery County politicians have spent the past decade outdoing each other in lavishing favors on public employee unions, whose memberships are presumed to constitute critical voting blocs,” showing a  “deeply ingrained reflex of coddling public employees’ unions.”

Tax rates should be much lower in Arlington County than in other Counties in the region, because its natural expenses are much, much lower (it has far fewer school-age children to educate than do Fairfax, Loudoun, and Prince William Counties, as a fraction of its population) and because its tax base is much richer (due to lots of commercial property within its borders).  Yet its tax rates are not much lower than Fairfax’s, thanks to the enormous wasteful spending of the Arlington County Board.

Porn More Interesting to Media Than Flaws of Financial ‘Reform’ Bill; Obama Is “Lying His Face Off”

by Hans Bader on April 26, 2010

in Bailout Watch, Economy, Insurance, Legal, Politics as Usual, Regulation, Sanctimony

There are plenty of problems with the financial “reform” bill, but the media aren’t interested in that.  They’re much more interested in revelations that senior enforcement staff at the federal Securities and Exchange Commission, which would gain new powers under the bill, spent many hours looking at porn on their office computers.

The porn issue certainly deserves some attention, given just how much time some SEC staff wasted looking at porn at taxpayers’ expense: “A senior attorney at the SEC’s Washington headquarters spent up to eight hours a day looking at and downloading pornography. When he ran out of hard drive space, he burned the files to CDs or DVDs, which he kept in boxes around his office.”  You have to wonder if this kind of inattention to its duties led the SEC to ignore the $50 billion fraud by Bernard Madoff, which was repeatedly brought to its attention to no avail, and the multi-billion dollar Ponzi scheme committed by Robert Allen Stanford.  But it probably didn’t.

While the media, including the New York Times, has reported on the porn, it has largely ignored substantive criticism of the financial “reform” bill, which is a Trojan horse that would reinforce risky practices that led to the housing bubble, while ignoring needed reforms, harming insurance policyholders, and giving executive branch officials arbitrary power to bail out or take over banks and financial institutions.

As journalist Matt Welch notes, Obama “is lying his face off about financial reform.”

President Obama has collected millions from Wall Street special interests, his administration contains many Wall Street lobbyists, and he supported the unnecessary $700 billion bank bailout.  But now, he’s pushing a deceptive financial regulation bill with phony rhetoric about “reform,” claiming it is “not legitimate” to point out that the bill could lead to yet more bailouts and government takeovers (as economists and banking experts like Peter Wallison have demonstrated).

Obama’s legislation would do nothing to rein in the worst offenders behind the mortgage crisis, the government-subsidized mortgage giants Fannie Mae and Freddie Mac, even as it would enrich the politically-connected liberal Wall Street firm Goldman Sachs (recently accused of fraud), enrich left-wing lobbying groups and community organizers, and give the government the permanent ability to bail out and take over Wall Street firms.

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, the Obama administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation.  The Obama administration is now expanding the bailouts of these mortgage giants so that they can lavish pay on their CEOs and reduce the payments of deadbeat mortgage borrowers.  (At the direction of the Obama administration, Freddie Mac is now running up $30 billion in lossesto bail out mortgage borrowers, some of whom have high incomes.  Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.)

Fannie and Freddie helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk.  “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”

Why did they buy these risky loans?  They put up with Clinton-era affordable-housing regulations that required them to buy up lots of risky loans, in order to curry favor on Capitol Hill and thus retain their annual $10 billion in tax and other special privileges (which they possessed owing to their status as “Government-Sponsored Enterprises” or GSEs). They paid their CEOs millions in the process, and engaged in massive accounting fraud — $6.3 billion at Fannie Mae alone — to increase the size of their managers’ bonuses.  As GSEs, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.

Banking expert Peter J. Wallison, who prophetically warned against the risky practices of Fannie Mae and Freddie Mac for years, says that Obama’s proposals will lead to “bailouts forever” and give big, politically-connected banks that are “too big to fail” the ability to drive smaller rivals out of business at the expense of consumers and taxpayers.  His colleague Alex Pollock notes that Obama has not lived up his Administration’s claims that it would back reform of Fannie Mae and Freddie Mac.

Obama claims that it will not lead to more bailouts, but even congressional Democrats admit that it will.  As Congressman Brad Sherman (D-Calif.) admitted, the “bill has unlimited executive bailout authority. . .The bill contains permanent, unlimited bailout authority.”

Government pressure on banks to make loans in economically-depressed neighborhoods was another key reason for the mortgage meltdown and the financial crisis.  If Obama has his way, that pressure will increase.  The House earlier approved Obama’s 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.”  It would do so without regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a key contributor to the financial crisis.

Obama’s proposed financial regulations would also harm retail banking operations used by middle-class people and small businesses.

Online Gambling Could Have Brought $150 billion and 32,000 jobs to the US

by Michelle Minton on April 23, 2010 · 6 comments

in Legal, Nanny State, Odds & Ends, Personal Liberty, Privacy, Tech & Telecom

In the past five years since the de facto ban on Internet gambling (congress passed the Unlawful Internet Gambling Enforcement Act in 2006) the US could have created 32,000 jobs and raised $94 billion in gross expenditures as well as an additional $57.5 billion in tax revenue from wagering activities, related job creation and growth of supporting businesses. All of this would have been the result of legalizing and taxing Internet gambling according to a new study released last week by H2 Gambling Capital.

But that didn’t happen. While most of the opposition to online gambling came from the neoconservative right, most of those legislators seemed more than happy to let the activity exist in a federal regulatory gray area with no federal law applying to non-sports wagering on the Internet, leaving it to particular states to determine if and how to regulate.

Republicans eagerly courting the tea party vote use the rhetoric of less government, less spending, no more bailouts. If they want to continue to use that logic while claiming that they can improve the US economy, not banning an industry is a good first step. As for the regulations, one might say that gambling in the US would really thrive if it were not legal or illegal. If the activity was simply regulated and taxed as any other business in the US more casinos would be interested in housing operations (and thus creating jobs) in the states. However, there are several bills in both the House and Senate that would legalize certain online gambling activities and amend the tax code in order to draw revenue from those activities.

Picture via techniumcast.com

Center-Right Coalition Letter Opposes Toxic Provisions in Dodd Bill

by John Berlau on April 23, 2010

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

Below is a letter sent today to the Senate that was signed by several prominent groups in the Center-Right Coalition expressing “grave concerns about the ‘Restoring American Financial Stability Act’ and its negative impact on Main Street.” The letter has been signed by a broad spectrum of the Center-Right coalition, including this author on behalf of the Competitive Enterprise Institute; economic conservative stalwarts Grover Norquist and Tim Phillips on behalf of, respectively, Americans for Tax Reform and Americans for Prosperity; and veteran conservative activists Phyllis Schlafly on behalf of Eagle Forum. Also signing on are two energetic new grassroots groups that speak on behalf of much of the Tea Party movement: Tea Party Express and American Grassroots Coalition.

The letter, printed below, highlights what it calls “a by-no-means exclusive list” of major concerns with the bill. These include the bill’s broad definition of “nonbank financial company” that would mean that many “Main Street non-financial businesses would be hit with taxation, regulation, and possible nationalization by the Federal Reserve” (Read more about this here), the proxy access mandates that would usurp state incorporation law and “empower union pension funds and other progressives by forcing companies to fund their Saul Alinsky-style campaigns for a company’s board of directors” (Read more about this here), and the lack of any reforms in the bill of Fannie Mae and Freddie Mac – the two government-created mortgage giants that were “primary causes of the crisis.”

The letter concludes: “While we believe the government should act swiftly to punish financial fraud, it should not diminish Americans’ choices and opportunities in the name of ‘stability.’ We believe that fundamentally, as with health care, although there are a lot of complexities involved, this is about the future of our country. Do we continue living in an America where entrepreneurs and investors can launch new businesses and new ideas — or do we live under a system in which almost every transaction has to be approved by a government agency or czar?!”

April 23, 2010

Dear Senators Reid and McConnell,

As leaders of groups representing millions of Americans that comprise a Center-Right Coalition, we have grave concerns about the “Restoring American Financial Stability Act” and its negative impact on Main Street. While we believe the government should act swiftly to punish financial fraud, it should not diminish Americans’ choices and opportunities in the name of “stability.”

We believe that fundamentally, as with health care, although there are a lot of complexities involved, this is about the future of our country. Do we continue living in an America where entrepreneurs and investors can launch new businesses and new ideas — or do we live under a system in which almost every transaction has to be approved by a government agency or czar?!

Below is a by-no-means exclusive list of our concerns about provisions that hurt Main Street.

1. Main Street non-financial businesses would be hit with taxation, regulation, and possible nationalization by the Federal Reserve: Defenders the $50 billion upfront resolution (bailout) fund argue that the money would come not from general taxpayer funds but fees on “financial institutions.” But putting aside the fact that even taxes on big banks would be passed on to depositors and borrowers, the bill’s definition of “financial institution” subject to the fee and regulation by the Federal Reserve goes far beyond a bank or stockbroker.

Life, home and auto insurers would be subject to this bailout fund fee even though they already pay into state funds for insolvent insurance companies, and the fee would then be passed on to their policy holders. The Federal Reserve would also have the power to define a “nonbank financial company” to encompass any business it deems as “substantially engaged” in financial activity, and experts fear this definition could include energy companies and manufacturers tangentially involved in finance and credit. These firms would be subject not just to the bailout fees, but to the Fed’s new powers of breakup and nationalization for firms it deems “systemic.”

2. “Proxy access” and corporate governance provisions would take power from states and empower progressive interest groups — from unions to animal rights: Even though they have little justification in preventing the next financial crisis, the bill contains “proxy access” provisions that would empower union pension funds and other progressives by forcing companies to fund their Saul Alinsky-style campaigns for a company’s board of directors. Combined with other items federalizing incorporation law — like a mandated majority instead of plurality standard for director votes– this could enable special interest activists to harm the interests of ordinary shareholders and encourage corporate directors to cut deals with them on things like card check, cap-and-trade, and kicking conservative media personalities off the air.

3. What’s not in the bill — any reform of Fannie and Freddie: The bill ignores the two of the primary causes of the crisis: Fannie Mae and Freddie Mac. They’re bigger than ever, and the Obama administration quietly lifted the $400 billion cap on government backing on Christmas Eve — the “Christmas bailout” — so now taxpayers have unlimited liability for them. A bill aiming to prevent the next crisis is woefully insufficient without reform of Fannie and Freddie, and could have the unintended effect of allowing them to carry the risks that other businesses would be barred from taking.

We are happy to meet with you or members of your staff to discuss further these vital concerns.

Sincerely,

Jennifer Hulsey, Co-Founder, American Grassroots Coalition

Dick Patten, President, American Family Business Institute

Tim Phillips, President, Americans for Prosperity

Grover Norquist, President, Americans for Tax Reform

Chuck Muth, President, Citizen Outreach

John Berlau, Director, Center for Investors and Entrepreneurs, Competitive Enterprise Institute

Phyllis Schlafly, President and Founder, Eagle Forum

Colin Hanna, President, Let Freedom Ring

William Greene, President, RightMarch.com

Jim Martin, Chairman, 60 Plus Association

Amy Kremer, Director, Grassroots and Coalitions, Tea Party Express

Cc:

The Honorable Christopher Dodd               The Honorable Richard Shelby

Chairman                                                      Ranking Member

Committee on Banking, Housing,               Committee on Banking, Housing,

and Urban Affairs                                        and Urban Affairs

United States Senate                                    United States Senate

Washington, DC 20510                               Washington, DC 20510

The Honorable Robert Corker

United States Senate

Washington, DC 20510

Obama Uses Phony Rhetoric About Financial ‘Reform’ to Push Bill That Enriches Special Interests and Perpetuates Bailouts

by Hans Bader on April 23, 2010

in Bailout Watch, Economy, Legal, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Zeitgeist

President Obama has collected millions from Wall Street special interests, his administration is chock full of Wall Street lobbyists, and he supported the unnecessary $700 billion bank bailout.  But now, he’s pushing a deceptive financial regulation bill with phony rhetoric about “reform,” claiming it is “not legitimate” to point out that the bill could lead to yet more bailouts and government takeovers (as economists and banking experts like Peter Wallison have demonstrated).

Obama’s legislation would do nothing to curb the abuses of the worst offenders behind the mortgage crisis, the government-subsidized mortgage giants Fannie Mae and Freddie Mac, even as it would enrich the politically connected liberal Wall Street firm Goldman Sachs (recently accused of fraud), enrich left-wing lobbying groups and community organizers, and give the government the permanent ability to bail out and take over Wall Street firms.

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, the Obama administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation.  The Obama administration is now expanding the bailouts of these mortgage giants so that they can lavish pay on their CEOs and reduce the payments of deadbeat mortgage borrowers.  (At the direction of the Obama administration, Freddie Mac is now running up $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes.  Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.)

Fannie and Freddie helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk.  “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”

Why did they buy these risky loans?  They put up with Clinton-era affordable-housing regulations that required them to buy up lots of risky loans, in order to curry favor on Capitol Hill and thus retain their annual $10 billion in tax and other special privileges (which they possessed owing to their status as “Government-Sponsored Enterprises” or GSEs). They paid their CEOs millions in the process, and engaged in massive accounting fraud — $6.3 billion at Fannie Mae alone — to increase the size of their managers’ bonuses.  As GSEs, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.

Banking expert Peter J. Wallison, who prophetically warned against the risky practices of Fannie Mae and Freddie Mac for years, says that Obama’s proposals will lead to “bailouts forever” and give big, politically connected banks that are “too big to fail” the ability to drive smaller rivals out of business at the expense of consumers and taxpayers.  His colleague Alex Pollock notes that Obama has not lived up his administration’s claims that it would back reform of Fannie Mae and Freddie Mac.

Obama claims that it will not lead to more bailouts, but even congressional Democrats admit that it will.  As Congressman Brad Sherman (D-Calif.) admitted, the “bill has unlimited executive bailout authority. . .The bill contains permanent, unlimited bailout authority.”

Government pressure on banks to make loans in economically-depressed neighborhoods was another key reason for the mortgage meltdown and the financial crisis.  If Obama has his way, that pressure will increase.  The House earlier approved Obama’s 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.”  It would do so without regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a key contributor to the financial crisis.

Obama’s proposed financial regulations would also harm retail banking operations used by middle-class people and small businesses.

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