Fannie Mae and Freddie Mac are bankrupt. Lehman Brothers filed Chapter 11, AIG borrowed $85 Billion from the Federal Reserve, Merrill Lynch lost $8.4 Billion and was sold to Bank of America, and IndyMac the US's largest mortgage lender collapsed July 11, 2008. The Dow Jones fell 778 points or 6.9% in one day. The Media and Politicians quickly called this "one of the greatest economic crisis" in our nations history. I think the entire debate the entire media coverage has been nothing but a blame game and doomsday rant, respectively.
Washington's first response to this crisis was to play their favorite hand, the blame game. Democrats blamed George Bush and the Republicans for neglecting the signs of the oncoming doom. Democrats were quick to point out Republicans had failed to create more Federal Oversight to monitor the Subprime Mortgage's. Republican Presidential Candidate John McCain claimed he foresaw the problem. Apparently he never introduced any legislation to try and solve the problem. Republicans were also quick to point to the Democrats as being the party at fault. Democrats now control both houses and did nothing, even as the crisis loomed on the horizon. Democratic Presidential Candidate Barack Obama also claimed he foresaw this crisis years ago, but just as McCain, did nothing to prevent it. The National Media was quick to jump on board and claim the economy was hinging on depression. Their answer was to jump whole hearted behind the Bernanke/Paulson/Bush $700 Billion dollar economic bailout plan. The Media showed no mercy in attacking the House for showing a lack of leadership for not immediatly passing the Bailout. Washington showed a complete lack of leadership and the national media once again proved their socialist and progressive leanings by misrepresenting this situation and attack capitalism.
I want to quickly explore the reason there is a financial crisis. The Subprime Mortgage crisis is most simply put the direct result of stupid business practice. If a person can only afford a $200,000 house and the banks give them low interest rates and loan them $500,000 this isn't a government problem this is a illogical business practice. Freddie and Fannie were knowingly lending to people who couldn't afford a housing loan. They were encourage by liberal/progressive/socialist lobbying groups. This kind of unsound business practice will never be successful.
Nancy Pelosi, Democratic Speaker of the House, gave a speech before the House voted on the Bailout bill in which she unashamedly attacked Capitalism and the Free Market. She made claims that a Free Market without regulation is a dangerous thing. It was an attack on Laissez-faire Capitalism. How can she honestly argue that government dabbling in business brings any positive results? Fannie and Freddie are in fact government sponsored enterprises. They Failed because when government gets involved with business and the markets the result will always be corruption.
Finally the progressive/socialist/ are pointing to this crisis as the end all proof that Free Markets and Capitalism do not work. Pelosi made a comment in her speech to the effect that in our system the rich get richer while the poor get poorer. Am I the only one who finds this comment absurd? Absurd because she's the one trying to pass a $700 Billion dollar bailout to keep the companies afloat! Not to help the American taxpayer but the business. Mrs. Pelosi, in Capitalism when a company fails government doesn't inject it with money to keep it from filing for bankruptcy. When a bank fails because of bad lending decisions such as the aforementioned companies have, then they must be allowed to fail.
Yours in Liberty,
Nate
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