Wednesday, October 5, 2011

What Is Really Too Big To Fail? Crony Capitalism

George Bush, Jr., as he left office, bailed out Wall Street (the banks) to 'save the world economy' and because the banks were 'too big to fail'. He spent about $300 billion and handed off another $400 billion or so to Obama to finish the job. They called it TARP.

Obama not only continued the bank bailout but added the auto companies to the list and heaped money on GM and Chrysler (Ford refused). Interesting that Obama forced money on some of the banks that didn't want, nor need, bail out assistance. Strange, huh? Not really, read on.

So what was it that made these businesses TOO BIG TO FAIL? Let's take the banks first. The federal government muscled banks to make questionable loans to a large set of the populace that could not afford to own homes (called sub-prime mortgages). They claimed to back these banks by having Freddie Mac and Fannie Mae support these loans with tax payer money. George Bush, Sr. signed legislation that stated that Fannie and Freddie have an affirmative obligation to facilitate the financing of affordable housing for low-income and moderate-income families.  They set a target of 30% for loans to this segment.  In 1999, Fannie and Freddie came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas.  They drove the percentage to over 55%. (this also served the Clinton economy).

These actions supported the Liberal cause by making loans to moochers who vote Democratic (and favored racial groups) while hyping the economy (we call it a bubble). When the government creates a partnership with selected large corporations to further their mutual causes it is called CRONY CAPITALISM. Also in most, if not all cases, it results in disaster because it interferes with natural FREE MARKET FUNDAMENTALS.

So when the 'stuff' hits the fan (in this case the sub-prime homeowners can't make their payments and the price of their homes fall below the their mortgage balance) the government starts scrambling because their SCAM IS TOO BIG TO FAIL and the politicians need to cover up the facts of their actions that caused the problems. So they buy off their cronies with bail outs. The last thing they want is for the banks to tell how they were forced, and enticed, into violating their own regulations and business practices at their government partner's urgings. So politicians bail out their cronies with taxpayer money and government debt to keep them quite and to get their continued co-operation (not to mention big contributions to their campaign funds). It is a typical government cover up.

And why bail out the auto companies? Look at the two major factors that have made the American auto companies fail. The first was labor laws and government practices that backed the labor unions with excessive wage rates, lucrative health care plans, and ridiculous retirement plans. If that isn't enough to keep you from competing in a world market add severe regulations on top of the labor costs. Regulations that dictate what kind of products the auto companies must make to meet fleet emission standards and mileage regulations supporting the government's global warming scam. The government then makes it difficult for the auto companies to build plants in labor markets where they would be competitive. Again when the stuff hits the fan and the auto companies approach bankruptcy, the government must bail them out. It just would not serve the politicians interests for the auto companies to, first, tell the public why they failed. And next, for the companies to take the actions necessary to get rid of union contracts and to demand less regulation. As it is, the government and their crony auto executives are just kicking the can down the road. The auto companies will fail again unless they throw off union and government control. American companies have no chance in competing against free market competitors with lower costs and the freedom to build autos that world buyers desire.

Interesting that even though Ford didn't take bail out money, they are on the record supporting the bail out program. Are you kidding me? Obviously they have been threatened to not criticize the 'hush money bail out'. The rumor is they were recently encouraged to take down an ad bragging about not taking bail out money. The Obamas were quick to announce that Ford had approved of the bail out even though they didn't participate.

What are the lessons learned?  Moderate Republicans, the Bushs, will pass legislation working with the Libs that seems reasonable at the time. The Dems (Clinton, Obama, etc.) will then dramatically alter the implementation to buy votes and ultimately do considerable damage to the economy.   Example:  George, Jr. hands Obama $400 billion in TARP.  Obama immediately adds another trillion in stimulus.  George, Sr. passes  sub-prime legislation, and Clinton drives a truck through the opening he was given.

Think about it and vote the bums out before they destroy other industries and bankrupt the nation.  Also, beware of Moderate Republicans.  If it wasn't for George, Jr. there would not be an Obama in the White House.  If it wasn't for George, Sr. there would not have been a Bill Clinton.


Monday, October 3, 2011

William Jefferson Clinton: A Business Genius or Scammer?

As promised in the last blog posting Scott Riddle (local cattleman, insurance tycoon, Texas Holdem expert, occasional investor in anything of interest, and nephew of Hall of Fame Baseball Player, Tris Speaker) was asked to discuss the Clinton Boom Years of the 90's. His remarks follow.

"Many folks rewrite history by giving Bill Clinton sole credit for a robust economy, creating jobs, and generating a federal government surplus (by raising tax rates). Clinton's economic metrics were benefited considerably by what is called a 'bubble' in the Internet sector of the economy. What was the Internet Bubble? It was an orchestrated assault on America's investors by Wall Street investment bankers, venture capitalists, and the Clinton administration led by one, Robert Ruben (Clinton's Secretary of the Treasury and former CEO of Goldman Sachs, but of course). This collusion literally flooded the IPO (Initial Public Offering) stock market with high tech Internet start up stock offerings. Most of these companies were heavily funded by venture capital firms, many of which were also funded by the venture investor organizations of the investment bankers who would 'take these companies public'."

"Most of the IPOs (Initial Public Offerings) went public at huge valuations and most of the companies were operating at huge losses at the time of the public offerings. In this crazy Internet world all former rules based on revenues and profits were thrown out in this race to Internet 'gold'. Those hyping these companies convinced investors that profits weren't important. A term called 'eyeballs' replaced profits. The companies spend huge sums of money enticing visitors to their web sites while convincing public investors that this would convert to revenues and profits sometime in the future (sounds a lot like GREEN INVESTMENTS DOESN'T IT). The end result was the company employees, the venture capitalists, and Wall Street investment banking companies all made out handsomely, and the Clinton economy produced jobs and wealth for those who were lucky enough to 'cash in' before the BUBBLE POPPED. And when did it pop? In Clinton's last year of office (of course) dumping the country in a recession at the expense of the nation, and particularly at the expense of the shareholders who thought they had made investments in real companies with long term futures. Very few companies lived up to this expectation. Companies that did not make the IPO window shut down losing the investor's money and the jobs of many employees. The High Tech Industry has still not recovered."

"Another big loser of the Clinton Bubble was the whole concept of Initial Public Offerings. This method of rewarding successful high tech start up companies with liquidity and growth capital had been largely responsible for this countries' world leadership in innovation, technology, and worker productivity. Clinton's outlaws basically KILLED INITIAL PUBLIC OFFERINGS! This may be the greatest cost of Clinton and his cronies GREED."

"So what did Wall Street move to after the Clinton Internet Bubble? They colluded with Washington (Chris Dodd, Barney Frank, Black Caucus, Fannie, and Freddie) to create a huge REAL ESTATE BUBBLE. Using the government and taxpayers to bail out their bad loans they packaged things called 'instruments' and played a game passing off the hot potato (they called these sub-prime loans) hoping they weren't the last to be holding these instruments when the bubble popped. With the un-able (Dennis Miller calls a race between Obama and Cain a race between Cain and Un-able) assistance of Obomb-us we are still suffering from this criminal act."

"While Bush didn't stop the Real Estate Bubble, he did get the economy moving again after inheriting the Clinton recession by eliminating Clinton's tax increases and not doing the insane government interference of the Obama crowd. Bush, however, did allow his obsession with the nation's security to blind him into allowing the Democratic Congress to overspend. Bush's weakness in reigning in Democrats lost his conservative base and enabled the election of Obama in my opinion. His approval ratings as he left office was in the thirties because he lost conservatives."

"And what Bubble would the Libs like to replace the real estate mess with? THE GREEN REVOLUTION, of course. If they can sell the world on 'man caused global warming', they can use government regulations to create an artificial market for all types of GREEN SCAMS. They can through regulations force consumers and companies to buy and use any products they choose whether it is window shades, solar panels, roofing materials, electric cars, or public transportation to name just a few. This could be the biggest scam of all if they can pull it off."

"Lastly, if of course when you get under the covers of the surplus during the Clinton years, he had no choice. The Clinton policies created an environment begging for the Gingrich Revolution. Newt and the Republicans forced Clinton to move to the right and balance the federal budget, thus creating a surplus."

Mom had a question, "Scott, how do you know so much about this Internet Bubble?"

Good question, Maxine, "I actually invested in some of these Internet start up companies, and one in particular in Austin, Texas."

"Right, Scott. I think I know that company. The IPO window closed real tight right before they planned to go public, thank goodness! A failed start up company is one thing, a failed public company is much worse; I am told by a close member of my immediate family."

Lots to think about as Americans determine whether Hillary would be any better than Obama,