Let’s look at the field of finance and get some results from the government's action to cure the financial malaise we have suffered through as a nation.
They gave banks money, without any direction, and watched the banks "right the ship". Most of the big banks made money from selling the Treasury paper that financed the deficit caused by all the stimulus programs, originating "safe" Fannie, Freddie and FHA loans that were sold to the aforementioned government entities, and in some cases, buying their own stock and watching it rise in the up trending stock market. What they didn't do was control the bonuses to executives, help the business community expand their businesses with business loans, try to revive the missing part of the real estate market (which means offering jumbo loans), and generally work to improve the lives of individuals in this country. As businesses in this country, a capitalistic, free society, they needn't give the aforementioned goals a passing thought, but, taking money from the government (the people’s money) requires a different set of values. From my vantage point, the banks failed to do their duty. The missing piece of the puzzle was banks were required or coerced to take this money and were not given any direction for use. That statement indicts government and its leaders more than any other I have heard. No businessman would make that kind of mistake and be able to remain in business. The difference between business and government: money is a rare resource to business, not to government. Government can tax or borrow with impunity and never gives it a second thought.
Real estate must recover for the economy to remain vibrant in the long run. It can't happen until the mortgage market is given the sufficient tools to facilitate the move-up market, which is poised to take off because of the massive entry into real estate, based in a large part on the government's $8000 investment tax credit for first time home buyers. Do not look for this government to help in any way because it doesn't fit the real goal of this government, to perpetuate itself by controlling the populous. Also missing in the real estate arena is common sense lending. It is gone, verboten and missing in action. When the studies are produced in years to come as relates to who was a risk as a borrower and who wasn't, the nation may be surprised to see that the self-employed, stated income borrower didn't fare any worse than the employed, full-documentation borrower. The mortgage industry, under the guidance of such well informed and well meaning politicians as Chuck Schumer and Barney Frank, has completely lost track of borrowers and is busy creating a large amount of paperwork to prove, if challenged, that they overlooked nothing. Unfortunately, they never stop to realize that all the paperwork and stop gaps in the world don't insure payment of the loan if the borrower loses his or her job.
This gets me back to the real emphasis of this column, which is to show why, in my opinion, nothing should be run by the government that can be run by private industry instead. If you haven't run a business or professional practice and realize that mistakes can cost you everything, including your business or practice, you can't assimilate the experience. You can't read about it or learn it from a teacher, you need to experience it and see how you react under pressure. Even though the government is in charge of some enterprises and ventures, they still don't get the feeling of what sacrifices need to be made to keep the project afloat because of their unique ability to acquire the life blood of any enterprise: money. The experience the private sector gains from simply keeping afloat is like no other, period.
That said, I wouldn't let the government run a nationwide pet health program, let alone a program that has worked for all these years and is at the pinnacle of all health systems in the world. It should be illegal, and I believe it is as a senior citizen, because suicide is against the law.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.