More Folly From The Fed

The Federal Reserve, led by Ben “Break the Bank” Bernanke, is now issuing rules regulating how banks handle business with their consumers regarding overdraft fees.

This is another example of government trampling the rights of Americans under the false pretense of protecting them.

Who exactly do people think owns banks?  They are owned by private citizens who have put their money at risk in offering services to other private citizens who choose of their own free will to either do business with said bank or not.

If consumers do not like how they are being treated by one bank they simply move to another.  The switching cost of changing banks is exceedingly small and people do it every day of the year.

There is simply no reason for the Fed or any other government agency to become involved in transactions between Americans when said transactions are free from coercion.

If the situation were such that one group of people were using violence to coerce another into doing something that they would not do of their own free will, buying health insurance for example, that is certainly a case that calls for the protection of private citizens by the government.

The fact is that the Federal Reserve Bank has done far more to harm the American economy and American citizens than it has done good since its creation in 1913 including failing to fulfill exactly the purpose it was designed for in 1929.  The Fed is a monstrosity that is more responsible than anything else for the loss of 94% of the value of the dollar since the beginning of the 20th century and should be abolished.

Democrat Proposes to Expand Government Regulation of Airlines

A Northwest flight flew 150 miles past its destination in Minneapolis, MN.  It was discovered that the cockpit crew was using laptop computers which distracted them and led to the error.

Now the chairman of the aviation subcommittee, Senator Byron Dorgan (D), is proposing government regulation to address this issue.

Dorgan is following the common course of all who work in the legislative branch: write more laws to control more of the lives of Americans.  This is wrong, should be rejected and Dorgan should be voted out because of it.

Why is it wrong? 

1. Northwest is owned by Delta.  Delta has an existing policy that prohibits just this sort of behavior by pilots and co-pilots and has already suspended the employees.
2. Does anyone really believe that Northwest or any other airline will continue any similar practices?  If that were to happen again the consumer reaction would be severe.  Delta and Northwest have already had their brand images tarnished.  The industry is too competitive to allow a company to run shoddy service that passengers perceive as irresponsible and dangerous.

By increasing government regulation Dorgan is doing the only thing he knows how to do and it is exactly the wrong thing.  Increasing regulations always leads to increasing the costs for the consumer.  What should be done is not increase government regulation but decrease government regulation.

The consumer pressures mentioned in 2 would be even stronger if there was no regulation.  How?  The FAA regulates who can fly where, they prohibit competition.  If Northwest is one of the few carriers on that route they have more supplier power and can be lazy.  Since the FAA prohibits new entrants they existing carriers are protected from competition.  These factors make the carriers resistant to improvement because that often costs time and money.  This resistance gives the government a reason to write more laws claiming they are in the best interest of the consumer.  Regulation always raises costs to the consumer in one way or another.  Removing regulation however would increase carriers serving that route.  The switching costs for consumers is very low when it comes to picking a flight so having more choice would mean that carries would also have to provide better, safer service and lower prices to stay in business.

Again, we have a misguided effort on part of government that is completely unnecessary and will only expand government control and not be in the best interest of the consumer.  It is more of the same and it is not good.  The real solution is the same as it ever was: free markets.  The consumer will decide which airlines they and what kind of services they demand.  As is almost always the case, there is simply no place for government here.

Obama’s Selective Memory

While Obama was campaigning for the reelection of NJ Governor Jon Corazine he had the audacity to suggest that the Socialist/Democrat Party was not to blame for the recent economic debacle.  Obama said

“‘It wasn’t a consequence of Obama policies or Corzine policies that we went into this hole,’ the president said during a raucous campaign stop in Camden. ‘There seems to be some selective memory going on here.'”

There certainly is some selective memory going on and it is all inside the heads of Obama and the Socialist/Democrats.

This began in the 1970s with the racist Community Reinvestment Act (CRA) that the Socialist/Democrats used to coerce banks to lend money to unqualified borrowers on the basis of race in an effort to buy minority votes.  Jimmy Carter pushed the program.  Bill Clinton was perhaps the strongest advocate of the CRA, putting a great deal of pressure on banks to make bad loans.  

Banks are a heavily government-reagulated industry and are required to gain the permission of the government for just about everything including growing their business.  The primary mechanism of growth has been merger and acquisition.  The Socialist/Democrats decided that the number of loans a bank made to people targeted by the CRA would be used in assessing the ability of a bank to be eligable to merge with or acquire another bank. 

The absurdity is clear.  In what way does the government have any right to tell you who you must lend your money to?  No American would stand for that in their day-today lives, not even the socialists.  Would you lend money to someone you did not belive would pay you back?  Of course not but that is exactly what the government forced the banks to do.  Consequently the perception of risk was horribly distorted.

The Socialist/Democrats have been determined to assume control over every aspect of American lives and this presented an opportunity to advance that agenda.  And what if it lead to massive failures in the industry as bad loans were a given under such conditions?  That would simplify the government’s job greatly as they could cut out of the loop the people who actually owned the money that was at risk, the bank share holders, step in and nationalize the industry by introducing more regulation.

So, in an effort to grow their business and make more money for their share holders, the only responsibility a corporate agents have and is mandated by … wait for it … yes, the US government, banks began to act in a manner that was consistent with satisfying the socialist agenda of the government and their legal obligation to their share holders.

It cannot be forgotten that the US government had established a precedent for what happens when a financial institution behave irresponsibly.  That is know as the Savings & Loan Scandal.  The US government bailed out companies that made bad decisions. 

So the mindset was that everyone was following all the government regulations and if anything bad happend the government would probably step in.  All of this encouraged if not mandated banks to to take excessive risks.  The result of this is what we have now.

And what now is the solution that Obama and the Socialist/Democrats have in mind to fix the massive problems created by government regulation?  More regulation.  Does anyone remember Enron and SarbOx and how it has served to increase costs for US businesses and drive investment out of the US? 

Apparently for the Socialist/Democrats there is no problem that cannot be solved with the same misguided ideas and incompetence that were used to create it in the first place.  That is not entirely fair as it implies that the Socialist/Democrats are interested in the best outcomes for each individual American.  The Socialist/Democrats are not; they are interested in advancing their socialist agenda and transforming the United States into a socialist country where all citizens are completely dependent upon the socialist government for everything.  So the Socialist/Democrats have actually been pursuing exactly the right course of actions to bring about the change they all believe in.  Unfortunately that is the worst possible outcome for every America.

One thing that Obama is also selectively neglecting to mention is that he was the number two recipient of money from Fannie/Freddie and his chief of staff was on the board of directors for an entire year leading up to their total collapses.

Selective memory?  You better believe it.