Sunday, September 20, 2009

The Quaintness of America

For the great number of people who think that calling the actions of this administration a slide into socialism is a gross exaggeration, please read the following two articles in Saturday’s Boston Globe and The New York Times.

In the first, a new bureaucracy, The Consumer Protection Financial Agency (CPFA) is proposed to be established in order to redouble existing regulatory oversight under the premise of helping people, effectively further removing that quaint old quality of personal responsibility from one’s actions.
The new agency Obama wants to create would be tasked with making sure people receive accurate information about mortgage rates, credit card deals, and other financial products, Summers said. In addition, the agency would have broad authority to monitor lending companies to ensure that they are not using deceptive practices to sell people mortgages that they can’t afford. It was the high default rate on so-called subprime loans that played a major role in the economic crisis that came to a head last fall. [emphasis added]
What about the twins, Freddie and Fannie, government sponsored enterprises created to give otherwise, non-qualifying consumers a leg-up in the housing market, or the Community Reinvestment Act which tied a financial institution’s supply of credit to low-income communities with approval for its business expansion? Weren’t they designed to sell people mortgages that they could not otherwise afford?

It seems that the Obama administration wants to spend billions of taxpayer dollars to set up this new bureaucracy only to insure that fraudulent practices are not used to entice agreements between parties. Isn’t fraud already illegal? Isn’t that what the entire Judicial Branch of the government is for, to determine under objective laws when force or fraud, both violations of individual rights, have been used against individuals, in this case, to elicit agreements between two or more parties? What will this new agency bring to the party other than expanding the government’s role from protector of individual rights to the role of hammer where everything looks like a nail?
“The way you get a level playing field to protect consumers is to establish an agency that has protection of consumers as a focus,’’ Summers said.
Leveling the playing field is a popular expression that sounds almost like fairness until you realize that it’s not about an individual’s equal standing before the law, but rather a reduction in values that one obtains for himself for the benefit of others who have not obtained those values. Regarding this bureaucracy, it means a reduction in the variety of business practices which is directly related to the range of consumer choices. It requires that individuals suspend their actions derived from their knowledge and experience for a mandated behavior based on the inference that all businesses are bad and will happily screw their customers whenever and wherever they can.

This mentality turns the quaint idea of “innocent until proven guilty” on its head. Where is the fairness in that? And who are these clueless consumers who can’t possibly think for themselves? This agency says they are us and we must be protected from ourselves by the big hammer of government.

More than the ability to sue for breach of contract or the implied warranty of goods under objective law, I don’t think I need government agents to oversee my voluntary transactions for me. I certainly don’t need seven more papers to sign when I want to buy something. What I do need is the ability to choose freely where and how I want to spend my money. All this agency will do is cost me money, time, and effort – and worse, it will further strangle businesses. Since businesses are the implied enemy of any “consumer protection” none of us should worry about them, anyway, right? What have these businesses done for us lately?
[Representative Barney] Frank said that the business groups know there is no intention to target people such as the local butcher. Still, to take the issue off the table, Frank said his version of the legislation would include a clause that makes clear which types of businesses are affected. [emphasis added]

I, for one, feel better knowing that the new bureaucracy has no intention of targeting the local butcher. I can’t wait to find out which businesses it will target. I’m sure that the Schechter Brothers would have felt the same sense of relief.

Despite the claim by Heather Booth, leader of the Americans for Financial Freedom coalition, that the intentions of such an agency “should be motherhood and apple pie,” I think they are more like a wielded baseball bat intending to level that playing field. Another quaint American icon, Chevrolet, certainly tried to wield that bat against its competitors.

The second Saturday article reveals the latest Washington proposals for dealing with those nasty rich folks who assumed that since they fulfilled their contractual obligations, they would be rewarded with their contractual payments.

This article states that it’s time to end the “hands off approach that dominated bank regulations for the last three decades.” That is rich (see FDIC, FRB, OCC, etc.). But the good news reported by the article is that the proposed rules are not as strict as those proposed by European leaders. Apparently, America as a sovereign country is also becoming one of those quaint old ideas.

Perhaps the most telling line come from our Secretary of the Treasury, who reports that “The simple proposition should be that you don’t want people being paid for taking too much risk, and you want to make sure that their compensation is tied to long-term performance.”

All I have to say is…well, I’d have to change my blog to an adult rating, so let me say that until you own the company, Mr. Geithner, you have no say in how to compensate its employees. This is a naked example of slide toward socialism.

Finally, let’s end with a little sanction of the victim here.

Bank executives said they welcomed the Fed’s efforts, which were first reported by The Wall Street Journal. Some executives, speaking on the condition of anonymity so as not to antagonize lawmakers, said they hoped that the Fed’s efforts would dissuade Congress, many of whose members were furious over bonuses paid to American International Group, from passing much stricter limits on pay.

The principles of individual rights and personal responsibility are not quaint notions. We should not allow, let alone call for, our government to treat them as such.

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