From Rajan’s book Fault Lines, I summarize the latter part of the first chapter (sub-titled “A Short History of Housing Credit”). From Rajan, before we embark on this little history:

But much of the profit stemmed from their low cost of financing, deriving from the implicit government guarantee, and this was a critical political vulnerability.

On average, these entities accounted for 54% of the market across the years, with a high of 70% in 2007. He (Pinto) estimates that in June 2008 the mortgage giants, the FHA, and various other government programs were exposed to about $2.7 trillion in sub-prime and Alt-A loans, approximately 59% of the total loans in those categories. It is very difficult to reach any other conclusion than that this was a market driven largely by government, or government influence money.

Two weeks of links to catch up!

Closing Guantanamo; big priority during the campaign, not so much now.  (Well, especially since even Democrats don’t even want to do it.)

The Obama administration turned down using Dutch oil skimmers because they couldn’t meet our stringent government environmental regulations on how pure the decontaminated water was that they dumped back into the Gulf of Mexico, right on-sight of the spill.  Instead, we transport the oily water to facilities and decontaminate it there.  Huge efficiency drop during a major catastrophe because, ironically, of environmental regulations.  Read the whole article for more things we turned down that could have averted a lot of this problem.

Our own Treasury Secretary is ignorant of economic history.  Timothy Geithner said this at the latest G-20 summit:  “One of the mistakes made in the 1930s was that countries pulled back their recovery efforts too soon, prolonging the Great Depression.”  However, precisely the opposite happened.  Recovery efforts failed, lasted too long, and that’s what prolonged the Great Depression.  NewsBusters has the charts.

School vouchers improve graduation rates. Now we have a government study to prove what common sense already told us.

Sharia Law in the UK:  Dogs barred from buses so as not to offend Muslims.

Democrats have decided that there will be no budget this year.  Hey, at least (this time) they’re being honest about it.  I guess they’ll just spend until it doesn’t feel good anymore.  Or until they’re voted out.  Whichever comes first.

In Venezuela’s socialist paradise, the government’s Food Ministry rounds up 120 tons of rice because it might be sold above regulated prices.  At the same time, 80,000 tons of food was found rotting in government warehouses.  Government efficiency at its finest.

Another example of bait-and-switch in the passage of ObamaCare.  Obama rejected the idea that the individual mandate was a tax increase, but in defending it from state lawsuits, the administration does classify it as a tax increase.  This way, the mandate falls under a law that forbids the states from interfering in tax collections.  In addition, “an early draft of an administration regulation estimates … a majority of workers—51 percent—will be in plans subject to new federal requirements….”

If your 11-year-old asks a particular Massachusetts school for a condom, they’ll get it, no questions asked.  Also, parents objections will not be taken into consideration.  Actually, there’s no real age limit on the policy; any kid can get one.  Only in Massachusetts.  For now.

And finally, all that hard work pays off, but not the way you thought it would.  (From Chuck Asay.  Click for a larger version.)

Just had to point this out.  Since at least January, Glenn Reynolds has been noticing how often the term "unexpectedly" keeps showing up in news reports about the economy, either by the administration or by the reporters themselves.  Examples:

Jan. 8:  Employers unexpectedly cut jobs in December, even after the stimulus.

Feb. 4:  The number of newly laid-off workers filing initial claims for jobless benefits rose unexpectedly last week.

Mar. 31:  Private payrolls dropped unexpectedly fell in March.  (Though at some point, the word "unexpectedly" was excised later.  Perhaps they realized Glenn was on to them.)

Jun. 5:  The withdrawal of federal tax credits for home buyers led to a steeper-than-expected [aka unexpected] plunge in May home sales in much of the U.S., as the housing market struggles to wean itself from government support.

Jun. 11:  Sales at retailers unexpectedly fell in May.

The first few pages of this search will give you an idea of how often this comes up.

Y’know, after all this "unexpected" bad news after the stimulus, you’d think that they’d try something different.  Instead they want to do the exact same thing.  That’s government for you.

Capitalistic greed as our problem? I’ve been hearing a lot of that lately. Especially when traversing topics such as the BP oil spill or nationalized healthcare. Add to it the bit about inequality among the masses and you’ve usually put the cherry on top. Self-deprecatory statements, such as,

Moreover, I am also enraged by the sheer amount of greed, which exists in our country today—and not just our country, but it is passing onto other nations too.

seem to make it pretty clear – it’s the fault of those greedy, capitalistic Americans.

If greed was truly the problem, then we should all become sincere communists (I know, that’s an oxymoron). But greed isn’t the problem… it’s selfishness. Selfish rich, selfish poor, selfish capitalists, selfish communists, etc.

And there’s no human way around that.

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And about those rich folk… in the Bible. Interesting thoughts at Stand to Reason.

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NOTICE – No Guns Allowed A law, in New Mexico, is going into effect which will allow concealed carry weapon (CCW) permit holders to dine in establishments which have a beer & wine license. Restaurant owners do have the prerogative, however, to not allow such permit holders to bring their weapons into the restaurant, simply by posting a notice on the premises. From the Santa Fe New Mexican,

The law, passed by the Legislature this year, will allow people with concealed-carry licenses to take their guns into restaurants with beer-and-wine licenses. However, restaurant owners have the right to keep guns out of their establishments. All they have to do is post a sign.

Wow. I had no idea it was so simple to keep guns out of an establishment! Maybe someone should start posting these types of signs at bank entrances?

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Too bad they didn’t have a “no guns allowed” sign. From the Orange County Register,

Police are looking for a male suspect in connection with an armed robbery that took place in Yorba Linda on Sunday.

The robbery occurred around 12:54 p.m. when a lone man walked into the Round Table Pizza on Yorba Linda Boulevard near Lakeview Avenue, brandished a black handgun and demanded money from the cashier, Brea Police Sgt. Bill Smyser said.

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The unengaged president. Mark Steyn provides, as always, a good read. An excerpt,

To return to Cohen’s question: “Who is this guy? What are his core beliefs?” Well, he’s a guy who was wafted ever upward – from the Harvard Law Review to state legislator to United States senator – without ever lingering long enough to accomplish anything. “Who is this guy?” Well, when a guy becomes a credible presidential candidate by his mid-40s with no accomplishments other than a couple of memoirs, he evidently has an extraordinary talent for self-promotion, if nothing else. “What are his core beliefs?” It would seem likely that his core belief is in himself. It’s the “nothing else” that the likes of Cohen are belatedly noticing.

Well, I’ve started reading Raghuram Rajan’s Fault Lines: How Hidden Fractures Still Threaten the World Economy, and have gotten through the overview/introductory chapter and the first chapter as well. Mr Rajan in his analysis of the current recession blames it on what he terms “fault lines” where competing interests and actions of different organization, nations, and other groups, which taken by themselves individually are understandable and rational when they interact at their “boundaries” create phenomena he likens to the fault lines of geology. The first chapters of this book describe the major players and how they contributed to the recession and why what they were doing was rational and in their best interest. 

Thomas Sowell reviews the book "Out of Work" by Richard Vedder and Lowell Gallawa, which, among other things, counters the idea that it was the depression that cause the subsequent unemployment problem.  But as Sowell notes, the historical stats say something completely different.

Those who think that the stock market crash in October 1929 is what caused the huge unemployment rates of the 1930s will have a hard time reconciling that belief with the data in that table.

Although the big stock market crash occurred in October 1929, unemployment never reached double digits in any of the next 12 months after that crash. Unemployment peaked at 9 percent, two months after the stock market crashed– and then began drifting generally downward over the next six months, falling to 6.3 percent by June 1930.

This was what happened in the market, before the federal government decided to "do something."

That "something" was government intervention.

What the government decided to do in June 1930– against the advice of literally a thousand economists, who took out newspaper ads warning against it– was impose higher tariffs, in order to save American jobs by reducing imported goods.

This was the first massive federal intervention to rescue the economy, under President Herbert Hoover, who took pride in being the first President of the United States to intervene to try to get the economy out of an economic downturn.

Within six months after this government intervention, unemployment shot up into double digits– and stayed in double digits in every month throughout the entire remainder of the decade of the 1930s, as the Roosevelt administration expanded federal intervention far beyond what Hoover had started.

Oh, and there was another stock market crash, more recently, that did not result in huge unemployment.  Quite the opposite, in fact.

The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock market crash in 1987 that most people have long since forgotten.

What was the difference between these two stock market crashes? The 1929 stock market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock market crash was followed by two decades of economic growth with low unemployment.

But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock market crash– despite many outcries in the media that the government should "do something."

Hat tip to Don Sensing, who has some charts and graphs to help point this out.

A typical reason couples live together before getting married is that, supposedly, this will allow them to find out if they are compatible and thus ensure their marriage lasts longer.  But a new study says, nope, they are less likely to stay married.

Read my lips; no new taxes on those making $250,000 or less.  Well, we may soon add to the many exceptions since that promise was made, “unless you own a home”.

The revolving door between the MSM and the Democratic Party.  Oh, that liberal media.

If the Gulf oil spill had happened on Bush’s watch, do you really think the environmental groups would be as virtually silent as they are now?  (Me neither.)

Remember how the UN climate change panel was supposed to be the result of boatloads of scientists in agreement?  Turns out the boat was a dingy.

And from the “Beware of Governments Bearing Gifts” department:

Churches and other faith-based organizations that receive government funds, beware. In an agreement that will be enforced by a federal court, government agencies in New York have agreed to monitor the Salvation Army to ensure that it doesn’t impose religion on the people its serves through its tax-funded social services.

The agreement just effects the Salvation Army’s social work in New York, but it’s more than a cautionary tale for religious groups in this era of government-backed faith-based initiatives. “With this settlement, government is watching out,” co-counsel Deborah Karpatkin of the N.Y. Civil Liberties Union said in a statement. “It will not fund religious organizations to proselytize to recipients of government-funded social services.”

The Salvation Army’s social services are intended to be an expression of faith in God and love for fellow man, but if they are prevented from doing the former while performing the latter, they’re being hobbled.  My suggestion has always been to avoid government money at all costs.

Which country’s citizens see it as more socially just; the capitalistic United States, or the bit-more-socialist Germany?

70 % of Germans polled consider their economic system hardly or not at all socially just. "A new Rasmussen Reports national telephone survey of Likely Voters finds that 24% believe American society is generally unfair and discriminatory".

The very of embodiment of capitalism, the U.S., fares better in the category "social justice" than welfare state Germany, based on the subjective judgement of each population?

Makes you wonder whether Germany shouldn’t turn to American style capitalism in order to improve social justice in the country…

Hey, Michael Moore, do you hear me? Michael?

As German blogger David notes, this is a subjective measure, but it’s very interesting to see the huge disparity.  Part of this is likely due to what each country’s people consider "socially just", so that standard may be different.  But I think that’s an important issue.  I find it very likely that Germans, who have come to expect more hand-holding by their government, don’t see what their government does as enough, mostly because government can never do "enough".  At some point the individual has to own their situation, but growing up and living in a culture where this is expected, any time the government falls short (and it will fall short, a lot) is perceived as "unjust", and contributes to an overall disappointment with a government that is quite possibly redistributing much more wealth than the United States.

In the US, the pendulum can swing the other way, too.  In a country built on individualism, it’s possible that most might see the economic system as being just fine, might see those not making it as moochers, and thus consider it more "just".  But as has been noted before, the same folks who defend capitalism the most (i.e. the center-right in this country) also give more in charity personally, in both time and money, and don’t expect the government (i.e. everybody else) to do it for them.  They own their own social justice issue, and thus, I believe, see it as just.  Not perfect, because neither situation is, and people will fall through the cracks under both systems.  But they do own it themselves.

This is the title of a post by Phil Cooke on his blog "The Change Revolution".  Phil is a Christian media consultant (that is, a consultant to Christian media) and has had some big name clients.  His bio is impressive.

But I think he’s not giving churches and other Christian organizations enough credit.  As to why the changes in movies are happening, why the reduction in sex and nudity, this is his answer:

Wal-Mart.

That’s right. In 2007, the major Hollywood studios made $17.9 billion in DVD sales. The catch? $4 billion (nearly 25%) was made from selling to Wal-Mart, the largest retailer in the world. But Wal-Mart actually has a policy that forces any movie with high sexuality and nudity away from the areas of highest visibility in their stores. They take those DVD’s and put them in an "adult" section that’s much harder for customers to see.

Why do they do it? They don’t want to offend moms. They know mothers are there to get family oriented DVD’s for their kids, and they represent a huge market for Wal-Mart.

OK, fair enough.  And here’s what he says isn’t working.

Although it might be hard to believe, sexuality and nudity is actually going down in movies today. And a number of Christian organizations are taking the credit. Some raise money based on telling the public they work in Hollywood "consulting" the studios, and others say they boycott or apply pressure from the outside. I don’t need to mention them, but they jump to the forefront when statistics indicate that sexuality in movies have dropped over the last number of years, and are the first in line to take credit. But the truth is, that’s bunk.

His conclusion:

Is it religious ministry organizations making the difference? Nope. Studios are discovering that it’s simply good business.

I’m not sure that the conclusion necessarily follows. He zeroes in on Moms making good choices, but if we zoom out just a tad, isn’t it very likely that many of those moms are actively participating in a boycott of some sort?  Isn’t it at least possible that knowledge of certain religious organizations’ views influence their choices? 

And what of Wal-Mart itself?  The Walton family has a background in the Presbyterian Church USA and have given millions to that church.  I find it highly likely that their decisions for the stores is influenced by their church and other religious ministries.

Are bees responsible for the production of fruit on trees?  Nope.  Each individual bee is just hungry.  OK, not the best analogy, but hopefully it serves to show that if you look too closely, you can miss a much larger picture.  I’m surprised that a guy like Cooke can miss something like this.  Perhaps the influence of religious organizations isn’t as big as those organizations themselves think.  But Cooke’s analysis by no means proves they have no influence.

Salt and light work.

Isn’t government supposed to enforce the laws it makes?   Well, it looks like the Obama administration has a bit more leeway.

How’s that Gitmo-closing promise coming along, 5 months after its due date?  “The House Armed Services Committee has dealt a blow to President Obama’s hopes to shutter the military prison at Guantánamo Bay, Cuba, by unanimously approving legislation that would prohibit creating a detention center inside the United States.”  Aren’t there one or two Democrats on that committee?

The Hollywood Left just loves their socialists.

American filmmaker Oliver Stone said Friday he deeply admires Hugo Chavez but suggested the Venezuelan president might consider talking a bit less on television.

Promoting his new documentary “South of the Border” in Caracas, Stone heaped praise on Chavez, saying he is leading a movement for “social transformation” in Latin American. The film features informal interviews by Stone with Chavez and six allied leftist presidents, from Bolivia’s Evo Morales to Cuba’s Raul Castro.

“I admire Hugo. I like him very much as a person. I can say one thing. … He shouldn’t be on television all the time,” Stone said at a news conference. “As a director I say you don’t want to be overpowering. And I think he is sometimes that way.”

(We’re not entirely sure whether Stone said “director” or “dictator” at th end there.  Either can be overpowering.)

When the director of the Congressional Budget Office directly refutes cost-saving claims of the President and his Budget Director, it’s worth noting.  Even the NY Times (finally) notices.

How’s that “smart diplomacy” workin’ for ya’?  Please remember; speeches are no substitute for sound policy.

Marry a Jew, lose your citizenship.  Can armbands with the Star of David be far behind?  Tell me again, who are the bad guys in the Middle East peace situation?

How did the pollsters do predicting the recent primary results?  About as good as expected, which isn’t saying much.  And the Daily Kos fired its official pollster, Research 2000.  Turns out they skewed left.  Now who would have thought that?  This time, however, it was downright embarrassing.

And finally, Chuck Asay on life, liberty, and the pursuit of happiness.  (Click for a larger image.)

It turns out that how well you know your basic economics principles correlates pretty closely with your spot on the political spectrum.

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101.

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents’ (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

They describe the specific questions as well as their methodology, which breaks things down by incorrect answers, and where "not sure" doesn’t count against you.  I can see one of the questions that I might disagree with what they considered the correct answer, but you had to be positively wrong (so to speak), not just unsure, to get marked off.  The results?

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Ronald Reagan said, "The trouble with our liberal friends is not that they are ignorant, but that they know so much that isn’t so."  This shows how remarkably true that is. 

That’s the good news, for all of us.  Crime is down pretty much across the nation, in all sorts of environment.  But Richard Cohen notes that this has some ramifications for an enduring liberal assertion.

This is a good news, bad news column. The good news is that crime is again down across the nation — in big cities, small cities, flourishing cities and cities that are not for the timid. Surprisingly, this has happened in the teeth of the Great Recession, meaning that those disposed to attribute criminality to poverty — my view at one time — have some strenuous rethinking to do. It could be, as conservatives have insisted all along, that crime is committed by criminals. For liberals, this is bad news indeed.

I have always wondered how this assertion has endured when there was a very clear, very stark historical example contradicting it.  If it was true, crime should have exploded during the Great Depression with so many folks reduced to poverty who weren’t there before.

Cohen asks the question:

What’s going on? A number of things, say the experts. As is always the case, the police credited the police for magnificent police work, while others cited the decline in crack cocaine usage. Those answers, though, are only partially satisfying because, believe you me, if and when crime begins its almost inevitable ascent, the very same police authorities will blame economic or social conditions beyond their control — not to mention the inevitable manpower shortage.

Whatever the reasons, it now seems fairly clear that something akin to culture and not economics is the root cause of crime. By and large everyday people do not go into a life of crime because they have been laid off or their home is worth less than their mortgage. They do something else, but whatever it is, it does not generally entail packing heat. Once this becomes an accepted truth, criminals will lose what status they still retain as victims.

Seems this economic explanation is more often a convenience used by liberals to create victims (and potential voters) of those they insist they care about.  Cohen wraps up, after a “West Side Story” reference you’ll need to Read The Whole Thing to see, with a conclusion that may be news to some, but shouldn’t be at all.

Common sense tells you that the environment has to play a role and the truly desperate will sometimes break the law — like Victor Hugo’s impoverished Jean Valjean, who stole bread for his sister’s children. But the latest crime statistics strongly suggest that bad times do not necessarily make bad people. Bad character does.

The good news is, crime is down.  The … good news is, it’s possibly another counter example that could (hopefully) soon fully discredit this liberal article of faith.

In the superb movie "Awakenings", Leonard Lowe (Robert DeNiro) is woken up from his catatonic state by a drug administered by Dr. Malcolm Sayer (Robin Williams).  All goes well until Leonard starts to exhibit some side effects.  While this is happening, he insists that Dr. Sayer continue to film him, which Sayer is doing as part of the research.  We see Leonard from the perspective of the movie camera, almost yelling at it, "Learn from me!  Learn from me!"

It’s hard to watch this experiment demonstrating, in the body of Leonard, what could be a huge flaw in what otherwise appears to be a promising treatment for his illness.  It is a turning point in the story.

We are at such a turning point in another medical story, but I wonder if we’ll notice it and learn from it.

Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.

Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate "incentive fees" to generic drug manufacturers.

British Columbia is replacing block grants to hospitals with fee-for-procedure payments and Quebec has a new flat health tax and a proposal for payments on each medical visit — an idea that critics say is an illegal user fee.

And a few provinces are also experimenting with private funding for procedures such as hip, knee and cataract surgery.

It’s likely just a start as the provinces, responsible for delivering healthcare, cope with the demands of a retiring baby-boom generation. Official figures show that senior citizens will make up 25 percent of the population by 2036.

"There’s got to be some change to the status quo whether it happens in three years or 10 years," said Derek Burleton, senior economist at Toronto-Dominion Bank.

"We can’t continually see health spending growing above and beyond the growth rate in the economy because, at some point, it means crowding out of all the other government services.

"At some stage we’re going to hit a breaking point."

A government handout (or, really, a redistribution of wealth)  running way over budget?  (See "Stop the ACLU" for a discussion of costs in the Canadian system that the Democrats pretend they can keep at half.)  Why do we keep hearing this tune and yet be surprised when it ends exactly the same way?  Why do politicians say that this kind of system will reduce costs when…

Ontario says healthcare could eat up 70 percent of its budget in 12 years, if all these costs are left unchecked.

The answer for Canada is cut back on benefits, which they’re seriously considering.  But that is fraught with trouble.

Scotia Capital’s Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. "(The public) will use the services more wisely if they know how much it’s costing," she said.

"If it’s absolutely free with no information on the cost and the information of an alternative that would be have been more practical, then how can we expect the public to wisely use the service?"

That’s the problem with separating the payment from the service.  It’s not absolutely free; it’s paid for with huge national taxes.  But thinking it’s free, or even just using it more knowing that you won’t be charged more, creates additional demand that the system can’t handle.

But once you’ve made that mistake, there’s no going back.

But change may come slowly. Universal healthcare is central to Canada’s national identity, and decisions are made as much on politics as economics.

"It’s an area that Canadians don’t want to see touched," said TD’s Burleton. "Essentially it boils down the wishes of the population. But I think, from an economist’s standpoint, we point to the fact that sometimes Canadians in the short term may not realize the cost."

These economic decisions are now even more political than they ever were, but the thought of damaging something so much identified with Canada is just unthinkable.  So Canada must either go bankrupt, reduce services, or raise taxes.  And all this from a program that was supposed to reduce costs. 

This, folks, is the future of ObamaCare(tm) if it gets implemented or, worse, if the removed provisions get implemented piecemeal later on.  Canada is suffering from the experiment.  Learn from it.

I may start doing this more often.  I collect links during the week, some I comment on here, and some just languish in Google Bookmarks.  But instead of a daily report of links like my co-blogger Mark, I’m going to save it all until the end of the week.  This installment will be a bit longer than others since I’ve got some aging links here that really want to see the light of day.  So here they are, usually, but not always, in reverse chronological order:

Coattails?  What coattails? “Some Democrats on the campaign trail have hit upon a winning campaign tactic: Run against President Obama and his agenda — especially the health care overhaul.”

Seeking asylum in the US for … homeschooling persecution? “A German Christian family received asylum in Tennessee after being severely penalized for illegally homeschooling their children in Germany.”  I’ve covered this particular situation before; here, here, here, here, here and here.

California, parts of which are boycotting Arizona for it’s new immigration law, which just enforce existing federal law, should take a look at it’s own lawbooks first.  They might find something familiar.

The economic meltdown in Greece should be a wake-up call to politicians of both parties in the US.  Otherwise, it may turn out to be, rather, a coming attraction.

ObamaCare(tm) is predicted to increase the crowding in our hospitals’ emergency rooms.  “Some Democrats agree with this assessment. Rep. Jim McDermott (D-Wash.) suspects the fallout that occurred in Massachusetts’ emergency rooms could happen nationwide after health reform kicks in.”  But he still voted for this snake oil anyway.

“Economic Woes Threaten Chavez’s Socialist Vision” Only on NPR would this be news.  For the rest of this, it’s a redundancy.

Comedy Central stands on the bedrock of free speech and will mock anyone, just as long as there’s no chance of getting beheaded for it.  “The show in development, “JC,” is a half-hour about Christ wanting to escape the shadow of his “powerful but apathetic father” and live a regular life in New York.”

Green energy falling by the wayside in Europe.  Seems the massive subsidies for this alleged cost-saving energy are too much for governments going through financial troubles.  Should we (will we) take note?

CBO says ObamaCare will cost $115 billion more than thought.  That is to say, if you already had a healthy skepticism of government estimates.  And those same people won’t be surprised if when this figure climbs higher.

Pity the poor folks who have been snookered by the Democrats.