WE HAVE LIFTOFF!
No, I didn’t watch the Inauguration. I like political arguments, but I don’t like political speeches. A prize fight is usually interesting, but an exhibition of bag-punching by a fighter is less so. There have to be two sides.
You don’t expect to hear two sides from somebody who’s just been sworn in as President. Instead you will get a recitation of all the good things he’s going to do for the peepul of this great country, God bless ‘em. Sometimes this gets out of hand, the way the annual State of the Union address has. This has resolved itself into a laundry list of goodies spread all over the map wherever voters are to be found. There’s a new traffic light for Chillicote, Ohio, for instance, and they’re gonna fix that railroad crossing in Des Moines, Iowa as well. It goes on and on. Inauguration speeches are like that or getting like that.
I’m not the first to check them off. Back in 1880 James Garfield, the twentieth president, later assassinated, wrote that he’d been reading the speeches of his predecessors and they were all so bad, except Lincoln’s, that he though he might not bother with one at all. You couldn’t do that today. Television and all that, you know.
A lot will have been said about the New Deal, I’m sure. It fits. The New Deal originated at the 1933 inauguration of Franklin Roosevelt, a Democrat like Obama. Times were disastrous then as now. Banks were closing, businesses collapsing, layoffs taking place.
The New Deal was suggested but not spelt out in the inauguration speech. It got flesh on its bones as the year went on. Regulation was in, laissez-faire was out. Deficit financing, that is, borrowing money for Uncle Sam to spend creating jobs for the unemployed, was the way out of the Depression.
As I’ve said before along with many others, it didn’t work. In 1938 unemployment nationwide was 19%. It had been 16.9% in 1936. This leaves no doubt that Roosevelt could never have been re-elected -- especially to an unprecedented third term -- in 1940 if it hadn’t been for World War II. The European demand for armaments created a boom in America, sending the unemployment rate down to 14.6% in 1940, and after we hyped things even more by joining the fight, the rate bottomed out near zero. People who claim the New Deal ended the Depression often forget to mention all this. Especially in inauguration speeches. It would spoil the mood.
So the New Deal will get a lot of favorable mention from the new President, which will include endorsement of the idea of much more intensive regulation of financial concerns, who are in hot water over their misguided investments in mortgages on properties that (a) were over-appraised in the first place and (b) were bought by people who didn’t have the kind of incomes necessary to make the mortgage payments. These mortgages are now called “toxic”, a word that seems to have caught on like “high-yield” or “locked in (profit)”. What has happened to them, I wonder?
The toxic or subprime mortgages were a consequence of New Deal thinking which rejected the idea that poor peoples’ money deposited in banks was best utilized by the banks lending it out on mortgages and other sound investments that would yield a return that would cover interest payments to the depositors for their money and also enable the bank concerned to cover its expenses and continue in business. Profitable investments of this kind were most often to be found in prosperous areas and not necessarily in the neighborhoods where the depositors lived. This was unfortunate maybe, but it did mean that the depositors got a return on their money
This wasn’t good enough for some politicians and ‘community leaders’ who originated something called the Community Reinvestment Act, which required that deposits from underprivileged areas should be invested in part at least in the areas from whence they came. In other words the banks were required to throw caution to the winds and plunge into the financing of slum property and slum business. The people at risk would be the slum residents who had entrusted their money to the banks in the hope of a decent return. For the most part they didn’t know what the bank was doing with it at the instigation of politicians and ‘activists’. The banks just crossed their fingers and hoped for the best.
It all started to fall apart in 2007. All the ‘progressive’ bragging about increasing the level of home ownership of the formerly downtrodden and underprivileged classes and lifting them into the middle class, was shown to have been a snare and a delusion, in biblical terms. The borrowers couldn’t make the payments on their mortgages and their houses had been overvalued to begin with.
This seems to have stimulated demand for increased regulation of banks to prevent such fiascoes in the future. But do we really want more political interference in business in view of the results therefrom that I’ve noted above? Do we trust politicians that much? Do we really believe that all we have to do is increase their power and their discretion about using it and it will never be abused?
I’ll drag up a story from the past that refutes that idea. There was a priest named Father Coughlin who was almost a Rush Limbaugh of his day. He supported Franklin Roosevelt, then split with him. Roosevelt wanted him off the air and sent word to the Catholic Church that if he wasn’t removed, the IRS would commence an investigation of the income of every Catholic bishop in America. He got his man.
So in order to violate one man’s First Amendment right to free speech, the President of the United States proposed an illegal inquiry into the private lives of people who had given no grounds for such investigation by an agency which legally existed for the purpose of collecting the revenues of the United States and not for carrying out personal vendettas of the president or anyone else. We need to think of things like that before we go delegating “oversight” over our affairs to presidents, vice-presidents, senators, dog wardens or any other such ambitious overreachers.