Barney Frank

Killing the Economy with Regulations

by Bill O'Connell on September 21, 2011

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Photo by Mike Licht, nationscapital.com

Often overlooked in the class warfare that President Obama is unleashing on America so that he can continue spending, is how business is being strangled by regulations. Every time the government fails to protect our rights and freedoms because it is too busy trying to micromanage our lives, and as a result some calamity descends upon us, the answer is always more regulations. Nowadays, that will typically mean thousands of pages of new laws that turn into tens of thousands of pages of new regulations and those who never met a payroll wonder why we are stuck at 9% unemployment.

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Let’s Be Frank, the Estate Tax is Immoral

by Bill O'Connell on December 21, 2010

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Barney Frank, in an interview with CNBC’s Maria Bartiromo, made the bold statement that, “heirs who now inherit, they haven’t done this on their own, they haven’t worked hard, that’s a pure gift to someone who was lucky enough to be related to someone or be friendly with someone who left them money.” So Mr. Frank concludes that they are not entitled to that money. So tell me what is the argument that government should get nearly half of it? How did they earn it?

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The Morality Malaise

by Bill O'Connell on August 13, 2010

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Steven Slater tells off a plane load of Jet Blue customers, grabs a couple of beers, pulls the emergency chute and dramatically exits the plane, his job, and his career. He is soon hailed across the Internet as a hero. People walk away from home equity loans saying, “I’m not going to be a slave to the bank.” Challenge after challenge to any reference to God in the public square as part of an effort to drive faith underground. Our is government telling us that the only way we can survive is by a government handout. We cannot make it on our own. If you wonder why we are heading in the wrong direction as to 70% of your fellow Americans believe, perhaps we should give morality a closer look.

The story on Mr. Slater is unclear. He says one thing, witnesses say another. It will eventually get sorted out, but let’s assume for a moment that Mr. Slater is correct in that a passenger’s behavior set him off. In a more moral society, Mr. Slater could have done one of two things. One, he could have taken a deep breath, held his tongue and just written it off to that passenger having a bad day. He would have won the admiration of those who watched him behave with self-control and dignity. Or, two, he could have asked the pilot to inform the authorities to meet the plane on the ground because an unruly passenger defied the instructions of the flight crew. That passenger would have been arrested on the ground and would be facing federal charges. But instead Mr. Slater took the route of immediate gratification. He got on the intercom and told off the whole plane, grabbed a couple of beers from the beverage cart, triggered the emergency escape chute and then like a giddy child went down the slide and ran home. A moment’s thrill of control followed a world of grief. Was his moral compass broken or pointing in the wrong direction?

Shawn Schlegalis a real estate agent in Arizona. Since moving there in 2005 he bought several houses with each one financing the next. He is currently in default for $94,873 and is basically saying tough luck, I’m not paying. The lender got a court order garnishing his salary, but that was eighteen months ago and he hasn’t heard anything since. “The case is sitting stagnant,” he said. “Maybe it will just go away.” While I don’t have a great deal of sympathy for any bank that would approve this chain of financing, I don’t know if the lender was aware of what the home equity loan was for, but it is Mr. Schlegal’s attitude that disturbs me. He made the decision to do this and he feels it is not his fault. True he will be impacted if he tries to borrow again in the near future, but he doesn’t seem to care. This is reinforced by the commercials flooding the airwaves advising consumers how they can walk away from their credit card debt. How about selling the flat screen TVs and sports cars you purchased on the plastic, and pay it back? Meanwhile our government continues to use your taxes to help people who are over their head pay their mortgages. Why do you have to pay your mortgage and theirs? You were responsible, they were not. The very concept of such a program would have been baffling to the Founding Fathers.

Our current government reinforces the idea of Americans as imbeciles. The mortgage companies took advantage of you, they were predatory lenders, while it was government programs that told the predators to get busy. We have to have more home ownership, we have to help people achieve the American Dream, so Andrew Cuomo at HUD, Barney Frank, Chris Dodd and the good folks at Fannie Mae and Freddie Mac who made millions on pushing these products, all pushed these government programs on more people, encouraging them to buy houses they couldn’t afford and when the bubble burst they pointed the finger at everyone but themselves. They believe the American people are helpless idiots who cannot fend for themselves and if by some accident someone does succeed, it is the government’s responsibility to take as much of what they earned by the sweat of their brow and give it to the simpletons they claim to be responsible for. That is a racist, sexist, class warfare point of view that unless our Ivy League educated elites give us our daily instruction, we will shrivel up and die. It is anything but the American Dream.

We see efforts to ban the Pledge of Allegiance because it contains the phrase “under God”; to ban the display of the Ten Commandments in court houses; the ban of religious displays on publicly owned land; and to ban prayer in any form at school graduations, football games or other gatherings. While atheists, a small percentage of the population, do not believe in God, why is another person who believes in God so offensive to them that they can’t bear hearing it? But as faith is driven further and further from the public square, boorish behavior becomes more and more acceptable. There is something to be said about eternal damnation curbing one’s baser appetites than responding to the statement, “You want me to stop it? Make me.” There is something to be said for fulfilling one’s obligations because it is the right thing to do, but the right thing to do does not come from living in the here and now. That is self-gratification. Doing the right thing comes from a set of morals that say, “Character is what we do when no one is watching.” Those who believe in a God believe someone is always watching. Perhaps John Adams said it best:

“We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made for a moral and religious people. It is wholly inadequate to the government of any other.”

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Never Mind Fannie and Freddie, Let’s Nail Betsy

by Bill O'Connell on August 11, 2010

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The Dodd-Frank Act that in a mere 2,000 pages sought to put the control back in financial regulation skipped right over Fannie Mae and Freddie Mac the Government Sponsored Enterprises that were at the heart of the fiscal crisis and are bleeding red ink. Focusing instead on those evil bankers on Wall Street the Dodd-Frank Act really put those guys in a box, until Goldman Sachs slipped its fetters faster than Houdini. So who’s buried under the pile of rubble that is the latest masterpiece of our massive government, Betsy Jensen. Who is Betsy Jensen?

Betsy Jensen is a farmer in southwest Minnesota. She and her family grow wheat and soy beans. She doesn’t have a mortgage, so she didn’t cause the housing bubble. But she does use derivatives to control the risk in farm prices which can be rather volatile. For example, a bushel of wheat went for $18.69 in February of 2008 whereas it was selling for $3.49 in July of 2010. A farmer has to buy their seed and fertilizer at the beginning of the growing season and they don’t sell their product until the harvest. If prices fluctuate wildly during that interval, it isn’t hard to imagine what that can do to your business, let alone your sleep patterns.

So where do derivatives come in? Farmers like Betsy can negotiate a guaranteed price for their grain with their customers. Betsy risks missing out on some profits if the prices go up as they have recently (45%) due to fires in the wheat producing region of Russia, but she also is protected against a price drop, for similar reasons beyond her control. She recently negotiated a price of $7.15 per bushel and with that knowledge, she can manage her farm business and sleep a little more peacefully. For her purchases she can also use derivatives to buy fuel and fertilizer, where the latter has seen price fluctuations of $435 to $685 per ton. Then along come Barney Frank and Chris Dodd, a couple of career politicians who never worked in the private sector.

The Dodd-Frank Act says it is unlawful to enter into swaps (derivatives) “in excess of such amount as shall be fixed from time to time” by the Commodities Futures Trading Corporation (CFTC). That doesn’t sound like a free market to me. What if, in Betsy’s example, the CFTC didn’t get around to raising the amount on wheat above $5 per bushel? Betsy couldn’t arrange to sell it for $7.15. What if the grain elevator couldn’t turn around and sell Betsy’s wheat for the 45% increase in price due to the Russian fires? Do you think with a cap on the upside they might not be willing to pay as much for Betsy’s wheat?

From Dodd-Frank to Bill O’Reilly we hear about the evils of speculators. O’Reilly used to rail against the speculators when gas prices were rising toward $5 per gallon. The evil, greedy speculators were driving up the price of gas! But little mention was made of speculators when the price of gasoline fell back down? Did the speculators retire? Go on vacation? The reality is that speculators don’t care if the price goes up or down, they only care it moves in the same direction on which they are betting. They can drive the price down just as fast as they can drive it up. But they are useful, not evil.

Speculators bring liquidity, that is, money to the market. Betsy Jensen estimates that about one-third of the purchasers of wheat contracts are traders who never take physical control of the product. But by adding their view and their money to the market they keep prices from fluctuating wildly. If these traders are banned then, as she put it, one-third of her customers would disappear. With one-third fewer customers the price swings will increase rather than decrease. Remember, a trader who does not take delivery of the wheat can make money on small swings in the price and is likely to get in or get out on smaller moves and thus change the market price accordingly. If only those who take physical possession of the product are in the market, then other factors such as transport, storage, spoilage, must be factored into each transaction and the price swings will be wider and wilder.

But Betsy said it best, “I may not be able to manage Mother Nature, but I can manage my risk with derivatives.” If only our government would get out of her way and let her do so.

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When Does It Become Obama’s Economy?

by Bill O'Connell on July 30, 2010

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The talking points have been established that it was eight years, eight, of failed Bush and/or Republican policies that got us into this mess and President Obama and the Democrats are working hard to get us out of it. Let’s take a closer look.

What blew up in 2008? It was the housing market. The underlying cause of the problem has Democrat/liberal/progressive fingerprints all over it going back to Franklin Roosevelt who created Fannie Mae. Add into that mix Lyndon Johnson privatizing Fannie Mae to hide it from the budget and creating HUD; Jimmy Carter creating the Community Reinvestment Act; Bill Clinton pushing for more home ownership among those who could least afford it, Andrew Cuomo as HUD Secretary pushing Fannie and Freddie to take on riskier mortgages; Barney Frank and Chris Dodd fighting against regulation before they were fighting for it (and where have we heard that formulation before?); and when housing prices run out of gas and the house of cards that the Democrats built collapses, it’s all Bush’s fault.

Let’s look at the timeline. When he took office, President Bush was handed a recession from Bill Clinton resulting from the dot.com bubble. In less than a year we had 9/11. In spite of that, Bush pushed through tax cuts and got the economy to grow through most of his presidency. The Democrats took control of Congress in January 2007 and in December 2007 the economy went into recession. One year later Barack Obama is elected President of the United States. Now, more than a year and a half after Obama is in office the economy looks like it is slipping into a double dip recession, and this is the Republican’s fault? Who has been spending like a drunken sailor? Who wasted almost $1 trillion on a stimulus plan that was so ineffective the Obama administration had to invent a new statistic, “jobs saved”, to hide its dismal performance. They add on ObamaCare, which no one in Congress read before voting on it and no one knows what is in it and so no small business is going to hire anyone until they know what it costs. How is that the Republican’s fault or Bush’s?

We are just a few months away from the tax cuts put in place by President Bush expiring. President Obama wants them to expire. This will place an additional massive burden on small businesses and just about everyone else and he wonders why aren’t companies hiring? The man came into office with no executive experience and the year and a half he has been in office he hasn’t seemed to pick up any. Could it be because he is surrounded by advisors who have little to no executive experience themselves?

To my fellow Americans I say, hang in there it is less than 100 days to vote the bums out. Perhaps not all of them, but at least we can bring in some adult supervision. It’s time to stop steamrolling the American people with the socialist programs and to let “We the People” take back our government.

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Goldman Skirts Volker Rule – Well That Didn’t Take Long

by Bill O'Connell on July 28, 2010

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It never ceases to amaze me how the political class thinks they are so much smarter than the rest of us. They think they can write a 2,000 page law that will really “fix” things and don’t believe that all the intellectual horsepower in America can’t disassemble their work in a matter of days. Today’s political class is too dumb to realize Thomas Paine was right and still is, “that government is best that governs least.”

This is from Fox Business News. Goldman Sachs has figured out a way to get around the Volker Rule’s restrictions on trading that was just enacted in the Dodd-Frank Act. It is doing this by changing its “risk taking- traders into asset managers.”

The move is designed to exploit a loophole in the Volker Rule, part of the recently signed financial-reform legislation named after presidential economic adviser and former Federal Reserve chief Paul Volcker. The Volcker Rule is supposed to scale back on Wall Street risk taking by ending what’s known as proprietary trading, where firms use their own ideas and capital to make market bets.

But by having the traders work in asset management, where they will take market positions while dealing with clients, Goldman believes it can meet the rule’s mandates, avoid large-scale layoffs and preserve some of the same risk taking that has earned it enormous profits, people close to the firm say.

This is really about the arrogance of those who have been breathing the heady air of Washington, DC for too long. From way up in those ivory towers they can’t see that among those on the ground are the most brilliant minds in the world and before one of their lofty laws tossed from the tower hits the ground, the huddled masses will turn it into mince meat. Why does Medicare/Medicaid lose $60 – $100 billion a year to fraud? Because for every beltway pinhead writing a regulatory rule, there are 100,000 people reading that same rule and finding all the ways to get around it and how to use the same rule to tie the government in knots so it can’t stop them.

Are they really that arrogant? When asked that question John Kerry sniffed and said, “Let them pay taxes.” He then cackled, stepped on to his 74 foot yacht Isabel and sailed off into the sunset, quaffing champagne as he went.

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Here Come the Dodd-Frank Unintended Consequences

by Bill O'Connell on July 23, 2010

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The rush to push through the Dodd-Frank Act, unread by those who voted for it, is working to bring the greatest economy on earth to a grinding halt. Here is exhibit A.

The Wall Street Journal reported that The Ford Motor Company wanted to issue bonds that were backed by packages of auto loans, but had to pull the issue because of the new Dodd-Frank Act. Dodd-Frank requires that issuers include credit ratings in its offering documents, that is, it has to disclose what credit rating agencies such as Moodys, Standard and Poors, and Fitch say about the quality of the bonds. Those rating agencies, however, have refused to allow companies like Ford to use their ratings in their offering statements because the Dodd-Frank Act now holds them legally liable for the quality of their ratings. In other words, if those credit rating agencies say the bonds are high quality, and it later turns out they don’t live up to that rating, the rating agencies could be sued for damages. This has brought the $1.4 trillion asset-backed securities market to a standstill.

Ratings companies argued that the new law effectively would render them “experts,” which brings with it potential new liability akin to those held by auditors and lawyers.

“The inclusion in the offering documents are an unacceptable risk,” Dan Curry, president of DBRS Inc., a bond rater, said. He said the expert liability is “really the standard for an auditor” and shouldn’t be used for rating agencies, since their opinions are “an attempt to predict future outcomes.” – WSJ, July 21, 2010

Gee, how long did that take to gum up the economic works? Less than twenty-four hours. This legislation was rushed through without waiting for the report from the Financial Crisis Inquiry Commission to tell Congress what the root causes were so, perhaps like grown-ups, they could actually craft legislation that would address the root causes rather than hamstring the economy.

The Securities and Exchange Commission just issued a six month waiver to the requirement that credit ratings must be included in bond offerings. That should give us enough time to send all these overpaid progressive chowderheads packing and reclaim our country.

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Fire, Ready, Aim

by Bill O'Connell on July 22, 2010

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The Sherrod incident is the latest in a long line of shoot from the lip misfires from the Obama administration, from the president on down. Here is a review of some of the more egregious of them:

President Obama, without waiting for the facts says the Cambridge, Massachusetts police department “acted stupidly,” in an incident involving African American professor Henry Louis Gates. A picture from the “beer summit” shows the president confidently striding toward the cameras while in the background Sergeant Crowley takes Professor Gates arm to help him negotiate the stairs, as Professor Gates walks with a cane. Racist?
With 13 dead Americans at the hands of terrorist Nidal Hasan, Janet Napolitano comes out and claims, “The system has worked really very, very smoothly over the course of the past several days.” A few days later she would eat those ridiculous words.
Not to be outdone by herself, after another terrorist attempt on our soil in Times Square, Secretary Napolitano quickly came out to label the attempt a “one-off” and the suspect a lone wolf. As the investigation picked up steam there were all sorts links to terror groups in the Middle East.
When the president of Honduras tried to override term limits and become the next Hugo Chavez, the Honduran government enforced its laws against the changes that its president was trying to illegally implement. The Obama administration immediately labeled the legitimate actions of the democratically elected Honduran government a coup. Hillary Clinton’s State department cancelled the visas of all members of the Honduran Supreme Court. Not to be intimidated by Chavez, Castro, or Obama, Honduras stood its ground. The Congressional Research Service looked at the Honduran Constitution and the actions of its government and found that the government acted properly and within the law.
When Arizona reached the end of its rope and could not get the Obama administration to enforce the law on the border, they passed a law to give their police greater flexibility to determine the legal status of people stopped for another police matter. The Obama administration immediately called the law unconstitutional. When asked if they read the massive 10 page law, that’s right 10 pages, both Attorney General Eric Holder and Secretary Janet Napolitano (yes, her again) both said they hadn’t read it before declaring it unconstitutional. This administration pushes through legislation running thousands of pages each and they can’t find time to read a ten page law before condemning it.
Department of Agriculture employee Shirley Sherrod gave a speech to the NAACP where she spoke about her transformation from having a racial bias in a decision she made 24 years ago, to today where she tries to treat all individuals regardless of race. Only the first part of the story was headed toward the airwaves, the part about her past discrimination, and before the news hit the air she was fired by the Obama administration. Had they watched the whole tape before acting, they wouldn’t be swimming in apologies right now.

Is this just the lack of experience or does the Obama administration need adult supervision? They jump to these wild conclusions and then end up backtracking days later. After eighteen months in office you would think they would have learned by now how to govern.

Another case without as quick a trigger is the passage of the Dodd-Frank financial reform bill. After taking office President Obama appointed a commission, the Financial Crisis Inquiry Commission to investigate the root causes of the crisis. A prudent person might say, let’s hear what the commission finds out and then write legislation to address those root causes. With months more to go before that commission’s work will be done, we have another 2,000+ page bill coming out of Congress and signed by the president to put new regulations in place on the financial services industry. Why the rush? Wouldn’t it be better to fix the real problems rather than what Chris Dodd and Barney Frank think are the problems and let them paper over their own culpability in the creating the crisis? Why were Fannie Mae and Freddie Mac excluded? In one of the hearings before the commission an argument was made that AIG did not have to be bailed out, that there were measures in place to ride out the crisis and that in the long run their policies would be fine. Whether that is true or not, will have to wait for the final report, but the “just don’t stand there, do something,” mentality is disconcerting. I certainly hope we are never faced with another Cuban Missile Crisis with this team in place.

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NAACP: From Pride to Prejudice

by Bill O'Connell on July 16, 2010

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The NAACP was once a proud organization with a noble cause, to advance the lot of people of color. Today it has abandoned those principles to become just another attack arm of the Democratic Party. This week they released a resolution condemning racism within the Tea Party movement.

I have been to a number of Tea Party events with hundreds of thousands of peaceful orderly participants and racism was not evident, surprisingly so. I say surprisingly because with any gathering of that magnitude to have a few fringe elements at either end of the spectrum would almost be expected. So is it possible there are racist elements at any given event? Sure. It is routine in the Tea Party? It is so rare, you have to aggressively search to find it and when you do, what proof is there that they are really Tea Party members or supporters or just some wacko who walked into the crowd with a sign?

Let’s look at the Strategy

The left has tried vainly to paint the Tea Party as racist because that is the most toxic label that they have. The racist label brings out the black electorate, polarizes the progressives, mortifies the moderates, and makes conservatives cringe. If they can make it stick it is very effective. It is also overused and as such, it is losing its sting. So how do you make it stick?

One way is to follow what the NAACP is doing. Pass a resolution condemning racism and demand the Tea Party repudiate racism in their ranks, which by the way is virtually non-existent. If you can cow the Tea Party members to take the pledge, then the liberal/progressives can plant racists at each rally with nasty signs, videotape them and then blame the Tea Party for failing to honor their pledge and thus “proving” racism is in the ranks of the Tea Party and it cannot be eradicated. This is straight out of Saul Alinsky’s Rules for Radicals.

Let’s Look at the Facts

This is from the NAACP web site:

“Today, NAACP delegates passed a resolution to condemn extremist elements within the Tea Party, calling on Tea Party leaders to repudiate those in their ranks who use racist language in their signs and speeches.”

I was a marshal at the Tea Party rally in New York on April 15^th this year. We were concerned about reports on the street that infiltrators with racist signs might show up to garner media attention, which to that point had been rather thin. What were we to do? We couldn’t take their signs away, we couldn’t touch them as they had as much of a right to be there as we did. We came up with the idea that we would carry signs repudiating the person that our signs pointed to. We would approach the person, politely, tell them that their sign did not comport with the values of the Tea Party and ask them to put the sign away or leave. If they did not comply, we would surround them with our signs that said those views of that individual were not consistent with the Tea Party so that any media picking up their sign would see ours as well. If things got aggressive we would call in the police that were on hand. To my knowledge we never had to use our tactic as there were no racially offensive signs at the rally. We did not need a resolution by the NAACP to develop our counter strategy. It was part of our core beliefs, which puts the big lie to the NAACP’s resolution.

The Regulators are Dead, Long Live the Regulators

by Bill O'Connell on June 28, 2010

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As written about extensively here, government regulators have failed us in so many ways that to continue the practice of putting more control in the hands of government is lunacy. To wit:

The financial crisis, although typically blamed on Wall Street greed, was due in large part to government agencies and programs (Fannie Mae, Freddie Mac, HUD, Community Reinvestment Act, National Homeownership Strategy) that opened the door through which Wall Street followed.
The oil spill in the Gulf happened after regulators either signed off on waiver applications from BP or just didn’t enforce the regulations on the books
Anywhere from $60 billion to $100 billion is stolen from Medicare/Medicaid every year and our government can’t seem to stop it
First time homebuyer tax credit was claimed, to the tune of $9 million, by incarcerated felons.

But the current administration insists that government must get bigger to tackle our nation’s problems and must tax us more to do so.

Senator Chris Dodd and Representative Barney Frank were at the heart of the financial debacle, claiming that Fannie Mae and Freddie Mac were in sound financial shape. Meanwhile Senator Dodd was getting a sweetheart mortgage from Countrywide as a “Friend of Angelo” Mozillo, the CEO of Countrywide. Now we are to believe that Senator Dodd and Representative Frank have ridden to the rescue and have crafted the solution we have all been waiting for, just don’t ask about Fannie and Freddie, they aren’t included in this master work.

The Federal Reserve will now have more power to regulate banks, after failing to monitor what was going on at Citibank and having the government step in because they were “too big to fail.” The Treasury stepped into to bail out some banks and let other financial firms like Lehman Brothers to go under, will now have more power to determine which financial institutions are sound and which ones are not and step in to take control without allowing the bankruptcy courts to get involved. The SEC which was asleep at the switch, or too busy watching porn on taxpayer purchased computers, when the Bernie Madoff scam was delivered to them wrapped in a bow, will now have more power to decide how easy it will be to allow union pension funds to place their candidates on boards of directors.

The new legislation, which does nothing really new, runs to 2,000 pages (did you expect something less?) and leaves much of the details to the regulatory agencies themselves to fill in the blanks. And never to miss an opportunity to slip a new tax into the mix there are $19 billion in new taxes to pay for this new regulatory oversight.

So when regulators fail, the government’s response is not to look at government’s role in creating the original problem, but to blame any private interests and add more regulations that will increase the scope and power of the government, take away your liberties, and do nothing to fix the original problem. When the next crash comes, and it will, these same folks will say, “oh, dear, how did this happen?” They will blame any private interests that are anywhere near the problem, absolve government agencies of all blame, and layer on more regulations.

The only way to fix this problem is to make sure these same folks are not around in the future and to cut the government down to size.

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← Previous Entries

Barney Frank

Killing the Economy with Regulations

Let’s Be Frank, the Estate Tax is Immoral

The Morality Malaise

Never Mind Fannie and Freddie, Let’s Nail Betsy

When Does It Become Obama’s Economy?

Goldman Skirts Volker Rule – Well That Didn’t Take Long

Here Come the Dodd-Frank Unintended Consequences

Fire, Ready, Aim

The Regulators are Dead, Long Live the Regulators

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