TCS Daily


I Think We Better Think It Out Again

By James V. DeLong - September 30, 2008 12:00 AM

I favored the bailout proposal, on the grounds that the alternative is too risky and I am a 'fraidy cat.

But I admit to admiration for the people who are standing up to say "No -- there is too much to dislike and we are too suspicious of the bailout's advocates, and we will roll the dice on whether the consequences of rejection will be disastrous."

But there is a middle ground -- a proposal by John Hussman in You Can't Rescue the Financial System If You Can't Read a Balance Sheet. He argues that help should not take the form of a purchase of assets, but should be a direct injection of capital in the form of superbonds, which are senior to existing equity and debt but subordinate to consumers' claims. In other words, protect the customers and counterparties, but not the investors.

Those who would reject the current plan have some serious arguments:

The Bloated Financial Sector

Professor Kenneth Rogoff of Harvard noted last week that over the past few years the financial sector has become bloated. A sector that is 4% of GDP is taking 30% of corporate profits, without even counting its super-high wages. For a sector that is supposed to be increasing efficiency, it is taking an awfully big piece of the pie. So, says Rogoff, the sector must shrink, a lot.

One can fairly ask whether the financial sector's concern is with bailing out the country, or bailing out a business model that has run its course.

Regulatory Triumphalism

The Democrats are pulling off a propaganda coup. They opposed reasonable regulation of Fannie and Freddie, and imposed CRA regulation that contributed significantly to the growth of unsustainable subprime mortgages. Now, they blame all problems on Bush-Cheney and "deregulation" and promise that the bailout is the first installment of a massive re-regulation of unspecified nature.

There is some truth to the attack, in that the feds watched the development of an opaque and fragmented system of mortgages and derivatives without finding out what was going on. The SEC also dropped the ball with respect to the investment banks, according to its own IG. But it is unclear why the solution is an increase in the power of institutions that were inept in the exercise of their existing power. There is a serious argument that what is needed is transparency and clearinghouses so that the market can work, not new micromanagement.

From the standpoint of a free-marketer, this regulatory triumphalism reduces the incentive to support the bailout. If one believes that increasing regulation is a certain road to sclerosis and long-term decay, why sign on to it? It is a losing game. Whether or no the bailout averts recession, there will be increasing regulation. If there is no bailout, then, granted, recession will lead to a new New Deal, but if recession is avoided then the advocates of re-regulation will be discredited and we can move back toward less regulation. Given the general lack of faith that the authorities know what they are doing, why not roll the dice? At least that way there is a possibility of a long-term favorable outcome.

Valuation Issues

Constant references are made to the difficulty of valuing the mortgage securities. This is partially true. Mortgage backed securities consist of streams of payments over time, which can be valued. The complications come because they were originally built on certain assumptions about default rates; as housing prices peaked and started to come down, these assumptions became dubious. So now, how one values the paper depends largely on one's assessments of the future of the economy and housing prices. So the problem is circular, since these in turn depend to a great degree on whether the financial system gets sorted out.

Further, much of the difficulty may be that the holders of the paper are being deliberately obfuscatory. By maintaining the opacity of the system and discouraging the development of market prices, they retain their edge of knowing more about the value of the paper than anyone else, which allows them to stoke the fires of bailout. Professor Rogoff commented that the Treasury will assign valuations by employing the unemployed bankers who could not value the paper before, which does not induce optimism.


No one has come up with serious responses to these concerns. So why isn't the Hussman recommendation a superior alternative to the original proposals? And why shouldn't we take advantage of the delay to work out the details? As Hussman says:

Public funds must function to increase the capital of distressed financial companies, not simply to take bad assets off of the balance sheet at market value (which may improve the "quality" of the balance sheet, but does nothing to improve the capital cushion and therefore little to avoid future runs on the institution).

Also - current stories are that the Democrats are coming back with a left-wing bailout bill in an effort to capture the 95 Dems who voted against the first version, hoping to pass it with no Republican support. If that happens, then the question will be whether Bush should veto it. Hussman's capital injection idea would let the Administration avoid the unpalatable alternatives of signing a monster or courting crisis.

Categories:

58 Comments

Assessing fair market value
This author makes a very good point:

"Constant references are made to the difficulty of valuing the mortgage securities. This is partially true. Mortgage backed securities consist of streams of payments over time, which can be valued. The complications come because they were originally built on certain assumptions about default rates; as housing prices peaked and started to come down, these assumptions became dubious."

Putting a value on them is pretty easy. If the homeowner's been making payments on time, and it's a fixed, rate, amortizing loan, he's good. We've got tons of numbers on exactly what these good loans are worth.

If it's an upside down mortgage, or the rate just readjusted and now the poor schlub is starting to default on the new rate, we also have numbers on what those loans are worth.

First, you have to have an army of soldiers in the trenches, looking over these assets one by one. And when you pick out all the turkeys, lo and behold! There's a well established market for those.

Typically it's about 20-40 cents on the dollar. All those bad loans could be sold tomorrow at their market value. The problem is, the sellers don't want to take this money... because they hold so many turkeys they'd have to go bankrupt the day they cashed out. And then their creditors would collapse as well.

That's why they're all looking for Daddy to bail them out by paying them well above market. And that's what they asked Mr Paulson to go to Congress to secure for them.

Congress is in the driver's seat. If they want to play hardball, they can just recess until the elections are over. Then in January, they and we will know a whole lot more about what happens when the fire department decides not to arrive.

Addendum
Clusterstock has a good summary and discussion of the Hussman proposal.
http://www.clusterstock.com/2008/9/hank-paulson-and-ben-bernanke-please-read-this-now

Wanted: nerves of steel
Steve Landsburg offers this timely insight... which has the virtue of being an original thought.

"So what's special about banks [that they deserve a bailout]? According to what I keep reading, it's that without banks, nobody can borrow, and the economy grinds to a halt. Well, let's think about that. Banks don't lend their own money; they lend other people's (their depositors' and their stockholders'). Just because the banks disappear doesn't mean the lenders will. Borrowers will still want to borrow and lenders will still want to lend. The only question is whether they'll be able to find each other. … [A]s any user of match.com can tell you, the technology for finding partners has improved since [the 1930s]. When a firm wants to raise capital, why can't it just sell bonds over the web? Or issue new stock? Or approach one of the hedge funds that seem to be swimming in cash? Or borrow abroad? … I'm not sure these big Wall Street banks are really necessary, and I'm not sure we'd miss them much if they were gone. Maybe there's something I'm missing, but if so, I think it should be incumbent on Messrs. Bernanke, Paulson and above all Bush to explain what it is."

You'll never guess where I found it.

http://mises.org/story/3132

Virgin Money
"When I first started out in the record business, and was struggling to get by, my Aunt Joyce was kind enough to give me a small loan.

That loan kept the Virgin Records recording studio afloat. It gave me the time and resources I needed to make my business a success. And many years, and many business ventures later, I still have her to thank.

So, obviously, loans between family and friends are very close to my heart.

That's why I was intrigued by the team at CircleLending and their innovative approach to finance. And why I wanted to bring them into the Virgin family and help them launch Virgin Money in the United States.

Like all Virgin companies, Virgin Money believes in getting customers a better deal. With money from family and friends, you can pick your own interest rate and loan terms to fit your situation. Rather than giving interest to a bank, you can keep it in the family – often adding up to thousands of dollars of savings. "

http://www.virginmoneyus.com/ALetterFromRichardBranson/tabid/172/Default.aspx

If Branson can do it, why not every other billionaire?

Who needs banks?

Governments NEED banks to control the money.

Free markets most efficient
The consumer is the the best regulator.

Ever hear of Angie's list?

What people like Roy don't like is that people will learn to take responsibility for their actions and won't need government 'help'.

Stumble Upon
Look what I stumbled upon:

http://www.stumbleupon.com/

A modest proposal
Here's another of my great ideas.

Let's assume that Congress is not reading the pithy comments appearing on these pages... and in the end decides, grumbling, to bail the SOBs out anyway.

I don't feel like giving them another free ride with MY money. We just did that a few years ago, for the S&Ls.

They could at least partially recoup the favor by repaying the taxpayers over time. I would suggest a tax on ALL financial transactions... not a large one, maybe two percent.

That would remind them that federal insurance for their follies doesn't come for free. We're the ones doing the rescuing, we get to name the terms.

More from Roy's Simple World
"Putting a value on them is pretty easy. If the homeowner's been making payments on time, and it's a fixed, rate, amortizing loan, he's good. We've got tons of numbers on exactly what these good loans are worth."

Gotta love a guy who relentlessly sees the world through blissful ignorance.

You NEVER know the value of a given mortgage. You ESTIMATE IT.

First of all, a mortgage isn't just a single instrument, its a package of things. The payment stream is but one part of it, then there's the MSR's (mortgaging service rights) and there's always the matter of the terms of interest rates (fixed vs. variable, timing and extent of allowable adjustment).

Moreover past payment history is only a rough indicator of the future payment history, and the value of any instrument is related to the expectations of future payments, rather than prior history. Twenty years of solid payment history can be rendered irrelevant by an injury or illness, divorce, personal assets, amount of other debt, etc. We'll never have anything but rough indicators.

The fact is that the GOVERNMENT kept hammering lenders over the head about not lending to special groups of people who coincidentally lacked some or all of the "3 c's (character, creditworthiness and collateral), so they simply stopped asking what should be routine questions-creating NINJA mortgagages (No Income, No Job or Assets). That's why fifty armies couldn't just start looking. There's nothing to look over, just sliced and diced inadequately documented loans made under duress.

Once again, Roy simply demonstrates an overly simplistic view of the world. If he can't readily apprehend some financial matter others spent careers trying to understand, he can attribute it to conspiracies (long time readers will remember Roy telling us how depreciation was a conspiratorial fiction) or he can simply run home to standard left-wing drivel.

If it was up to me, the first thing that would've happened would have been that the architects of this mess (Raines, Johnson, Gorelick, et al) would have been arrested and perp-walked just like Lay, Rigas and the others. Over a 20 year period Obama was the second leading recipient of Fannie contributions, even though he was only in the Senate 20 years. Of course his constituency is largely to starstruck to wonder wonder why the firechief has hired arsonists. Some of those people should be "contributing" the millions they made from Fannie/Freddie to the bailout.

Nor does McCain get off either. He can rattle on about "Wall Street" greed, but didn't say squat about "K street". As for his idea that asessing blame will come later, why? We know how disordering the CRA and all the other market manipulations were. Charging forward with more money is like using water to supress an oil fire.































All Financial Transactions?
They could at least partially recoup the favor by repaying the taxpayers over time. I would suggest a tax on ALL financial transactions... not a large one, maybe two percent.

Really? Would that apply to financial transactions such as paycheck cashing, ebay payments, utility payments, payments to the IRS, payments down at the local anique store?

I know you've never seen a problem you didn't think could be remedied by taxes, but your proposal isn't modest, its typical of your ideas: utterly predictable and lacking in spcificity. Forget greatness.

Correction: 3 years, not 20
was only in the Senate 20 years

Obama was in the Senate 3 of 20 years.

And if anybody thinks that "wall street" is a right-wing place, they should list to another of its star alums- "Speedy" Corzine.

Roy's GREAT political advice
"Congress is in the driver's seat. If they want to play hardball, they can just recess until the elections are over."

Works for me! Since the Dems control Congress and PROMISED the public they'd do a better job if they gave them that control in 2006 (which they did), then the Reps can blame them for doing nothing right up until Election Day.

You see, there still is the small matter involving a liquidity crisis that needs to be fixed. Not necessarily today, but definitely within the next two months would be nice before some real economy-wide damage is caused from the uncertainty.

But hey! Roy the Great Economist says that Congress should play 'hardball' (whatever that means) as if they have all the time in the world.

In the meantime, the Reps have a proposal that doesn't involve much public money that they can push in ads that simultaneously ask why Pelosi & Obama are doing NOTHING unless it involves $100 million or more to their ACORN cronies or for 'wool research' (that's in the current Senate bill, no lie).

The price for having civilization...as Roy keeps reminding us
"I don't feel like giving them another free ride with MY money. We just did that a few years ago, for the S&Ls."

You don't seem to mind supporting policies forcing ME to fork over taxes as 'the price of having civilization', so why the hypocrisy? Especially since we, the taxpayers, made a net PROFIT in the S & L bailout, which was necessary because of changes in government interference (not the abolition of thereof, as the myths keep being promoted say).

And you wish to punish those that OVERWHELMINGLY did not cause this, with your 2% 'Tobin Tax' (Oh yes, Roy...I know what you are really pushing here and it isn't about 'justice')?

Basically, Roy is just plugging for a domestic 'Tobin Tax'
http://en.wikipedia.org/wiki/Tobin_Tax

The proceeds of course, go towards more wealth redistribution at the expense of economic activity (GDP growth).

You know what I mean
On investments.

Not all problems can be remedied by taxation. But when the financial world calls upon me to bail them out from their folly, to the tune of $700 billion, I will attach a price tag.

It would be only appropriate that they pay me back.

I invite your further comment
Well, thank you for saying so. I thought my suggestion was okay, but... if you think so, all right, great it is.

I offered my comment in the full knowledge that our failure to either perform the massive bailout, as suggested by the man from Goldman Sachs-- or to do something equally effective-- would result in a serious and worldwide Depression. But I'm saying that the alternative seems to be to have the country put in the position every few years of having to rescue a perpetually improvident financial sector-- by buying them out of their bad investments. And I think I cited the Great Savings and Loan Heist as my example.

I am unwilling to continue doing this indefinitely. If they can't be curbed from this disgusting behavior by moral suasion they have to be cut off from the funds they squander so recklessly.

Do you have some better idea, which would rescue the world of easy credit while at the same time costing the US taxpayer nothing? What is your take, for instance, on the glorious yet thrifty master plan of the House Republicans?

I'll certainly listen. It would be nice not to have to see massive unemployment and business contraction, brought on by our reluctance once again to facilitate these people's irresponsible improvidence.

BTW it does seem a mite disingenuous to blame the feckless Ds for the entire mess... considering that they do not have a supermajority in either house, and the President has implacably vetoed their every attempt to change the direction of national events. Blame the man holding the nyet vote.

It's not punishment, it's restitution
A couple of your points cry out for greater clarity.

1. "...we, the taxpayers, made a net PROFIT in the S & L bailout, which was necessary because of changes in government interference (not the abolition of thereof, as the myths keep being promoted say)."

We made a profit? Point me toward your source.

2. "And you wish to punish those that OVERWHELMINGLY did not cause this, with your 2% 'Tobin Tax' (Oh yes, Roy...I know what you are really pushing here and it isn't about 'justice')?"

You're a little off here. It's actually neither about justice nor about punishment. It's about acting as an insuror of last resort for the global financial community. As we print up the world's reserve currency in huge scads, the least we can do is to keep it sound by acting as backup for reckless pirates who threaten to sink the good ship dollar every decade or two.

But it takes money. Do you think we should just write them a check every time, like some endlessly indulgent rich Daddy? I don't.

If we bail them out this time we should use the occasion to set up a new arrangement... whereby a fund is formed. We can even hold it separate from the General Fund, as we do with Social Security. And they can pay into this fund when times are good, and everyone's got money to burn.

Then when times turn sour, we can dole back out to them from the Fund. But just not to have a reserve fund, and write them a fat check anyway whenever they get themselves (and us) into trouble? That's crazy.

Before you start calling me brilliant and a genius again, I must say this is not my original thought. It was conceived in Sumeria some 5,000 years ago, when the King decreed that a royal granary be kept. And each farmer put in a tithe in the fat years, so he could take therefrom in the lean.

I'm not even asking for a tithe. So it's a very modest plan.

The Tobin Tax
At last, your vast erudition pays off!

You can be my bibliographer.

Smoke and fog
You're doing a lot of fancy footwork there, Voice Without a Face. But you're just pointing out the obvious. The numbers on loan returns are obviously addressing ROIs in aggregate. On any individual loan the guy could be good as gold, and have a heart attack on his way to the Post Office with his payment one day.

My point was, when speaking of hundreds of thousands of loans, the portfolio has value. And the value of the total portfolio-- or any tranche from within it-- can be estimated very closely.

So there is in fact a market for all these defective instruments. It's just not quite what the holders of all that rotten produce would like to have seen.

What's simple is only your one dimensional characterisation of my comments. I would agree with you though, that if any candidate for national office be a Democrat or a Republican, he will have received gratuitous contributions from the financial industry.

A big fat falsehood
"The fact is that the GOVERNMENT kept hammering lenders over the head about not lending to special groups of people who coincidentally lacked some or all of the "3 c's (character, creditworthiness and collateral), so they simply stopped asking what should be routine questions-creating NINJA mortgagages (No Income, No Job or Assets). That's why fifty armies couldn't just start looking. There's nothing to look over, just sliced and diced inadequately documented loans made under duress."

Duress, I assure you, had naught to do with it. It was purely greed and opportunity. All this agonizing over the CRA is just post facto revisionism.

No lender could ever be brought up on charges of noncompliance if he could demonstrate that he applied the same yardstick to all loan seekers, vis a vis credit rating, income-to-payment ratio, track record, etc. That red herring is simply not so. And if you are as conversant with business as you present yourself, you know that full well.

As for the matter of collateral, it was a pure oversight. Housing prices always go up, don't they? That's what everyone thought. And that's the bedrock upon which the entire scheme hinged.

No, the CRA guidelines presented a handsome opportunity-- to make interest-only, ballooning and variable rate loans to undercapitalised and naive greenhorns, loans that the originators had every reason to understand would likely self destruct at some future point. That's why they invariably sold them off ASAP.

They were a phenomenon the country has had extensive experience with-- thieves who have carefully broken no laws.

" cut off from the funds they squander so recklessly. "
Are you willing to do that for government funding for the education and medical industry too?

The government guarantees cheap money to buy houses with little or nothing down. This stimulates demand as the government is throwing money at people to buy houses raising their prices. But the whole point of the CRA and government funding was to provide 'affordable' housing.

(Note how high the cost of housing is in Moscow. They have cash to burn so prices are exploding. Just like in gold camp in CA 150 years ago.)

The same is happening in universities and in medicine. Government subsidies to 'help' people inflates the costs 'forcing' more government support, inflating the cost even more.....

I you really want to keep the costs of anything down, you must promote competition in the market.

If the government must help people then let them do so with vouchers that have strict eligibility requirements and have limited purchasing authority, similar to food stamps.

Thre royal granary
Nice idea, but the ants that toil year in and year out to fill the granary don't appreciate the grasshoppers stealing the fruits of their labor.

The missing fundamental is private property. When people can keep the wealth they earn and are encouraged to earn more, they can then choose to share that wealth in charity or investments. (Give a man a fish and he eats for a day, teach a man to fish and he can eat every day.)

Conversant with Business
No, the CRA guidelines presented a handsome opportunity-- to make interest-only, ballooning and variable rate loans to undercapitalised and naive greenhorns, loans that the originators had every reason to understand would likely self destruct at some future point. That's why they invariably sold them off ASAP.

Idiot, the CRA made institutions make loans they wouldn't otherwise make, and all of the exotic instruments were merely ways to react to a situation that was artificially created. Of course some people profited. Just look at the Fannie/Freddie payroll. You can bet we'll never see Franklin Raines get the Ken Lay treatment, though.

As for applying "the same standards", that's hogwash. The CRA was intentionally designed to force LOWER standards and when they couldn't lower the standards enough, they created the "subprime" market. Of course you see this as lender predation, when any reasonable person who understands this even a little, smells the the scent of the social engineers. What really is amazing is how little you learn from the easy transition a Jon Corzine makes from megamillionaire to Senator & Governor. Why do you think that is so? Could it be that the propelling force to either position is unbridled ambition (it is). But you keep believing politicians are somehow noble and public spirited,because you need a fairy tale.

Whethe you like it or not, your use of the word "tranche" can't mask the utter lack of knowledge that you've demonstrated here before. By the way, you conceded my expertise in your retreat on the depreciation matter a couple years ago.








Restitution? Amen!
I await seeing the checks from Mssr's Raines and Johnson and Ms Gorelick on "the smoking gun"...

Hah Hah Hah Hah Hah

Apparently a business you were never in
Why, thank you for stepping out from under your rock of anonymity. I simply had no idea that was you. :)

1. The CRA rules did not imply a lender would be forced to lower his standards-- only that he would have to consider loans in every precinct by the same standards. Your argument is akin to an employer complaining that the Equal Opportunity Act forced him to hire unqualified black people.

Far from it. What the Act did was to force him to hire any QUALIFIED black people that might apply-- that is, qualified under the exact standards he used to assess white applicants.

The increase in subprime loans was due to the opened door of greed and opportunity, as the CRA allowed for shoddy loans to be backed by FNMA guaranties.

2. "By the way, you conceded my expertise in your retreat on the depreciation matter a couple years ago."

Hardly. My point was that income could be made to disappear before one's eyes through the adroit use of depreciation schedules. And I offered a detailed example of how that art might work-- one that you never refuted.

My point was never that depreciation in and of itself was a scam. That was your own off-point idea.. one you then proceeded to devastatingly defeat with your steamroller wit.

Competition, the universal cure-all
"I[f] you really want to keep the costs of anything down, you must promote competition in the market."

In none of the cases you cite has there been efficiency attained through greater competition. FNMA and FRMC exercised inadequate discretion in vetting the loans they approved. As a result, they have now fallen under federal control. Let's hope they operate under greater oversight now than they did back when they were poorly regulated private corporations.

Likewise, inadequate governmental controls in the area of medicine have resulted in our having the world's highest costs for care-- by far-- while only receiving middling results (about the same as medical outcomes in Slovakia). This could all be corrected in a twinkling by our becoming the last developed country on earth to go fully to a federal health care program.

In education, we already have competition in the market. Anyone who has the money can afford the finest schools for their little darlings. That's far from addressing the very real problems localities encounter in running public school programs.

Odd that you would champion vouchers, that most socialist of approaches. I thought you felt subsidies distorted markets.

Targeted surcharges would be better
"...wouldn't the investment firms pass the cost of that tax along to their clients (who are taxpayers)."

Yes they would. But they wouldn't be ALL taxpayers. Just the ones who used investment services.

It would be more of a federal surcharge than a tax. And it could certainly be exercised with greater discretion than just on "all" transactions.

As the intent is to operate as a federal bailout fund it would be akin to an insurance fund. Ordinary stocks and mutual funds present little potential for abuse under our system, and so they could be exempt.

Complicated derivatives, such as the infamous credit default swaps, are the greatest con games. Such "vapor ware" would be charged the highest rate to be eligible for federal bailout.

That way the investment houses themselves would be forcibly educated against their penchant for adopting the sexiest, most arcane vehicles to sell their supposedly professional customers. The customer would be forwarned by an offering that carried a four percent federal surcharge for bailout insurance.

Mom and pop's hundred shares of General Motors play no part in the problem we're trying to solve here. And the firewalls that separate ordinary banks and brokerages from the world of the arbitrageur should be strictly defined and enforced, for such a program to work.

Running a private game
"Nice idea, but the ants that toil year in and year out to fill the granary don't appreciate the grasshoppers stealing the fruits of their labor."

That's precisely the beauty of the plan. Under our present system, the provident ants have to bail out the improvident bankers, securities dealers, arbitrageurs or whatnots every decade or so.

Under the new plan the only people putting into such a bailout fund would be those likeliest to abuse their power to create investments out of thin air. In other words whether private or public, such a fund would operate exactly like insurance. It could even be made optional. In order to qualify for a federal bailout you could elect to pay a default premium to the federal agency administering the program.

It would be exactly like saying your account was FDIC insured.

By upholding the notion of private property, you are saying we should go to the other approach, and never under any circumstances bail out the world of privately conducted finance. My point is that at the point they extend their hand to accept a bailout, they voluntarily relinquish their right to say they still own and control private property. They can't have it both ways.

Should they all refuse to accept the federal bailout I expect will shortly be offered, THEN I will agree with you. They would then be running a private, uncontrolled card game and should be allowed to run wild, run free. It would be understood that one plays at one's own risk.

My father used to say that any game's fair, so long as everyone plays by the same set of rules. The corollary would be that everyone at least know the rules.

Surprise-- I agree
You know what? I agree with you. Gorelick, Raines and Johnson stand in the same relation to Obama as Ken Lay did to Bush. I am as appalled as you are, to find that politicians of either stripe always seem to find themselves in bed with these kinds of people. Further, this particular bed seems to have been made up by Bill Clinton and friends.

It's too bad the Congressional response to this impending disaster-- the Federal Housing Enterprise Regulatory Reform Act-- was flawed from its inception, and stillborn. Opponents were able to level such charges as these:

1)The bill was an attempt to privatize regulatory agencies. Hence, Democratic resistance to it. Hence, even Republicans voting against it.

2) The bill did nothing to address fraud and tighten oversight. Hence, Democratic resistance to it. Hence, even Republicans voting against it.

At any rate it was twice proposed in Congress, and it never got out of committee. Senator McCain nobly signed on late to sponsor the bill, after it was already dead. Bottom line: it had an inadequate number of fans in either party.

Opinions on the worth of this retrospectively intriguing bill are mixed-- and not always along party lines. It failed to move forward under either the R-controlled (1995) or the D-controlled (1997) Congress. Links to the bill itself and an interesting discussion can be found here:

http://www.govtrack.us/congress/bill.xpd?bill=s109-190

Here's the summary:

>1/26/2005--Introduced.

Federal Housing Enterprise Regulatory Reform Act of 2005 - Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.
Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.
Excludes the Federal Home Loan Banks from certain securities reporting requirements.
Abolishes the Federal Housing Finance Board.

IF government MUST subsidize, do so with vouchers.
Let the user decide, not the government.

"In none of the cases you cite has there been efficiency attained through greater competition."

Free market competition always improves service and reduces costs.

Why would you trust the government with any money?
Social Security was supposed to be a trust fund just as you described.

Now it is truly a Ponzi scheme.

An open admission
"The increase in subprime loans was due to the opened door of greed and opportunity, as the CRA allowed for shoddy loans to be backed by FNMA guaranties."

Given this open admission that the real source of this mess was government intervention (via FNMA guaranties) into a credit market that has worked just fine for centuries, (despite the greed and the predatory tendencies of humans throughout all history) are you any closer to admitting that government intervention into market economics is a recipe for disaster, and should be avoided at all costs? Are you any closer to abandoning your leftist brothers, who blame this on an unregulated free market, rather than on an overgrown government intend on meddling in things that our government should not touch?

Are we any closer to putting the blame on well-intentioned but ill-informed liberals (was that redundant?) who put sociopolitical concerns above economic realities, which in the end causes even bigger sociopolitical problems (leading to bigger government solutions, then bigger problems, bigger solutions, etc. ad infinitum, or collapse, whichever comes first)?

The road to hell....
Feelings are all that matter to liberals.

"If if feels good, do it."

Roy is out of touch
"No lender could ever be brought up on charges of noncompliance if he could demonstrate that he applied the same yardstick to all loan seekers, vis a vis credit rating, income-to-payment ratio, track record, etc. That red herring is simply not so. And if you are as conversant with business as you present yourself, you know that full well."

Sorry Roy, but one of the changes in the Clinton Era was to change the requirement from one of EFFORT to one of RESULTS. THAT is what caused the sub-prime NINJA loans to be born.

"No, the CRA guidelines presented a handsome opportunity-- to make interest-only, ballooning and variable rate loans to undercapitalised and naive greenhorns, loans that the originators had every reason to understand would likely self destruct at some future point. That's why they invariably sold them off ASAP."

Yeah, they sold them mostly to Freddie Mac and Fannie Mae. Which, we are now paying for. If Freddie and Fannie had not existed, this wouldn't have happened.

You sure you are not Bob Jones since you like to bash Bush so much?
"I am unwilling to continue doing this indefinitely. If they can't be curbed from this disgusting behavior by moral suasion they have to be cut off from the funds they squander so recklessly."

Yes...the path Japan took. Really worked for them, too.

Meanwhile, Sweden dealt with their crisis swiftly...and barely suffered for it.

"BTW it does seem a mite disingenuous to blame the feckless Ds for the entire mess... considering that they do not have a supermajority in either house"

No it isn't since the DEMS PROMISED that they would do this and that and some more DESPITE not having a supermajority or control of the White House. They LIED to the voters about promises they couldn't keep. They should be held to that. That's not the Reps' problem and certainly not the Executive Branch's. Congress has something like a mere 9% approval rating as a result -- lower than Bush's.

But you'd rather blame a lame duck president for what the Dems PROMISED (no matter what, they promised it) and didn't deliver? Amazing.

Hope all is well with you roy; and to all his detractors as well
I find it interesting the political web weaved around this issue. Liberals/Democrats want to blame Republicans "'cause it happened on Bush's watch", conservative/Republicans want to blame it on dems as "CRA was a Carter program and it was upgraded by Clinton" and on and on. Then everyone turns on the greedy bankers in their own way.

What happend was quite complex, some of it was caused by new regulations heaped on old regulations and some of it was greed. There is plenty of blame to go around. Mark-to-Market, CRA, Freddie and Fannie and Indy and the various regulatory organizations and watch-dog angencies and so on.

Why it happened is much easier. It began with the Great depression and bank regulation. That, in turn, led to more stock market and financial market regulation. That in turn led to advancements in marketing that needed to be turned lose so new regulations and partial de-regulation. That led to greed as new strategies were invented to take advantage of new regulatory rules, that led more failures, more bailouts and more changes in regulatory policy. Eventually we came to the present day, CRA, Mark-To-Market, and unbridled greed.

The reason it happened was the housing bubble created by the above-mentioned cycle (it was not a natural phenomen but created by crappy regulations and no oversight). The reason the problem is so widespread is that all the firewalls between banking institutions and investment houses were weakened or torn away completely.

After this $700 Billion boondoggle is passed, it would be nice if congress could strip all the laws out of the books and start with a clean slate, writting in proper protections with minimal interference in the markets.

No, roy is not entirely wrong, neither is anyone else. But it took the whole lot to create a mess this big.

True competition
Funny that you should mention "medical outcomes in Slovakia"; I just happen to know a medical doctor in Slovakia. From what she tells me, the system there is a split system - there is public socialized medicine, and there is a parallel private medical system. As you can imagine, the government run system is highly subsidized, and therefore much cheaper than the private system. But, as you can also imagine, the service is awful, the paperwork is cumbersome, the wait times are very long, the hospital staff is unhappy, the promotion system is highly politicized, and all the good doctors have already fled to private practice. Meanwhile, the private doctors are getting all the patients that can afford to flee the public system. Of course, rather than simply admitting that socialized medicine is a bad idea, a system that cannot compete, and closing their doors, the entrenched bureaucrats are arguing that patients should not be allowed to go to private doctors, and should be forced to use the inferior public system. Surprise!

>“In education, we already have competition in the market. Anyone who has the money can afford the finest schools for their little darlings.”

Competition? You are ignoring the fact the playing field is intentionally tilted in favor of one side. Those who want to send their little darlings to private school have to pay for both their own child’s education through private tuition, and for the education of their neighbor’s children through taxes. Meanwhile, those who send their children to public school pay only a portion of their child’s education costs, since it is subsidized by the taxes of their private school neighbors. Are you honestly going to label this as “competition”? What kind of “competition” is it when you force one competitor to carry the load of another competitor?

Do you really expect to see the full benefits of competition when you are preventing an honest competition from happening? The funny thing is, that the public system is SO BAD, that even with your hand on the scale, trying to hold the private schools down, and lifting up the public schools, the private schools STILL compete! And win! You might think that a reasonable person would see this, and then reward the system that overcame such obstacles, and won, despite such unfair competition. At this point, you ought to be able to declare the winner, don’t you think? But no! Instead, public school supporters declare that since the private school performed better, the playing field was not tilted ENOUGH, and that public schools need more help to make the competition more “balanced”.

>” That's far from addressing the very real problems localities encounter in running public school programs.”

Actually, since both public and private schools face the same “very real problems”, creating honest competition between them, and rewarding the winner, would be a very good way of addressing those problems.

>“Odd that you would champion vouchers, that most socialist of approaches. I thought you felt subsidies distorted markets.”

Penalty! Attempted Obfuscation! (And a lame attempt at that!) Loss of yardage, repeat the down.

Yes, subsidies distort the market. As it stands, public schools are subsidized by the tax payments of private school families, distorting the market. Obviously, in the case of public/private schools, vouchers are simply a way of removing this distortion. This is why they are vehemently opposed by public school officials, who supposedly have the student’s best interest at heart, but clearly have ulterior motives - like keeping the playing field tilted in their favor. I’m sure that you understand how vouchers would remove this distortion, just as they do. But they at least have a reason for opposing vouchers, even if it is self-serving. What is your reason?

Do you care to elaborate on how school vouchers are supposedly “socialist”? Or do I not want to know?

How does that help?
When an airplane crashes, NTSB finds out exactly went wrong and why.
They then issue a report of their findings so the industry can take corrective actions, if warranted.

Identify the specific government regulations and policies which caused the situation and eliminate them. If we had an objective news media that did its job it would be hammering those politicians, like Frank and Dodd who were the enablers.

Saying 'we are all to blame' is BS and will do nothing to fix it.

A game without rules?
You're arguing from a general ignorance of the profession-- and a specific desire to find the usual bad guys.

Lenders are like many investors-- they'll seize opportunity wherever they can find it. And free markets are never truly free. They are shaped by the laws that describe them.

The laws surrounding the origination of home loans changed a little when CRA was passed-- and the changes were pounced on by many in the industry as an excuse to start a new scam-- that of subprime and Alt-A loans, to be offloaded onto what would rapidly become a huge secondary market.

From a vantage point inside the business, this development appears very much like an unintended consequence rather than the express intent of the authors. I highly doubt it was some conscious plot on the part of legislators to bring the world of capitalism to a halt.

"...are you any closer to admitting that government intervention into market economics is a recipe for disaster, and should be avoided at all costs?"

My comments above describe a change in the rules. Let me draw you a picture of what home lending would look like if there were zero rules, and anyone could bribe a title company to falsify the sums of money owed, or being lent. And any prospective homeowner could sign onto a deal only to find, at the last minute, that the payments would be double what he'd been led to believe, and his deposit on the house would be forfeit if he didn't accede.

It would be chaos at first. Then, as the fact of this lex talionis world sank in, there would BE NO home mortgage industry. It wouldn't be trusted-- because there would be no rules, no enforcement and no justice. Nor would there be home ownership, other than for the few who could bring suitcases stuffed with cash to the table.

That's why we all, out here in civilized society, elect to have and enforce a certain number of rules of behavior. It's so we can continue to play the game.

Raw chauvinism on display
This one's well below even your usual lax standards. To begin with, I'm casting no blame. We live in highly partisan times. And without a supermajority, the technically D Congress has been able to accomplish nothing. The principle reason? The current president, exercising his veto power on manifold occasions.

That's not bashing, it's an objective description of what's happening. And since the Ds told the electorate they would do this and that once they got into power, and they never really got into power, that to you is lying? Come on. Don't be such a fraud.

The reason for the public's low approval rating for Congress is, of course, the fact that it can't get anything done. Gridlock always lowers this number.

The other thing is, I asked you a simple question: "Do you have some better idea, which would rescue the world of easy credit while at the same time costing the US taxpayer nothing? What is your take, for instance, on the glorious yet thrifty master plan of the House Republicans?"

And I will ask you again. Do either you or the Republican Party have some better idea, that isn't going to cost the public untold sums of cash? I thought you were the party that was going to shrink big government, and bring spending within limits.

Give this question another try, if you will. It seems to have eluded you the first time.

The effect of bad rules
This one deserves a thoughtful answer. As I got out of the business in 1993, there was the question as to whether I really am out of touch vis a vis subsequent events.

So I hit the books. And there does seem to be a great deal of validity in your comment. William Niskanen, for instance, offered these criticisms of the 1994 rule changes to the Subcommittee on Financial Institutions, in March, 1995:

* The "assessment context" provision would create the framework for pervasive credit allocation to politically favored groups. The regulatory agencies would evaluate a bank's CRA performance in terms of a regulator's perception of the overall credit and service needs of a community and the performance of other lenders. The 60 percent loan-to-deposit ratio has been dropped, but the regulators would have the authority to set a higher ratio in specific cases. This provision would be the genesis of massive micromanagement by the regulators and massive paperwork by the banks.
* The proposed regulation would override any concern about bank soundness. The regulations proposed in December 1993 had included statements that banks are not expected to make loans that are expected to result in losses, to expand their branching network, or to operate facilities at a loss. These protections are not included in the proposed new regulations.
* Banks should not be required to collect data on the race and gender of the owners of small firms that make loan applications. The CRA does not provide authority for any regulatory decisions based on such data, and the potential use of these data is not defined in the proposed regulations. The potential for abuse in the use of these data is also substantial.

http://www.cato.org/testimony/ct-ni3-8.html

There's no doubt the rule changes added a burden to an Act that had already posed a great burden of reportage (which burden Niskanen nobly discounts). However the new requirement seems to be that a BRANCH must adhere to a ratio of deposits to loans, in order to remain in good standing with FDIC, etc. That is, if I have this right.

And my experience leads me to think that a branch serving a zip code with few applicants being able to qualify for homes at the prices they're being offered, also probably has little money on deposit from those same people. They are fresh out of cash, and their lack of savings mirrors their inability to qualify.

If you'd ever worked the streets as I did, I think that would have been your conclusion as well. But let's note that in our inner cities there are many neighborhoods where white yuppies live cheek by jowl to impecunious black working families. And that the housing prices are grotesquely high, and that as a rule, only the upper incomes (that is, the whites) are getting the loans. So, we have high savings in the local banks, coupled with low loan closure rates for blue collar blacks.

These blacks were Clinton's constituency, and the rule changes obviously were intended to court their vote. So yes, it does look like the rule changes put the screws on.

I would have fought it. I'd have kept scrupulous records of every loan applicant, and the disposition of his request, and the reasons why. And I would have asked my federal inquisitors if, at any point along the way, they thought I had acted improperly under the spirit of the law. I would have been pointed in asking them if they thought I should lower my demonstrably prudent standards of lending in order to service the letter of the new rules.

And quite possibly I'd have set precedent in the matter, proving to the court's satisfaction that there are occasions when a black man fails to qualify and there is no discrimination involved. Poor black, rich yuppie neighborhoods are where I spent my real estate years, and that would have been my route.

There's no doubt that there were lenders, small ones, that may have acted through timidity, closing on loans that ended up biting them in the behind. But as I recall, everyone very quickly learned that they could lay off these turkeys on Fannie and Freddie.

F&F were, and are, needed institutions in the American home sales industry. We can't do without them; they're an integral part of our prosperity machine,and undergird a huge home industry. There is, of course, abundant evidence of their mismanagement, and they should be totally reoriented. Which, in fact, is what is belatedly happening.

There's no excuse for tolerating marginal loans, or unrealistic appraisals, any more than we can tolerate shoddy workmanship from the developer. All these areas require close oversight. Believe me, in your world without rules we'd be seeing excesses far worse than even those we're seeing now. The rubes would get took at every turn, signing on for loans they didn't understand and obligating themselves for million dollar homes that were actually only worth 200 thou.

So I agree with you, the rules that were set in place have allowed abuses. But I will disagree that that means we should now operate without any rules.

Public schools and public health
Thanks for the info, JT. Yes, Slovakia has a system pretty much like all the European countries: a standard-care system underwritten by the government and a premium-care system you pay extra for.

They all work pretty well, from what I've heard... although I've not tried them personally. And of the European countries, Slovakia has about the lowest outcomes (they're newest at the game, and not a rich country). All the rest have superior outcomes to the US, excepting places like Bosnia and Belarus.

But your second comment intrigues me even more. Because when we pay high taxes to educate the young, we don't do so just to educate our own kids. We pay to educate the other people's kids.

If we didn't, we'd be living in a backwater with an ignorant population. No high tech industries, no participatory democracy, no reasonably intact social order. We'd be living in a place like Nigeria. Or Pakistan.

So that's why we put the big bucks into public education. And if it's not good enough for our own privileged brats, we can always elect to pay extra to put them in the well connected schools. That way they can become legacy nightmares for the country, like the well-born C student we currently have in the White House. I recall his going to some good schools. But they haven't helped. :)

I for one would be willing to pay even more for a good public school system, if throwing money at it would help matters. We're already far too much toward the Nigeria-Pakistan end of the scale for my taste. I'd much prefer living in a land of bright, articulate and adaptible people, with effective means of action and good critical thinking skills.

With the advent of vouchers, eating up scarce public school funds, what would happen would be that the already faltering public system would just abruptly cave in for lack of funding. This is the obvious reason they are "vehemently opposed by public school officials".

Public money would instead be funneled to private schools-- which many poor inner city residents clinging to their vouchers would still be unable to afford. Secondarily, the availability of huge sums of new money would have an immediate inflationary effect on private school tuition fees.

And the steep class divide would continue to widen, with our poor now going to de-funded schools run by the dregs of the teaching profession as the better teachers leave for the better paying private jobs.

Finally, "Do you care to elaborate on how school vouchers are supposedly “socialist”? Or do I not want to know?"

Money is taken from all of us as taxes, and given to a few as vouchers. Does that not meet the definition of wealth redistribution we commonly encounter in forums like this one?

Price Tag
>"when the financial world calls upon me to bail them out from their folly, to the tune of $700 billion, I will attach a price tag."

Why not just say "No!!"? The whole idea behind this bailout is to shift the price tag from investors who got burned (buying risky mortgage backed securities for more than they were actually worth), to us, the taxpayers. Those investors are (and should remain) responsible for their investment choices. They took the risk, hoping to get rewarded. Now, when their hoped-for gain on investment turns out to be a loss, they suddenly want to hand the bag to us taxpayers! Would they be sharing their gains with us taxpayers if it had played out the other way? Nobody got left "holding the bag" who didn't voluntarily purchase the bag. They hoped it held goodies, knowing full well that it might hold crap. If you want them to pay a price, why not leave the price tag that is already on the bag?

Instead, they are trying to scare us into buying their bag of crap, telling us that if we don't, there will be hell to pay. Really? How so? "The stock market will crash!", we are told. Well, if the stocks are going to plummet simply because you are holding a bag of crap, then the stocks must be currently overvalued, and a correction is in order. The reason stocks are overvalued is because investors thought they had more money than they really did, and were buying more stocks than they had money for. They are just now realizing that some of the money they thought they had (these mortgage based securities) is less than they thought. So, naturally, these investors are not going to be buying more stocks soon, and instead, are going to have to sell stocks in order to cover their losses. This will drive stock prices down. Oh well!! One mans loss is another mans gain. Let the stock prices fall. That is what they are SUPPOSED to do in a situation like this. Instead, we have idiot politicians telling us that this is a "crisis" and that we need to "stabilize" the market. We don't need a "stable" market; we need a "corrected" market, which means the market must be allowed to move. The best way to stabilize the market is to let it adjust to the new reality. If stock prices fall, that simply means they were artificially high to begin with.

Stop trying to manipulate the market to make it fit your government policies. Instead, adjust your government policies to fit the market.

Market prices reflect the cumulative wisdom of millions of people, who have inside knowledge on all kinds of businesses, and all kinds of risks, and who are talking not just with their mouths, but with their wallets. Compare that to government policies, which are based on... well... politics.

Why do you think free markets don't have rules?
The issue is not whether there are rules, the issue is who writes the rules.

I have used this analogy before, but if you want to play pick-up basketball, you agree to certain rules. Playing poker, everyone agrees to the rules prior to the hand being dealt. If people cheat, they are not allowed to play.

Banks have a responsibility to invest their customer's money prudently. If they fail to do so they deserve to go out of business.

Now we have banks sitting on cash and won't lend it easily because they can't trust the borrowers will pay it back.

As with the Enron collapse, the issue is not the rules, but can you trust those who may or may not be following the rules, like Aurthur Anderson.

When those we are supposed to trust, like accountants, lawyers, Congressmen, bankers, can't be trusted, they must then start the slow process of earning trust again. Adding more rules to the ones they weren't following in the first place will not help to rebuild trust.

In a free market, trust is dealt with every day. If you buy a product and it does not meet your expectations, you return it for your money back. If you don't get your money back, you won't shop at that store again, will you?

A first rule of a free market is to satisfy the customer. Since the government has no customers, it must satisfy no one, and it is meeting the expectation splendidly.

Socialists don't trust individuals.
Although socialists claim they are for 'the people', they don't seen to trust 'the people'.

I wonder if they are projecting themselves onto others? Socialists want to control others and want to take from others, (for the good of all, of course.)

People value what they pay for, and earn.
"The U.S. Constitution was ratified in 1789. Horace Mann began his common schools crusade in 1837. That means that the nation was founded almost five decades before the basic seed of the modern, government-dominated, public-school system was planted. And, of course, the basic building block of the nation wasn’t government schooling, but quite the opposite: individual liberty. The Declaration of Independence–written more than six decades before Mann went to work–explains that."

http://www.cato-at-liberty.org/2008/05/22/whos-un-american/

"In this thoughtful, well-wrought study, Charles L. Glenn examines the historical development of the idea that the State should sponsor popular education in order to mold common loyalties and values among its citizens in the interest of national unity. This idea had led inevitably to conflict with parents and groups who do not accept the values and beliefs inculcated by the state and its educators. Over the years, the issues around which such conflict has arisen have varied, but the underlying positions remain the same. On the one hand there are those who assert the absolute right of parents to control the education of their children. On the other there are those who assert the absolute right of the State to control the education of children and to do so in a way that minimizes the differences among them. Glenn examines this tension primarily as it evolved in nineteenth-century Massachusetts, with reference to parallel developments elsewhere in the United States and in France and the Netherlands. He ends by reminding us that this continuing conflict over popular education raises troubling questions in a democracy. How, for example, can the pluralism we claim to value, the liberty we cherish, be reconciled with a State pedagogy designed to serve State purposes? Can government assure that each child is educated in the essentials required by the social, political, and economic order without seeking to impose uniformity? He concludes by offering workable and tested solutions to this perennial dilemma."

http://www.amazon.com/Common-School-Charles-Leslie-Glenn/dp/1558155228

A diploma is not so much earned as granted today.

O'Reilly blew up on Barney Frank
...yelled and screamed at him and even called him a 'coward'. He unleashed.

And Barney just sat there and dished out his usual BS.

Doesn't matter what the press does. The real problem is in our voting booths.

Too bad he didn't mention the bill Hagel and others submitted..
that was killed in committee.

I think is was Hagel, Shelby, Dole, and McCain.

Putting education within the reach of all
Marjon-- Your noble sentiment leads to the establishment of a permanent underclass, who don't make the kind of money that enables them to educate their kids. That's what we had in this country before the advent of public schools. And since their establishment they have been overwhelmingly valued by the American public. Our ability to school our children has been central to whatever it is that ever made us great.

And since, the rest of the world has emulated us. Ask anyone, from any nation, if they see any worth in public schooling (other than your own tight circle of pinheads, of course).

As to valuing only what one pays for, how does that apply to a person who has been given a stub of paper by the government, enabling them to give it in turn to the bursar of some school, for the education of their allegedly special, privileged children?

Preaching to the converted
Joe, if you go back and review this whole thread, I think you'll find that my sentiments are to offer no bailout, and suffer the ovious consequence of a serious worldwide Depression, as opposed to obligating the taxpayer to a bailout that only enables the perps to continue on their ways. Which, as of late last night, appears to be what we've gotten.

Much is being made of the semantics, whether this is a "bailout" or a "rescue". Bailout is the proper word. There is no provision for mandatory workouts being required of holders and payees on troubled mortgages-- so we will go through with the agony of having another two million families evicted, and another two million used homes pushed onto an already saturated market.

There is in this latest plan, no taxpayer equity. The first plan included federal ownership of purchased assets, and that I am being told has now vanished. I haven't read the thousand-plus pages of the act itself yet, but it seems to me that if you buy something, the seller shouldn't end up still owning it.

There appears to be no oversight in the bill, or any legislative mandate to reorganize the regulatory structure that permitted the excesses to happen.

And there is no cap placed on executive pay. The ONLY people being bailed out here are the ones that concocted the schemes that got the financial world in such a heap of trouble.

So my position is that we got screwed.

Now I assume you're talking to me, when you say "Stop trying to manipulate the market to make it fit your government policies. Instead, adjust your government policies to fit the market"?

The market was left to devise its own elegant solutions as to how to package and sell vast wealth, and to minimize the downside through the use of all those elaborate and mystifying constructions like default swaps. No federal agents dictated that a vast market in derivatives become entrenched in the fabric of our finance. And due to all of the above, THE MARKET FAILED.

Let me say that again. The. Market. Failed. And then it had to go to the big Nanny State with its hat in its hand, asking for more of Nanny's money to play with.

Your response is invited.

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