E-mail
Print
Op/Ed: Socialism in the mist
By Tyler Kristopeit
In the mists of a financial crisis we all must be wary of the enemy within, as Marcus Cicero would say – the enemy whose sly whispers rustle through all the alleys, heard in the very halls of government itself.
But who are these enemies? They are the people who wish to exploit the current crisis for not only for their own political gain, but to further a radical and detrimental ideology. They are those who wish to put forth an agenda that would change the very framework of our country as we know it. Spreading lies and twisting facts to achieve their ends. These are the people that we need to expose.
While a $700 billion bailout is not the ideal situation we want our government to be in, this crisis is not without precedent. In the late 80s the Savings and Loans Crisis paralyzed the U.S. economy. Banks, who gave out loans to people at rates far below market value, were struck with crisis as people who were given these low rate loans failed to repay them.
Sound familiar?
These S&L banks were federally chartered to give loans below market value. The idea, which originated during the Great Depression, was to allow anybody who wanted a loan to improve their lives by being granted one. Should somebody default on one of these low interest loans, the government would be there to bail them out. The government bailed out the S&Ls to the tune of about $160 billion. And this was when the Dow Jones was only around 3,000 points.
The exact same thing is happening right now - only on a much larger scale. The government has bailed out such corporations before, so why the delay and initial failure of the bailout in the House of Representatives? Initially it was opposed by everybody, but for different reasons.
Step by step some politicians in this country are trying to work us down the path of socialism, and they are using the current crisis to further their goals. They are the ones who blame the bailout on an unregulated market, and they are the ones who blame CEOs who make too much money. They are the ones who blame a system that rewards those who say we need government to solve this problem.
Government is the problem. Government mandates allowed S&L banks to give out high risk loans which led to their collapse. Government did not learn their lesson with Frannie and Freddie.Government is not the answer.
Government caused the current financial crises and caused the housing bubble to burst, and unfortunately government is the only one who can fix this mess. These corporations like Fannie Mae and Freddie Mac who specialized in high risk loans deserve to fail, while businesses like AIG who were victims of this credit crunch are the ones who need to be bailed out.
If it were just this simple it should have been done already, but this solution is not enough for house democrats. They tried to sneak sinister, socialist plans into what should be a non-political rescue plan to keep this country out of a depression. There were plans to limit CEO compensation to $500,000 a year, in addition to giving the power directly to the federal government to give out these high risk loans instead of having "puppet" corporations to do that for them. So all of a sudden government is telling business how to pay their employees, and nationalizing the loan industry.
Government needs to fix this problem and then get out of the way by getting out of the business of guaranteeing loans. The FDIC should be there solely for its original intention: bailing out peoples actual money they have in savings, not money people borrowed and couldn't pay back.
The free market would have taken care of Fannie and Freddie much earlier if the government didn't promise to pay any loans that their customers defaulted on. Without the government's involvement these companies would not have given out so many high risk loans and would not have gotten into this situation.
If for some reason a company did go bankrupt because of bad business practices a stronger company would have bought them - or left them to rot on the floor of the New York Stock exchange. That is how a free market should work, that's how it would have worked if the government would not have interfered and guaranteed loans.
In the financial market, like in most areas of life, government is not the answer. In this case however, they are the ones who screwed it up, they are the ones who need to fix it, and then they need to get out of the way.
Tyler Kristopeit is Chairman of the UWM College Republicans student organization
> Comments
Nathan Johnson on Oct 06, 2008 at 06:50 PM:
It is clear that there are no socialists in the government today, just as there weren't any when McCarthy claimed there were.
"Government is the problem." If the gov didn't intervene in the economy, and instead we had laissez-fair capitalism, every recession would be another Great Depression.
The business cycle occurs with or without gov internvention, the gov can only dampen the effects of the recession. However, there is no real "solution" to ending the business cycle other than to end the hierarchical nature of our economic system, and establish economic democracy with public ownership. It was public money that bailed out the economy; it makes sense that the public should have ownership.
Nathan, on Oct 07, 2008 at 02:14 AM:
Marxism was revolutionary 100 years ago... and failed utterly, because it is not compatible with human nature. I know Soviet communism wasn't Marx's communism, that it because Marx's communism is impossible, and why it has never been implemented anywhere ever. Capitalism was indeed revolutionary 4 centuries ago, and it continues to be the least of all evils today, as demonstrated by the tremendous wealth (even of the poor) in the western world, and beginning in the East. I know, it's because it's so gull darn exploitative! There are harsh realities in the world, let's get real.
Nathan Johnson on Oct 07, 2008 at 09:25 AM:
Let's get real- you're defending class society. Babies aren't born with a stamp on their head indicating what caste or class they belong to, what class we fall into is a result of our socio-economic system.
As long as society bears a class nature, Marxism isn't outdated. Look at the events going on in Venezuela, Bolivia, Nepal, East India, Czechoslovakia, etc etc and you can see that Marxism is still influencing the class struggle.
There is no "human nature." Humans appear selfish in our society because our system promotes that behavior. Native American culture, on the other hand, and other communal cultures foster a sense of community and low and behold, you don't have egoistic, selfish, profit-grabbing individuals.
Greg on Oct 07, 2008 at 03:24 PM:
I'm sorry Nathan, but that's a lot of retoric to say absolutly nothing about the article. I think the article is well writen and hits on the point of the current economic problem. There is strong evidence to support the claim that government is the cause for today's economic problems.
We can never know for sure, however, but theory would suggest that a truly free market would have corrected itself without nearly the collapse we are seeing today. True, business cycles will correct themselves with or without govt intervention however we've got to believe that the intervention doesn't fix the root cause and only goes to cover up the real problems. Eventially those problems, if not corrected organically, will explode. case and point in today's environment.
Your statement about public ownership rights due to public funds for the bailout, I believe, proves what the author is advocating...socialism in our government. If our public funds are used to buy up private companies, isn't that a scary first step to modern socialistic values? And an even more general question, does the public really want to own these companies, or more specically these worthless assets? Hell, volunteer stockholder don't even want to hold this, what value is provided the taxpayers by holding this?
We'd be well advised to remember that a clause in the bill gives the govt equity in the companies that participate in the program. As a taxpayer, do you want your tax dollar buying stock in banks the goverment chooses or would you rather invest those dollars on your own terms?
To help stress the author's point, here is a great article written by the wall street journal editorial board. http://online.wsj.com/article/SB122204078161261183.html
Greg on Oct 07, 2008 at 03:45 PM:
One more point on Fannie and Freddie..the author hits the nail on the head here. F&F were beneficiaries of an implied government backing which resulted in debt issuance just over the yield on a tressury note. Since the market dictates the rate on corporate debt, just being tied to the federal government allowed F&F to issue debt cheaper than every other corporation in the world. Their perceived "risk" of failing was just slighly higher than the federal government defaulting on its debt. If they wouldn't be able to borrow so cheaply, they never would have been able to leverage themselves so much, which most likely resulted in their collapse. This is a prime example of how government intervention disturbes markets for the worse. The market was essentially saying that it wouldn't lend money to a private company to have the same business model because the market believed it was more risky than the government did.
Then, after F&F could raise funds at such low rates, congress encouraged the agencies to buy high risk, subprime, alt-a loans for unqualified borrowers. Let me say this again, the government encourange FF to hold these crap loans. This of course created the secondary market.
If you're a bank and you can receive a higher return by originating an alt-a loan for the secondary market and selling it to the agency, why wouldn't you? Where's the risk for you? After all, the government, in not so many words, encouraged you to do it by creating a secondary market.
This all or course turned the implied backing of F&F into a realistic backing of F&F and was forced to take them over when they failed. The sad truth is that they had to do it with our money.
Midst on Oct 07, 2008 at 05:43 PM:
"In the mists of a financial crisis" Midst you dumb fuck.
Johanan Raatz on Oct 07, 2008 at 06:40 PM:
"However, there is no real "solution" to ending the business cycle other than to end the hierarchical nature of our economic system,and establish economic democracy with public ownership."
As soon as that system goes into equilibrium hierarchal structure will re-emerge yet again, and economic democracy will converge on state capitalism. The people in the rarer professions will simply unionize/corporatize and demand higher pay from the rest of the property owning democracy. Based on this you can see that the law of supply and demand is based on democracy which entails that though you may not see it capitalism is really based on democracy.
Economic inequality is unavoidable no matter what system you use as it is something that is built into nature not just any given form of society.
Johanan Raatz on Oct 07, 2008 at 06:48 PM:
"Let's get real- you're defending class society. Babies aren't born with a stamp on their head indicating what caste or class they belong to, what class we fall into is a result of our socio-economic system."
Yeah he is. So what? But it's not like people are locked into a "caste" under capitalism. People can work their way to greater freedom. Look at J.K. Rowling. She was on welfare when she wrote the first Harry Potter book and now look at her. She's a multimillionaire. The difference between caste and class is that you can work your way into higher classes.
"There is no "human nature." Humans appear selfish in our society because our system promotes that behavior."
Evolutionary psychologists or sociobiologists as they are sometimes known as would tend to disagree. Humans have human nature just like chimps will behave like chimps birds will behave like birds or ants will behave like ants.
"Native American culture, on the other hand, and other communal cultures foster a sense of community and low and behold, you don't have egoistic, selfish, profit-grabbing individuals."
You'd be surprised, early reports by settlers of Native Americans debunk the noble savage concept. They suffered from all of the same vices that the rest of humanity does.
Brutus on Oct 08, 2008 at 06:21 PM:
Cicero gets all the glory while it is ME who must do the dirty work! Nail his hands to the Senate chambers!