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Hernando Today

Failure Is No Longer An Option

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By DONALD J. MYERS, A Mind of My Own

Hernando Today

Published: September 20, 2008

Years ago the federal government bailed out the savings and loan banks. A few weeks ago it bailed out Fannie Mae and Freddie Mac in the mortgage business. Now it has bailed out AIG, the largest insurance company. This sounds much like Fidel Castro nationalizing all the business in Cuba in the early 1950s and Venezuelan Chavez doing much the same in this decade.
Unless I am misinformed, you and I, the taxpayers of this country, will pay for these bailouts.
When one listens to the politicians explain these events, it seems that it is all the fault of capitalism and greed. I think that there was some of that as there always is when a large amount of money is at stake. However, our government is responsible for a large share of the blame.
Banks generally take a long look at a person's ability to repay a loan before they grant one. What is their income, what is their history of repaying previous loans on time, how much credit do they have outstanding now and numerous other considerations are considered. Banks are in business to make money and if they do not make good loans, they fail.
Why would lending institutions make poor loans? In some cases the person trying to get a loan lies or misrepresents his ability to repay. Sometimes unscrupulous merchants assist these individuals. I am confident that some of that occurred in the failures of these institutions.
The federal government created regulations that forced lending institutions to provide loans to poor risks in an attempt to create more homeowners. If an institution did not do it, the government fined it. The Investor's Business Daily on Sept. 15 outlined specifically how the government did this in the article "The Real Culprits in This meltdown." As it points out "tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make loans that sound business practices had previously guarded against. It was either that or face stiff government penalties."
I recall a couple of months ago when I was in Las Vegas where one of my troops from Vietnam lives. We normally get together and remiss during each visit. We were talking about bad loans being given to poor risks. Tex said an acquaintance of his had a home loan for about a half million dollars and he said that he wouldn't loan him five dollars unless he had some type of collateral. This individual was unable to make the payments, and the home was now in default. Duh! Now multiply that example by millions and one sees how this could happen.
There are those who will now shout that President Bush should be held accountable as Sen. Barack Obama claims. The president was to blame, but not this one. These regulations were all implemented under former President Bill Clinton and many of his pals went to these institutions after they left the government. Franklin Raines took over as CEO of Fannie Mae and walked off with more than $100 million in compensations.
Now politicians want to add regulations. Many of these are the same politicians who contributed to the problem. Sen. Christopher Dodd, D-Conn., was the primary recipient of political donations from Fannie Mae, and he was followed closely by Obama.
It is time to demand that government become smaller and less intrusive rather than more so. Look at the last time the federal government spent less money in a succeeding year than the previous one. It was 1956. Each time that our government intrudes in what should remain private, it becomes worse.

Donald J. Myers, a retired colonel in the U.S. Marine Corps, is a regular columnist for Hernando Today. He lives in Spring Hill and can be contacted at DMyersUSMC@aol.com.

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