News about the pinheaded things by politicians and governemt.
Posts tagged Insanity
The Financial Disaster: The Other Shoe is About to Drop
Oct 9th
The New York Times has an article that should greatly concern anybody with a passing familiarity with the causes of last year’s financial melt-down.
The latest problem? The F.H.A. or the Federal Housing Administration.
The F.H.A. was created in 1934 to aid lower-income and first-time home buyers purchase homes. It does this by insuring the mortgages given out to these people. It also offers loans at terms not available from other lenders. The problem is that the people running the F.H.A. have apparently decided that their job is no longer helping people purchase houses. Instead, they are making decision based on propping up housing prices. That means facilitating as many sales as possible.
Propping up housing prices is not the role mandated for the F.H.A.
And the proverbial doo-doo is about to hit the fan.
Roughly 20% of the loans given out in 2007 and 2008 are in serious trouble. The number of loans in default have jumped from 232,864 to 410,916 in only a year. And the F.H.A.’s response is to increase the amount of loans they give out.
The mortgages issued by the F.H.A. are bundled into mortgage-backed securities and sold to investors. Investors aren’t buying. They aren’t buying because they realize just how much of the loans backing the securities amount to bad debt. You know, the toxic-assets that caused the financial melt-down in 2008?
This means money is drying up at the F.H.A. The F.H.A.’s capitol reserve has dropped from 6% two years ago to under 2% now. This is below the reserve mandated by the Government. This is likely to result in the F.H.A. being bailed out by the Federal Government.
Only the Government would reward poor decision making with more money.
The tragic part of this entire debacle is that the only reason the Government felt the need to intervene in the first place, is that Government policy made our financial markets dependent on artificially inflated housing prices. Prices that were also inflated by government policies.
If Government had stayed out of the housing market in the first place, it wouldn’t feel the need to intervene now.
We are coming out of a period of time that saw a housing bubble. Housing prices were inflated due to Government policies that allowed people that couldn’t ordinarily afford to buy one to do so. Now, Government is trying to fight against the bursting of the Government created housing bubble. It’s a losing battle, and the American people are going to be caught in the implosion.
Only Government could decide that the thing to do when finding themselves in a hole is to get the back-hoe out.
Doesn’t Anybody in Washington Pay Attention to the Rest of the Country?
Oct 9th
One of the things lost in the Health Care Debate currently going on in Washington is the fact that some of the States have already tried the approach being pushed by President Obama and Congressional Democrats.
8 States have implemented guaranteed issue and community rating rules for insurers in their states (a large portion of the current proposals before Congress). In every instance the results were a disaster.
Why?
Community Rating means that insurers can’t charge people based on the risk of covering them. They must charge everybody the same rate. The result of this is that healthy people (the people least likely to use insurance) have to pay the same amount for coverage as the people that utilize insurance the most.
At the same time, Insurers can’t refuse coverage for conditions that exist before coverage began.
This means that healthy individuals have an incentive not to buy insurance due to its high cost. At the same time, they bear no consequences for that decision because they can purchase it if they do become ill without having to pay more and they are covered for their illness.
As a consequence, only sick individuals carry insurance. As a result, Health Insurers are now faced with increased costs with a lower pool of policy holders. The only way to stay in business is to drastically increase premiums. The only way to force the healthy to buy insurance under this system is to impose a fee that dwarfs the cost of buying insurance.
All of this is a predictable result based on basic human nature.
Plus there is empirical evidence based on the results of implementing theses proposals in 8 States.
Yet, the Democrats are still insisting on implementing these failed policies nation wide.
Someone once said that the definition of insanity is doing the same thing that has been done in the past and expecting a different result. Couple that with the belief that the result will be different because you’re the one doing it, and what you get is a God Complex.
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