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  • Morning Bell: End Crony Capitalism

    At 300 East 23rd Street in the exclusive Gramercy Park neighborhood of Manhattan, where to get into parts of the park you need a key granted just to residents, a new 98-unit luxury apartment complex has been built with an outdoor movie theater and panoramic city views. The problem is that not enough buyers are coughing up the $820,000 to $3 million the project’s developers are asking for the privilege to own a unit in the building. But don’t worry, the Obama administration is coming to the rescue. Last December, the Federal Housing Administration loosened its financing rules so that U.S. taxpayers would have the honor of backing loans with downpayments as low as 3.5%. Now rich Manhattanites can better afford condos in buildings with pet spas, concierges and rooftop lounges like the one in Gramercy Park, all on the taxpayers’ dime.

    You read that correctly: the FHA, created in 1934 to make homeownership attainable for low- to moderate-income Americans, is now subsidizing Manhattan luxury condominiums. How did we get here? The mindset that allowed this unconscionable public policy to occur was on display yesterday in Washington, where Treasury Secretary Timothy Geithner hosted his Future of Housing Finance symposium. While Secretary Geithner promised “fundamental reform” of our nation’s housing policies, he also insisted that the federal government must continue to play a strong role in U.S. mortgage markets: “There is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing a measure of stability in access to mortgages, even in future economic downturns.”

    Geithner was not asked if FHA’s backing of Manhattan luxury condos fit his definition of a “carefully designed guarantee in a reformed system,” but American Enterprise Institute fellow Alex Pollock was there to at least throw some cold water on Geithner’s central-planner arrogance: “You can either, in my view, be a private company or a government agency — one or the other, but not both.”

    Geithner’s “carefully designed” government intervention mindset is at the core of why the Obama administration’s economic policies have been a complete failure. Since taking office the Obama administration has used the Troubled Asset Relief Program (TARP) and other initiatives to buy one car company, give another to union allies, punish non-union workers, undermine the bankruptcy code, enrich Wall Street at the expense of Main Street, bail out Mickey Mouse, keep unionized zombie firms from dying and generally terrorize the world economy. That is why, for the first time ever in 2010, the United States fell from the ranks of the economically “free,” as measured by The Heritage Foundation’s Index of Economic Freedom. From housing, to banking, to spending and taxation, the U.S. economy will only truly recover once it is clear to private enterprises that their best bet is investing in employees, machines and ideas, not lawyers and lobbyists in Washington. To that end, Heritage’s just-released Solutions for America chapter on Restoring the U.S. to a Free Economy recommends:

    Unwind Government Intervention: The government should end the interventions it has made since 2008, starting with abolition of the TARP program. It should then abolish Freddie Mac and Fannie Mae and repeal all U.S. government regulatory measures that interfere with mortgage markets. Congress should also repeal the Sarbanes–Oxley Act, which discriminates against small firms and reduces competition. Companies should be allowed to fail, and laws and regulations should create no expectation of a future bailout.

    Reduce Government Involvement in Commercial Decision-making: Congress must eliminate the insidious practice of earmarking, which corrupts the legislative process. The government needs to divest itself of all assets acquired in connection with the financial crisis and recession and refrain from interfering in bankruptcy cases.

    Reduce Tax Rates: Our corporate income tax rate, currently the second highest in the developed world, must be cut to restore U.S. competitiveness. The corporate tax rate should be set at or below the Organization for Economic Co-operation and Development average of 26% to eliminate the incentive for businesses and jobs to move overseas. We should also stop taxing businesses as individuals, but rather reduce rates to 25%, which would help business to grow and create jobs.

    Spend Less and Devolve Responsibilities: Congress should enact a firm cap on the annual increase in total government spending, limited to inflation plus population growth. Lawmakers should exert all effort to keep overall federal spending to less than 20% of U.S. GDP, the historical post–World War II average for federal spending.

    Give Workers a RAISE: Union contracts set both a wage floor and a wage ceiling. Unionized employers may not give productive workers pay raises outside those envisioned in the collectively bargained contract. The RAISE Act (Rewarding Achievement and Incentivizing Successful Employees) would allow employers to pay individual workers more, but not less, than the union contract specifies thus restoring to millions of union members the inherent American right to earn individual raises through individual efforts.

    On Monday, President Barack Obama visited the ZBB Energy battery factory in Menomonee Falls, Wis. Last January, the Obama Energy Department invested $14 million in the company, and President Obama was on hand to claim credit for every employed person there. But The Wall Street Journal did some homework and found that since going public in June of 2007, ZBB has been hemorrhaging money. The firm lost $4.9 million in fiscal year 2008, $5.5 million in fiscal year 2009, and has a “cumulative deficit” of $44.1 million. ZBB has admitted that its ability to continue as a “going concern” depends on securing additional investment. In a free market economy, private investors would provide those funds, reap the rewards if ZBB prospered and suffer the losses if ZBB failed. But under President Obama’s crony capitalist economy, ZBB is the big winner if the company survives, and if they fail, it is you, the taxpayer, who loses.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    38 Responses to Morning Bell: End Crony Capitalism

    1. Ken Jarvis - Las Veg says:

      Obama is WORKING TO MAKE AMERICA SUCCESSFUL

      HF has joined with MURDOCH to help make American FAIL.

      WHICH SIDE ARE YOU ON?

      LVKen7@Gmail.com

    2. George Colgrove, VA says:

      *Spend Less and Devolve Responsibilities*

      "Congress should enact a firm cap on the annual increase in total government spending, limited to inflation plus population growth. Lawmakers should exert all effort to keep overall federal spending to less than 20% of U.S. GDP, the historical post–World War II average for federal spending."

      Lets use the average percent through Reagan. Since Reagan, government spending has gone through the roof thereby skewing that percentage. I think government spending should be no more than 15% which I believe it was during Reagan, less prior to that. Other than the DoD (and even that could use some significant cuts in the non-military side of the department), there is little reason why we should be spending even 15% of GDP. If all the domestic spending was eliminated and those duties reverted back to the states (who are doing them already) or to the private sector (who could be far more effective on getting those tasks done) – then fed spending could be remarkably little. We are so hooked on the fed that it is difficult to see beyond them.

    3. Tirner says:

      Charity for the rich, an early indicator of trouble ahead.

    4. Karen Yancura, Sterl says:

      Great article! And your strategies for getting us out of this mess, if they were to be enacted, would reap great benefits throughout the country. Of course, right now, with the makeup of Congress and the White House, that is not going to happen. Will the Republicans chart the course set out in your article if they take Congress this fall

    5. M. Martin, W. TX. says:

      As a conservative Republican, the blame can be placed at the feet of the Republicans. While we had political majorities we could have put the brakes on these programs and even eliminated them. There was no Character or Integrity to get the job done. While we enjoyed those "majorities" I would ask my elected officials on a regular basis about not just "reforming" these stupid systems and programs, but eliminating them outright. It didn't take more than a couple of questions to have the rest of them permanently ignored.

      The Democrats will always do their thing their way. However I'm looking for a little intellectual honesty here in placing some of the blame where it belongs. -MM

    6. Michael Grant, Willi says:

      (Broken Links in article: 'giving another to union allies,' 'punish non-union workers' )

    7. Robert says:

      If we have learned anything in the last 30 years, we know the republican party is (not willing and) not capable of making government smaller and restoring the freedoms we have lost over the last 50 years. The democrat party is actually a communist/socialist party, but at least they know who they are. The only way to defeat them is if every single working taxpayer – who believes in liberty – joins together (despite relatively smaller differences that can be resolved by states' rights) to DEFEAT them. We need people tough enough to eliminate the Dept. of Energy, the Dept. of Education, the Dept. of HHS and HUD – along with 25% reductions in welfare spending every year until it is less than 15% of our budget.

    8. Gloria Martin, St. P says:

      The "Looters" are taking control. We've got to put a stop to this. Thank God for the Heritage Foundation!!!!!

    9. Barbara Holt says:

      I love the information you post but do not like this format……

    10. Kenneth Chilton, PH. says:

      I love Morning Bell and appreciate the Heritage Foundation for its excellent work. May I respectfully ask that you flesh out your proposal to eliminate Freddie Mac and Mannie Mae? What would you do for (or against) the stockholders and bond holders? Many pension funds are invested in these two pseudo-corporations.

    11. Richard Cancemi, Arl says:

      Intent for USA = Fascist Oligarchy + Marxist Socialism = Obama + Progressive Democrats.

      Is this what we want our Country to become under these traitors?

    12. Blair Franconia, NH says:

      Yes, end crony capitalism. That's what they have in Eastern European countries like

      Russia and Ukraine. Obama brought here. Let's work on getting him out of office.

      On 1/20/13, let's make the change we hoped for.

    13. Bob McClure says:

      A couple of quick comments. First, FHA has loan limits for New York of approximately $726,000, so these higher priced luxury units are not eligible for the FHA guarantees. Secondly, lobbyists do play an important role in providing information to Congress, as to what are the impacts/benefits of any piece of legislation affecting their industry. Our legislators do not have the staff, budget nor expertise to fully understand the implications of proposed legislation, so the lobbyists (which represent both sides of any issue or argument) can provide a source of information and education to the legislators, to assist them in making a knowledgeable decision. There are abuses, generally dealing with the ethics of the politician, not generally with the concept of lobbying for your position

    14. Drew, MI says:

      Bravo

    15. Kate Moran New York says:

      Who is bailing out the people I know who up to the time Obama took office were working hard, and doing fine financially. They now are out of work and loosing their homes. Who is helping them?

    16. Anthony Soscia says:

      Why haven’t conservative candidates promoted a new contract with America? We are ready to fix our new “Change”. Change it back!!

    17. wallyblu says:

      Why should there be any increase in Government spending? The Government should only spend 90% of anticipated revenues and use the other 10% for debt reduction. All spending should have to be reapproved every year, no spending bill putting off current spending to the future. Simple

    18. Pingback: Instapundit » Blog Archive » BARNEY FRANK: Obama admin ‘dumb’ to predict no higher than 8% unemployment. Ya think? UPDATE: …

    19. Pingback: Instapundit » Blog Archive » BARNEY FRANK: Obama admin ‘dumb’ to predict no higher than 8% unemployment. Ya think? UPDATE: …

    20. Tom, Michigan says:

      I think this may be the only time in the past year that I have been reading your blog that I disagree with your point of view. FHA does not subsidize mortgage loans, they insure them. FHA is a government insurance company versus MGIC, RMIC, PMI…, which are private insurance companies that insure the same type of mortgages. (with a 5% minimum downpayment).

      While I am not excited that high end homes are being insured through FHA, however as a capitalist, if it makes financial sense… let them pay the huge premiums each month. Insurance only works when you can spread the risk/claims over a large number of people. So if these people want to pay premiums that helps FHA stay in business to lend to other less privelaged people… I am OK with that. (As long as they played by all the rules and fit into the program guidelines).

      FHA does limit the loans size to try to stay away from these types of scenarios, but this system is not perfect.

    21. Steve Reed Bonita Sp says:

      Obama's economic polices are designed to fail. Isn't anyone listening to his speeches? He wants to usher in the "The New World Order", "Global Governance" or as he is now calling ot "The New International Order". Remember what he told the out of work autoworker in Michigan a few years ago? "Your job is gone and it is not coming back." We need to wake up, stop being so polically correct and Impeach this guy before he destroy's our whole economic system.

    22. KLIMAX Baltimore, Ma says:

      IMPEACH NObama NOW before he destroys OUR entire capitalistic base and turns us into a Socialistic Country where only the people in bed with him will make any gains !!! The more I read about NObama and his spending OUR tax money like water the more I want to join survivalist group and and get ready for the "Second Civil War" that will start when NObama and Company shove amnesty down OUR throats !!!!

    23. walter says:

      HANG ALL OF THEM LIKE THIEVES. They are thieves, crooks and cons.

    24. PippN, Severna Park says:

      Why doesn't Tim, "I love to spend your money," Geitner just admit his rock band, "O'Bubbles and the Socialists," is following the Cloward-Piven strategy. At least he wouldn't exude complete idiocy and incompetence. But then, he would have to tell the truth, which is clearly the antithesis of his intent. If the seriousness of this situation wasn't dire, people who use the head for more than a hat rack would find his blubbering hilarious.

    25. Dwight Brown, Pampa says:

      I am at the end of my trust in the current government (no party exlcuded). It is digusting to realize that even if the current administration is defeated in November, the replacements will join those who are left to continue their practices of pork barrell policies and growing bureaucratic control of our lives. Two million government employees, who produce nothing, will continue to leach off of the ever decreasing private sector of American workers who produce everthing in our GDP. Promises are no longer of any encouragement to me. If someone is willing to do what they promise, how will I know it until it is too late again and they are there for another term?

    26. Rt Quail, Grosse Pte, MI says:

      The first President I voted for was Ike. I was quite interested politics in high school and came from a large family, which encouraged discussion of local, national, and world governments. Six of my brothers served in the military, 3 in WWII, 2 Korean, one Vietnam. They all returned safely. I tell you this to give you some back ground for my comments. I have heard more than I ever wanted to hear about Soc. Sec. Health care, white collar welfare, corporate welfare, and government stupidity, theft, and treason. Why do we need lobbist, of course we need them to beg for benefits for big politic donors. Grant was right when he said “will no one rid me of these lobbyist”. I believe he is credited with coining the word. Your article and others informing the choir of all that is wrong with this administratrion and prior administrations will not change a thing unless the masses receive and understand the message. The talk shows have the same problem, their reach is limited to those of us that already know the story. I do not how you can discuss any point, when the group you are trying to reach (is absolutely sure of that which is not true to be true). We have for years argued all the above points to no avail. We can only hope that the present administration self destructs, and the Republicans have the back bone to return to the Reagan philosphy, and take it one step further. If we fail in our communications to change bad thinking. then change will come only after major trauma.

    27. Mark Smith says:

      What happened to representative government? What happened to the will of the people? Why are special interests granted everything against the wishes of the masses, and now, out of their sight, while the masses are being robbed to finance the special interests? Social security, for example. I'm loosing my country. 50% of the voting public does not vote, let alone know the issues…. let alone have any original thought. The current Administration, as the last one did, is taking full advantage of it. There is no other country that has the potential of America; nor is there any other country, or religion, that is as evil as Arabia, or Islam. Is money and power more important than America? Is it?

    28. Mike, North Carolina says:

      To end crony capitalism is a worthy battle cry in this war of ideas, and at this point it is a nice dream for us (U.S.) Americans who cherish the founding principles and documents (such as our Constitution written to limit government, for a change), repeatedly shown and proven truly right and just by the lessons of history before and since.

      However, it is at this point a dream and probably will be caused to remain so for more than one generation, considering, as also repeatedly shown and proven by history (such as in the case of Rome and all other Republics, democracies, and other systems before and since), when "cronyism" is a feature of or becomes entrenched, institutionalized, and enforced in and by the highest levels of government and elsewhere, such cronyism helps make soon the destruction, from within and without, of all Republics (which the U.S.A was founded as), democracies (which the U.S.A was not founded as), and any and all other systems; and considering that Statists (a.k.a. so-called "Progressives"/"Leftists"), especially since near the turn of the 20th Century, have succeeded entirely too far in indoctrinating with and entrenching their insidiously "Progressive" freedom-robbing, free-enterprise destroying Statist doctrine and agenda, which, as history also repeatedly shows, not only tends to patently feature but indeed relies upon, entrenches, and institutionalizes cronyism in and through government.

      So now too many (U.S.) Americans have thus been "Progressively" indoctrinated and pushed by Statists to the point where cronyism, including so-called "crony capitalism", is so entrenched, institutionalized, enforced, and even fiercely protected, that so-called "Captains of industry" willingly cooperate with Statist politicians and their accomplices (in government, the media, and elsewhere)…thus causing the term "crony capitalists" to be created…and many other entrepreneurs are not willing to do so but are caused by such politicians and their accomplices to fearfully feel that they must cooperate for the sake of the survival of their businesses and the jobs they create and provide, which causes to become associated with willing "crony capitalists".

      And so it goes that, while "End crony capitalism" is a worthy battle cry in this war of ideas, well, all things considered, it is again at this point a dream, and we, the people of the United States, shouldn't be surprised if it takes two, three, four, or more generations to even begin to succeed toward ending it, if at all, as far as the Statist "Progressive"/"Left" has succeeded at so patently misleadingly and duplicitously perpetrating and institutionalizing cronyism, which, as history also repeatedly shows, growing government power tends to feature and operate on, for their liberty decreasing government power growing agenda, and bribing the people with their own money in order to do so, for more than 100 years.

      The bottom line is this is another example of how it is that "Experience has shown that as government (power) grows, liberty decreases", as Thomas Jefferson said, and "The American Republic will succeed, until the politicians realize they can bribe the people with their own money", as Alexis De Tocqueville said.

    29. Timpclimber Provo, UT says:

      Fannie May, Freddy Mac and now FHA have become financial pawns for this administration. No wonder Obama, Reed and Pelosi left them out of the financial reform bill. The regulators would have found them as mismanaged and corrupt as Nation Wide. I have saved this article to use as a guide to remind our national and local elected reps that they really can do something to turn this mess around.

    30. Tom K says:

      THE DEMONCRAPS HAVE GOT TO GO IN NOVEMBER,EVERY GOOD AMERICAN HAS TO VOTE!!!!!!!!!!!!!!!!!!!!!!!

    31. Rick Caird in Florida says:

      The 3.5% down payment requirement is lunacy. Has no one learned anything from the past 3-4 years? A very small downturn in the market will put the owner underwater. It is doubtful any reasonable lender would loan with this small a down payment. It is only the FHA insurance that allows the mortgage in the first place.

    32. Anson E. Long says:

      "Ken Jarvis":

      "Obama is WORKING TO MAKE AMERICA SUCCESSFUL

      HF has joined with MURDOCH to help make American FAIL.

      WHICH SIDE ARE YOU ON?"

      Not yours, Mr. Jive@$$.

    33. toledofan says:

      A great piece and I hope the Republicans running this November are reading these articles and paying attention. No matter the logic and to the point facts, the Democrats not only don't understand, they have dug themselves into such a deep hole, it's going to take many years for them to climb out, unless, of course, the Republicans fail to do what needs to be done. They need to reduce the size of government, freeze spending, eliminate as much waste as possible, reduce taxes, get the economy going by creating a business friendly environment, the healthcare bill needs to be repealed and governemnt needs to step back and get out of the way. Even though it sounds like a daunting task, it's very doable and actually quite simple. All they have to do is follow the script as written.

    34. Nancy, New Hampton, NY says:

      Please, everyone forget that there might be one or two things about the GOP that you don’t like. Remember instead all the destruction and corruption that is ingrained in the Democrats. They have become defilers of our freedom and seem to be intent on turning us into a model much like the defunct USSR, Get out and vote them all out on November 2nd. This election is about SAVING our Republic. And then in 2012, a new and capable Commander in Chief. Change is in the wind.

    35. Zeb says:

      Sure Kevin Jarvis of Las Vegas………Marxism works. I'll bet you can list the enormous successes of Marxist governments and economic practices on….uhhhhhhhh…ehhhhhhhhh…errrrrrrrrrrrrr……..

      BTW…how's the moron of incompetence Harry Reid doing???

    36. Bobbie says:

      We're on the side of freedom, Ken. Sure don't hear that coming from Obama, or his unchristian actions.

    37. JOHN W. BUGLER says:

      HAVE YOU EVER HEARD OF ENUMERATED POWERS?

      YOU AND THE WHOLE COUNTRY AT LARGE WILL LOOSE THE FUTURE UNLESS WE GET BACK TO GOD AND ENUMERATED POWERS.

      WHY HAVE I NOT HEARD ONE WORD FROM YOU ON THIS ISSUE.

      YOU HAVE THE PAPER RIGHT IN FRONT OF YOU.

      YOU GAVE IT TO SEAN.

      GAD MAN GET WITH IT .

      ARE WE SENDING YOU TO CONGRESS WITHOUT A PLAN.

      NO MORE TAXES. NO MORE SPENDING.

      GET REAL.

      70% OF ALL SPENDING IS MANDATED BY ENTITLEMENT AEROGRAMS

      ENACTED INTO LAW SINCE 1937.

      THE RECKLESS ENDANGERMENT TO OUR FORM OF GOVERNMENT-

      CONSTITUTIONAL FEDERALISM IS GOING FULL STEAM AHEAD.

      NO WAY TO STOP IT.

      WHAT DO YOU PROPOSE.

      YOU JUST SHOUT "NO NEW TAXES"

      YOU SHOUT "NO NEW SPENDING."

      GREAT JUST GREAT.

      JOHN WE ARE SINKING WITHOUT NO NEW TAXES AND NO NEW SPENDING.

      THAT WILL NOT SAVE THE DAY.

      WE MUST RETREAT TO THE INTENT OF OUR FOUNDING FATHERS.

      FEDERALISM. DUAL SYSTEM.

      WE ARE DONE IF ALL YOU AND THE NEW CONGRESS JUST CLUCK AND CLUCK AROUND THE BARNYARD LIKE CHICKENS CLUCKING "NO NEW TAXES" " NO NEW SPENDING"

      WE NEED A COUNTER REVOLUTION.

      NOW JOHN IF I DO NOT HEAR YOU MENTION "RETURN TO ENUMERATED

      POWERS" THEN I WILL CAST THE DUST OFF OF MY SANDALS AND

      TAKE A WALK AND FIND SOMEONE WHO WILL.

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