Monday, July 14, 2008

Day-Late-and-Dollar-Short Government

Trot out the clichés about closing the barn door for news today that the Federal Reserve is cracking down on shady lending practices to home buyers and President Bush is fighting high gas prices by lifting a ban on offshore drilling for oil.

As Americans drown in bad economic news, these daring rescue moves are the equivalent of throwing them concrete life preservers.

The Fed's new rules to protect the public against predatory lenders of subprime mortgages are too little for future home buyers and too late for the millions who are losing their homes at the highest rate in history.

The regulations, which take effect in October, will require more disclosure, but bank lobbyists have managed to make sure they contain "loopholes that would allow shady lending practices to continue" and reassure financial industry executives, "who feared increasing oversight would lead to less lending."

But the Fed's attempt to ease public fears is positively heroic when compared to the Presidential move, which has no meaning whatsoever unless Congress acts as well and, even after that, would have no effect on gas prices for years. But that didn't deter the White House from staging a White House signing for the evening news.

There may be a pony somewhere in one of those barns, but the public would be well-advised not to invest in riding clothes.

1 comment:

GiromiDe said...

It is a shame the price of oil plummeted in the 1980s, or we might be far better with alternative energy sources today, like the other nations that didn't give up on ethanol, wind, solar, etc. Our approach to energy is no different than our approach to the markets. When things appear well at the surface, our society and government both ignore things underneath.

We fail to register that people up and down the middle class are living at the edge of their means. Even some in the bottom tiers of the upper class are living at the edge of their means. Our savings rate is terrible. We have fallen in love with easy credit that takes with it huge penalties we think will either disappear or only apply after we die.

I believe that the markets and our government should keep their fingers out of each other's business except when the markets are getting out of control. It's easy to say that those who invest in overinflated dot-coms, in junk bonds, or in subprime mortgages deserve their fate and bring it on themselves, but the government has to do something to put curbs on practices that coerce persons to invest in those things.

I say tell the banks and credit card companies they cannot send any applications or advertisements in the mail. If we can't sell cigarettes on television because of the public health risk, we shouldn't allow any citizen to have access to high-interest credit given to them by eager, predatory lenders.