Tuesday, July 31, 2012

Big Lies in Politics

It was either Adolf Hitler or his propaganda minister, Joseph Goebbels, who said that the people will believe any lie, if it is big enough and told often enough, loud enough. Although the Nazis were defeated in World War II, this part of their philosophy survives triumphantly to this day among politicians, and nowhere more so than during election years.
Perhaps the biggest lie of this election year, and the one likely to be repeated the most often, is that the income of "the rich" is going up, while other people's incomes are going down. If you listen to Barack Obama, you are bound to hear this lie repeatedly.
But the government's own Congressional Budget Office has just published a report whose statistics flatly contradict this claim. The CBO report shows that, while the average household income fell 12 percent between 2007 and 2009, the average for the lower four-fifths fell by 5 percent or less, while the average income for households in the top fifth fell 18 percent. For households in the "top one percent" that seems to fascinate so many people, income fell by 36 percent in those same years.
Why are these data so different from other data that are widely cited, showing the top brackets improving their positions more so than anyone else?
The answer is that the data cited by the Congressional Budget Office are based on Internal Revenue Service statistics for specific individuals and specific households over time. The IRS can follow individuals and households because it can identify the same people over time from their Social Security numbers.
Most other data, including census data, are based on compiling statistics in a succession of time periods, without the ability to tell if the actual people in each income bracket are the same from one time period to the next. The turnover of people is substantial in all brackets — and is huge in the top one percent. Most people in that bracket are there for only one year in a decade.
All sorts of statements are made in politics and in the media as if that "top one percent" is an enduring class of people, rather than an ever-changing collection of individuals who have a spike in their income in a particular year, for one reason or another. Turnover in other income brackets is also substantial.
There is nothing mysterious about this. Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience.
Politicians and media talking heads love to refer to people who are in the bottom 20 percent in income in a given year as "the poor." But, following the same individuals for 10 or 15 years usually shows the great majority of those individuals moving into higher income brackets.
The number who reach all the way to the top 20 percent greatly exceeds the number still stuck in the bottom 20 percent over the years. But such mundane facts cannot compete for attention with the moral melodramas conjured up in politics and the media when they discuss "the rich" and "the poor."
There are people who are genuinely rich and genuinely poor, in the sense of having very high or very low incomes for most, if not all, of their lives. But "the rich" and "the poor" in this sense are unlikely to add up to even ten percent of the population.
Ironically, those who make the most noise about income disparities or poverty contribute greatly to policies that promote both. The welfare state enables millions of people to meet their needs with little or no income-earning work on their part.
Most of the economic resources used by people in the bottom 20 percent come from sources other than their own incomes. There are veritable armies of middle-class people who make their livings transferring resources, in a variety of ways, from those who created those resources to those who live off them.
These transferrers are in both government and private social welfare institutions. They have every incentive to promote dependency, from which they benefit both professionally and psychically, and to imagine that they are creating social benefits.
For different reasons, both politicians and the media have incentives to spread misconceptions with statistics. So long as we keep buying it, they will keep selling it.

Big Lies in Politics

Monday, July 23, 2012

The Fed Has Destroyed LIBOR

bernanke gun

Intentional distortions of one of the world's most important financial benchmarks has sparked a worldwide scandal.

What's more, suggestions that central banks knew about manipulations of the London Interbank Offered Rate (LIBOR) and looked the other way have led many to accuse central banks of failing in their duty of keeping the financial markets working properly.

Manipulations of the LIBOR rate, while minuscule to most individuals, had much more substantial effects in the money markets, where banks go to borrow money from each other and hedge against changes in lending and interest rates.

These central banking cartel manipulations prevent private financial institutions from lending at rates which are competitive in market economies. That intervention by maintaining artificially low rates encourages lenders to loan to borrowers when they would not otherwise. This creates an inflation in the market which will lead to a burst of not equilibrated in the short term. 

Everyone should get free healthcare...

The chief strategist of a firm that specializes in brokering deals on Eurodollar futures contracts told Business Insider that blaming bankers for manipulating LIBOR misses what's really happening in money markets; LIBOR is still being distorted, and on an official basis.

That's why, he argued, the old way of monetary financing—and with it, LIBOR fixings—has been destroyed in the wake of the financial crisis.

"It didn't seize up [during the crisis]. It ceased to exist," he told Business Insider.

Understanding what he means takes some understanding of how LIBOR works and what its fixing affects and is affected by.

LIBOR isn't really based on a tangible number; it's based on a compilation of bank responses to the question, "At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?"

Banks need to find money to settle transactions denominated in other currencies or involving transactions abroad. Therefore they use instruments like Eurodollar futures, which allows them to borrow or lend dollars at banks outside the United States for a certain period of time.

The effects of any central bank action are felt directly in these markets. When the Federal Reserve wants to lower the federal funds rate, it uses open market operations—this means it states its intention of depositing more money in banks' accounts at the Fed, making it cheaper for other financial firms to get dollars.

In the years leading up to the financial crisis, the relative stability in rates allowed algorithmic traders to take advantage of very minute changes in LIBOR at various maturities, like those mentioned by Barclays traders in documents released by European regulators. The Fed and other central banks could control that rate by adjusting interest rates, but LIBOR moved pretty much in tandem with the federal funds rate.

(Click for larger image.)

overnight libor versus effective fed funds rate

"My colleagues and I, we say that [LIBOR] is 14 bps over the federal funds rate...as a joke," the trader told Business Insider, pointing to the uncanny correlation between the two rates up until 2007 and since 2009. When the rate at which banks lent to each other began to jump in late 2007, however, "the system couldn't take it at all," he added.

In the lead-up to and during the financial crisis, real interbank lending for any length of time beyond overnight practically stopped. Thus, saying that banks were pushing down their reports of the prices at which they could borrow is at best misleading, because the demand for lending long-term was nonexistent.

"We submitted a hallucination," said the source.

Central banks responded to the credit stress by offering massive lending facilities, which allowed banks to to access money—in particular, dollars—through a vehicle outside the traditional private money markets. That has changed the way the markets work.

The trader explained, "Since the crisis, banks don't fund themselves [through the traditional money markets] because they don't want to. It's really now about old contracts," that were purchased ahead of the crisis.

But while markets may have exited the crisis credit crunch, markets for securities determined by LIBOR have not, the trader told us. Instead, he says there's an implicit push by the Fed to keep the lending rate low, even though it should be much higher now.

By releasing interest rate projections and jumping to non-standard measures like quantitative easing and dollar facilities, the Fed destroys the incentive to actually exchange money via Eurodollar contracts. This means the Fed is refusing to let LIBOR function as a true, independent indicator.

"If you're long the TED [you believe there will be more financial stress] in a time of trouble, you buy T-bills and take the money offered to you, so you sell a Eurodollar." Essentially, you believe you'll be profiting off of higher lending costs for banks in the future. But if the LIBOR is kept artificially low, then you lose money on a Eurodollar futures contract.

But now, the Fed has become so committed to keeping interest rates down indefinitely—and has jumped so quickly to measures that distort the market—that it has completely destroyed any faith or interest in new contracts.

The trader believed that central banks have recognized that disaster happens when the LIBOR begins to deviate from its general relationship to the federal funds rate, and therefore the Fed (and perhaps other central banks) have suppressed it to make sure rising rates don't generate fear while it develops another money market system.

"I think what they want to do is make sure the system doesn't go crazy." Otherwise, he argues, "You're not just embracing a fantasy. You're embracing a fantasy that created the great credit bubble."

Central bankers will meet in September to discuss changes to the LIBOR system, and it is believed that they could use this moment to develop a complete alternative to rate, and thus the money markets it governs.

It's all gone Pete Tong...

Original Page: http://feedproxy.google.com/~r/TheMoneyGame/~3/yKWB-y5kcDY/expert-end-of-libor-2012-7

Left and Right are both Wrong

Every time we peek behind the GOP curtain it's always the same: hate, intolerance and lies.

There, fixed that for you:
Every time we peek behind the political curtain it's always the same: hate, intolerance and lies.

Take away labels like Liberal, Conservative, Left and Right, and I honestly have a hard time telling them apart. We don't have a two party system, it's just one group, and it's a private party. We the People are not invited to participate, but we are paying for our negligence and complacency. 

Friday, July 20, 2012

Obama Believes Big Government Regulation Has Helped the US Economy

Last wednesday, Mitt Romney was speaking in San Antonio and he criticized Obama for his regulatory strategy. The Washington Post characterized Romney’s speech this way:

He [Romney] said the administration has driven up the price of energy and made it harder for U.S. businesses to sell goods and services overseas. He said the health care overhaul has stopped businesses from hiring more workers. And he said businesses were being hurt by the “ever-growing intrusiveness of federal regulations.”
Comparing Bush to Obama is not as useful as one would think. They are very similar in much of their policy. Regulations just being one of them.

What is missed often in a discussion of regulations is that they favor larger corporations and less diversity in the market. This makes it inherently more unstable. Smaller companies and family businesses can't afford to compete and often shed jobs. These are the known job creators, and we are tying one hand behind their back.

One day we will realize that the most regulated sectors create the monopolies we despise. The banking sector is so highly regulated that we produce banks that are 'too big to fail'. We should let them fail and free up the smaller ones to take over.

The issue of Obama’s regulatory record came up most powerfully about a year ago, and now it’s just one talking point among many. The charge is that Obama has over-regulated the economy and that this attitude toward regulation has killed jobs. The record is much more complex, and some of it was debated by Cass Sunstein, Obama’s regulator, in an op-ed a while back.

The record however, as evidenced by this report, is that Obama has benefitted U.S. citizens with regulation, primarily through environmental regulations, and before one starts to go off on environmentalism, it’s worth noting that the previous Bush did the exact same thing.


President Obama Big Government Regulation Has Helped the US Economy

It doesn't really make sense does it? Regulation that stifles growth and even survival of smaller businesses that can't afford lobbyists is somehow what promotes it's existence? That doesn't make sense on any level. Heavy regulation kills jobs, kills growth, and kills markets for services and products.


Mitt Romney's Lame, Uninspiring Campaign

Mitt Romney must be trying to bore the American people into electing him this November. There is no real bold, inspiring vision behind his campaign other than "Obama sucks". Nor should we really expect anything bold from a man who has been on both sides of most political issues. Romney's campaign also shows an unwillingness to buck the conventional Beltway wisdom and propose any bold solutions to our nation's problems. Mitt Romney is running a "safe" campaign, but I fear he maybe running too safe of a campaign to defeat Barack Obama in November.

More evidence of how safe (ie. dull) of a campaign that Mitt Romney is running is who has already been excluded from speaking at the GOP convention in Tampa next month:

Texas congressman Ron Paul isn't the only prominent Republican to be denied a speaking role at the upcoming Republican National Convention in Tampa. Here's another high-profile snub from the Mitt Romney camp… Nope, the woman who was the HIT of the 2008 Republican National Convention — not to mention the party's VP nominee — Sarah Palin, has not yet received an invitation to speak at the 2012 shindig. Must be stuck in, ahem, e-mail. But, as Palin told The Daily Beast, she wasn't surprised. And not because she hasn't endorsed her party's nominee, Mitt Romney, other than to tout him someone who isn't President Obama and has a pulse.

I understand that Ron Paul is not the most disciplined or the most articulate speaker possible and I understand that Sarah Palin is a very controversial figure. However, both people speak to a constituency of independent conservatives and libertarian-leaners that Romney must not only win, but have rally around him and he must motivate to do the campaign volunteer grunt work such as canvassing and phone banking that will be needed to try and match Obama's excellent grassroots efforts.

With the overwhelming support for Paul even as an independent without the GOP nomination (and despite massive manipulation of polls and debates), it's surprising that Romney wishes to exclude that base which is more against Obama that for any alternative. 

To snub both speakers is Romney's way of taking grassroots conservatives and libertarians for granted and telling them that he's not really interested in their votes and their sweat and shoe leather. I really hope the Romney campaign reconsiders this decision or invites other speakers like Rand Paul or Mike Lee that can also speak to this constituency.


Original Page: http://www.unitedliberty.org/articles/10585-mitt-romneys-lame-uninspiring-campaign

Thursday, July 19, 2012

Oklahoma Lawmaker Drafting Bill To Jail Enforcers of Obamacare?

Ah, the Tenth Amendment, the one that reminds us that we live in a nation which is built of people, not politicians, and that everything distills down to individuals. States are above nationalism, and individuals above all else. Obama declaring his mandates as the word of gods is a mite trite. And even proposing legislation such as this is a gentle reminder to despots that the power in society is in the hands of the collective individuals, and that the breakdown in liberty only stretches so far before patience snaps. 

By The Watchdog | July 18, 2012 President Obama will not like this. He thinks his word alone is law. He thinks the American people must submit to his achievement called Obamacare. Despite the mass protest and phone calls flooding capital hill saying to our elected congressmen saying "do not pass this bill into law". [...]

Original Page: http://pprnnews.prepperpodcast.com/oklahoma-lawmaker-drafting-bill-to-jail-enforcers-of-obamacare/

Neil Cavuto Excusing 'You Didn't Build That' Comment by Obama

If Mitt Romney hadn't brought up President Obama's "you didn't build that" crack about business owners, the mainstream media wouldn't have reported on it, NewsBusters publisher Brent Bozell told Fox News Channel's Neil Cavuto on his Your World program today.

What a tool. I hadn't even heard Romney commented on it (not that I have a fuck to give), so Cavuto is just showing media bias in action.

"This was a bombshell story. Now look at the coverage.  You cannot-- this is a classic example of the two-sided nature of this campaign where the so-called news media are concerned," the Media Research Center founder noted.  "When Barack Obama said what he said it took NBC 94 hours before they reported it. It took ABC and CBS another 24 hours before they reported it." [MP3 audio here; watch the full segment below the page break]

read more

Original Page: http://newsbusters.org./blogs/matt-vespa/2012/07/19/brent-bozell-neil-cavuto-discuss-media-ignoring-excusing-you-didnt-build

Someone Else's Dream

Entrepreneurial Voters

Did I do that?

Interesting Entrepreneurs

You Didn't Do That, Someone Else Did

Other People

Uncle Sam

You Didn't Build That

Buy or Pay

#5 of the batch

It might be funnier if it weren't nearly true...

Elizabeth Warren, Again: "Nobody got rich on their own. Nobody."

Always more palatable with a white jumpsuit.Media apologists might be trying to get all post-modernist about President Barack Obama's justifiably infamous "you didn't build that" rap, but not Obama's former employee, the current Democratic nominee for Teddy Kennedy's old Senate seat:

"I think the basic notion is right. Nobody got rich on their own. Nobody. People worked hard, they buil[t] a business, God bless, but they moved their goods on roads the rest of us helped build, they hired employees the rest of us helped educate, they plugged into a power grid the rest of us helped build," she said.

That is correct, but almost any intervention by the state into markets creates inefficiency. Entrepreneurs are alone responsible for their actions, just as is anyone else. Politicians that tout government intervention as the solution are setting us up for failure. 

"The rest of us made those investments because we wanted businesses to flourish, we wanted them to grow, we wanted them to create opportunity for all of us. That's what we do together. We get richer as a country when we make those investments." [...]

Warren called government investments "a good thing," charging that, "the Republican vision of the future is just to continue to make cuts and not to make those investments."

Note here how all government spending is equated to roads, public education, and electrical power, which–despite massive spending increases–account for a very small fraction of federal spending. You could (and should!) lop the federal budget in half without touching these line items.

Note, too, how increased government spending has not noticeably improved the very areas of service Warren names. K-12 results are flat over 40 years despite more than doubling per-pupil spending. The electricity grid isinefficient, wasteful, and expensive. The latest federal transportation bill continues squandering money without building or maintaining anything near highway capacity, and is best described as "pathetic." We are getting much less return on our "investment," while being asked to pony up more.


Remarks by the President on Entrepreneurialism

Sen. Charles Schumer (D-NY) has appealed to the U.S. Justice Department to drop its antitrust lawsuit against Apple and certain book publishers through an op-ed in the Wall Street Journal, insisting that it will result in restoring Amazon to the “dominant position atop the e-books market”. The Justice Department filed the suit earlier this year against the iPad maker and five publishers for allegedly colluding to fix e-book prices. While Hachette, HarperCollins, and Simon & Schuster settled, Macmillan and Penguin Group are still part of the case. According to Schumer, Apple’s method actually helped increase competition and drive prices lower, and that the suit could “wipe out the publishing industry as we know it,” making it harder for young authors to get published.

Senator Tells DOJ: Drop Apple’s E-book Lawsuit! 

The Obama regime has recently made clear it's contempt for entrepreneurialism, and the Department of (in)Justice continues to attack everything but the cause of any problem on which it focuses. How do these efforts promote any sort of economic health? 

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet.
While everyone has different driving forces and motivations, only those who actually take action have the rights to the results of those actions. The state believes itself to be responsible for every positive action and result in markets, though the opposite is actually true. When the state intervenes, markets become inefficient and costs to consumers rise. But why should statists like Obama believe any different when we have idiots like Paul Krugman telling them that they are correct.

Remarks by the President at a Campaign Event in Roanoke, Virginia | The White House

Schumer is correct in defending free market principles, and Apple's efforts have definitely worked toward driving down costs to consumers. Even in a true monopoly situation, the market for eBooks would not be as efficient as some fear, but the healthy competition in this market will keep costs down over the long run, as innovation is thriving in this industry and coming from small and large businesses alike. This sort of collusion is more likely to keep competitors in the market, rather than driving out the ones that can not compete.
More than two centuries ago, in "The Wealth of Nations," Adam Smith observed that "people of the same trade seldom meet together . . . but the conversation ends in a conspiracy against the public or in some contrivance to raise prices." Coming from the father of laissez faire, that warning has been cited ad nauseam by antitrust proponents to justify all manner of interventionist mischief. Those same proponents, whether carelessly or deviously, rarely mention Smith's next sentence: "It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice."
The Case Against Antitrust

Government intervention into markets which are operating competitively is politically-driven (or revenue-seeking), and not in the interest of consumers or producers. Price-fixing is rarely an issue outside of a pure monopolistic situation, and this is far from one. If anything, this false flag interventionism into the market will drive up costs to consumers due to litigation and lobbying, and stifle innovation.
Make no mistake: A growing drumbeat of questions from Washington puts a damper on innovation. Reflecting on Microsoft’s decline after its decade-long antitrust case, tech expert Adam Thierer wrote in Forbes, “When antitrust hangs like the Sword of Damocles, every decision about how to evolve and innovate becomes a calculated gamble.”
D.C. Wants a Bite at the Apple

Wednesday, July 18, 2012

Obama on Entrepreneurs and Innovation


While I hardly believe one person is responsible for the success or failure of collective economics, especially on a national or international level, US president Barack Obama is so misinformed (or willfully ignorant) of economic principles that he actually believes innovation comes not from entrepreneurs, but from government intervention.

President Obama said in a speech at the weekend that governments and not individuals create jobs, telling entrepreneurs: 'If you've got a business - you didn't build that. Somebody else made that happen.'
He added: 'You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart.'
The inflammatory campaign speech comments underline the extent to which Obama believes that the state rather than ordinary citizens create jobs and wealth. 
Obama says the wealthy AREN'T responsible for their own success ... 

If you have a great idea, invest your time and resources into that idea, and you succeed, I believe that you are responsible for your success and deserve whatever profits or acknowledgement you receive, not the government. The state and it's interventionist policies, regulations, and ever-increasing taxation stifles innovation, impedes entrepreneurs, and holds back advancement, preventing any benefit or social good.

Obama's criticism of Romney (I honestly can't tell much difference between Obamney) and capital investment firms is misplaced. Without firms such as Bain, companies like Howard Johnson, where Obama fondly recalls childhood family memories, would have faded into history during the Great Depression.

“Entrepreneurs embody the promise of America: the idea that if you have a good idea and are willing to work hard and see it through, you can succeed in this country. And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs.” – President Barack Obama, January 31, 2011
I am having a hard time keeping up with the flip-flops from the Obama regime. The level of narcissism Obama maintains is nearly a psychological issue. If he believe half of what he claims, he is mentally unfit for public office. If he is simply a mouthpiece, reading speeches tailored for him, he is the puppet many claim. And we have a long line of potential replacements willing to tow the same line.

The regime wants to control and manage the entrepreneurial spirit, which is a statist goal.

The recent White House announcement of a new government program to promote entrepreneurship must signify that the Obama Administration finally “gets it” about job creation and economic recovery, right? Certainly free-market conservatives can agree with the President’s inspiring words. But … 
The regime wants to have the final word on what will be allowed in the market and what will be suppressed. This is not innovation, but interventionism, which is known instead for destroying innovation. Big surprise there.
The problems, as always, emerge in the details of the program. This “coordinated public/private effort” appears to be just another head-fake in the direction of capitalism with the intention of growing more government.
Obama's “Start-Up America” Initiative: Stalling Entrepreneurs

We do not have true capitalism, and have not for maybe a century or more. True innovation thrives without regulation and governmental burden, not under it's thumb and seeking it's approval. What we have is state-capitalism (it's no big secret, even the Economist understands this), with it's complex system of regulations, it's involuntary and intrusive taxation system for redistributing wealth from those who produce to those who do not. While many establishment supporters claim capitalism is the cause of our economic woes, they are at least correct about the methods, if not the name itself.

America saw free markets in the Not So Wild, Wild West, where government was absent until the turn of the twentieth century. Property rights were maintained, entrepreneurs thrived, society benefited, jobs grew, taxation did not yet exist before the government saw an opportunity to feed. Once the state stepped in, all that changed, just as it has changed across the world as the interventionism and it's proponents intervene and claim that they are the reason for the success of others, despite being an obstacle rather than a support system.

Tuesday, July 17, 2012

Political Rhetoric - Obama Edition

Watching the Obama speech in Austin, Texas this evening, an exercise in frustration. Listening to him speak about high education and healthcare costs, it is more than apparent that he either had little understanding of interventionist government policies in regards to microeconomics, or he is simply pandering to the crowd. Or maybe he actually believes that a failure of economic policy for almost an entire first term is somehow a success.

Either way, he is no better than his predecessor, and in some terms likely significantly worse.

Friday, July 13, 2012

Neither Romney/Bloomberg a 'Man of The People'

Tough day at the office?  In the market for some mood-brightening mirth?  Try this for a guaranteed giggle: Donny Deutsch claims that unlike Mitt Romney, Mayor Michael Bloomberg, while also rich, is a "man of the people."

Let's leave aside Bloomberg's massive wealth and a lifestyle that includes multiple mansions around the world and a fleet of personal aircraft.  What makes Nanny Mike perhaps the least "man of the people" you'd ever meet is his haughty, condescending view that he knows better than the mere masses what they should eat, drink and smoke, and is willing to use his power to enforce his preferences by government fiat.  View the video after the jump.

Watch Deutsch supply an unintentional side-splitter.

DONNY DEUTSCH: Here's the bottom line: there are two kinds of rich guys.  There's Mike Bloomberg, who's 20 times, 100 hundred times richer than Mitt Romney, but is a man of the people and then there's a rich guy who's a private equity guy, who won't show his tax returns --  

MIKA BRZEZINSKI: Who has a car elevator.

Who cares if he has a car elevator? How is that relevant?

DEUTSCH: Who has got a car elevator.  Who is playing fudgy, fudgy ball as far as when he was and when he wasn't CEO and that's a rich guy who plays outside the lines that I can't trust.  And that's not an electable figure.

I don't trust either, but don't think one is worse than the other. The idea that people like these can be trusted to make decisions on behalf of society is the real joke, and a dangerous one at that. 

When fools give power to despots, liberty fails, as it should be expected. 

Wells Fargo To Pay $175 Mil. To Settle Racial Discrimination Accusations

Yesterday, the Justice Department announced an agreement by Wells Fargo to pay $175 million in order to settle claims that its independent brokers discriminated against black and Hispanic borrowers. The Wells Fargo settlement, if approved, will be the second largest residential fair-lending settlement in DOJ's history.

While I would like nothing more than to see Wells Fargo collapse (sans taxpayer bailouts), companies should be allowed to operate as they choose without state intervention. If they make decisions that segments of society are negatively affected by, those consumers have the option to choose other businesses which do not discriminate. By intervening, the government is promoting the discriminatory practices in part, but primarily increasing costs to consumers. 

DOJ found that Wells Fargo's discriminatory lending practices resulted in African-American and Hispanic borrowers paying higher rates for loans solely because of the color of their skin. Minority borrowers were both steered into sub-prime loans and charged higher fees.

An investigation by the department's civil rights division found that mortgage brokers working with Wells Fargo had charged higher fees and rates to more than 30,000 minority borrowers across the country than they had to white borrowers who posed the same credit risk, according to a complaint filed on Thursday along with the proposed settlement.

Wells Fargo brokers also steered more than 4,000 minority borrowers into costlier subprime mortgages when white borrowers with similar credit risk profiles had received regular loans, a Justice Department complaint found. The deal covers the subprime bubble years of 2004 to 2009.

Thomas Perez, the assistant attorney general for the civil rights division, said the practices amounted to a "racial surtax," adding: "All too frequently, Wells Fargo's African-American and Latino borrowers had no idea they could have gotten a better deal — no idea that white borrowers with similar credit would pay less."

Federal law requires only that a lending practice have a disparate effect on minority borrowers to be illegal. No discriminatory intent is necessary. Data analyzed by DOJ showed that African-American borrowers, who qualified for a regular loan, were 2.9 times more likely to be steered into a sub-prime loan than white borrowers with similar credit ratings. Similarly, Hispanic borrowers were 1.8 times more likely than their white-counterparts to be steered into a sub-prime loan.

$125 million of the settlement will go to individual borrowers, while the remaining $50 million will go to a program that assists people in Baltimore, Chicago, Cleveland, an area east of Los Angeles, New York, San Francisco/Oakland, Philadelphia, and Washington make down payments and home repairs.

Wait, what? $50 million out of $175 goes to a "relief fund?" Seems a bit inefficient to me...

Those metropolitan areas were found to have particularly large numbers of individual discrimination victims. In addition to ending subprime lending in 2008, Wells Fargo annouced that it will no longer finance mortgages through independent brokers.

Original Page: http://thinkprogress.org/justice/2012/07/13/515964/wells-fargo-to-pay-175-mil-to-settle-racial-discrimination-accusations/

Thursday, July 12, 2012

Harry Reid vs. The Bimbos (and Reality)

Love them or hate them, Kim Kardashian and Paris Hilton "create" plenty of jobs. Harry Reid? Not so much.

In a fit of frustration, the Senate majority leader recently remarked that "fabulously rich so-called small business owners like Kim Kardashian and Paris Hilton could qualify for these wasteful giveaways." (By "giveaways," Reid means tax rates that are not yet instituted.)

By pointing out that these two stupendously wealthy airheads are supposedly beneficiaries of some undue "breaks," Reid might believes he's found the perfect tax villains. He's wrong. Because, as counterintuitive as it may seem, Kardashian and Hilton are effective job creators, the kind that Reid shouldn't be punishing.

In the same way that millions of Nevadans unfathomably vote for Reid, millions of Americans purchase goods bearing the names of young women who are famous merely for being famous.

Paris Hilton has reportedly generated more than $1 billion from her ventures — and, one expects, that most of that money isn't tucked under a diamond-studded duvet, but invested.

Her name graces the packaging of fragrances ("Tease" by Paris Hilton!), accessories, shoes and an array of other wholly overpriced merchandise. There are stores hawking her stuff and investors clamoring to get involved. As Hilton explained to FHM magazine: "They've produced more than $1.3 billion in revenue since 2005. I have 35 stores and 17 product lines and then there's my racing team, my 14 fragrances …"

That's a lot of jobs.

Reid believes that taxing producers to supplement incomes of consumers I a viable alternative to real market function. The problem is that idea creates inefficiencies in markets and actually drives production and revenues down. Too much burden and producers suffer or collapse, and the tax base dries up. Too bad career politician rarely understand the market system the attempt (and fail) to control. 


Best of all, unlike Reid, Hilton and Kardashian, as far as I can tell, don't believe they're entitled to your money.


Original Page: http://www.humanevents.com/2012/07/12/harry-reid-vs-the-bimbos/