The Mortgage Mess

Like obnoxious relatives, the mortgage mess won’t go away. Some two million adjustable-rate mortgages (ARMs) will reset over the next two years, and analysts say that within the coming year alone, $362 billion in subprime home mortgages will experience rising interest rates. This will lead to ever more payment defaults and foreclosures, a horrible state of affairs not only for the affected homeowners and lenders, but also for the financial markets in general.

As is their wont, officials from both parties are rushing to offer “solutions.” The Bush administration is urging lenders to maintain the low teaser rates on ARMs, while Hillary Clinton recently advocated a 90-day moratorium on home foreclosures. Although casting themselves as knights rescuing beleaguered citizens from greedy corporations, in truth these politicians will only make matters worse.

In his classic Economics in One Lesson, Henry Hazlitt said that the good economist looks not only at the obvious, immediate beneficiaries of a government policy, but also considers the long run, hidden costs. We should do the same with the latest mortgage proposals. Although particular homeowners may benefit in the short run, such government tinkering will ultimately harm average Americans by distorting the mortgage industry.

To understand the downside of the recent proposals, we need to step back and ask ourselves why ARMs and foreclosure clauses exist in the first place. They are obviously advantageous to the lender, so it’s no surprise that banks favor them. But why do the borrowers agree to these terms? Why doesn’t everybody simply take out a conventional fixed rate loan, and moreover one that is unsecured—so that the bank can’t seize one’s house in the event of default? Is every borrower just plain stupid for failing to insist on loans of this nature?

Of course not. The reason borrowers agree to adjustable rates (which have the possibility of skyrocketing) and to pledging their home or other assets as collateral, is that this allows them to receive concessions from the bank—in particular, it allows them to borrow a great deal more money than would otherwise be possible. Very few people would persuade a bank to lend them money to buy a house, if the bank didn’t ultimately have the right to take ownership of the house in the event that the borrower couldn’t make the mortgage payments. Yes, borrowers would prefer that they get a $300,000 mortgage with no strings attached, but lenders wouldn’t be too happy with this arrangement. The beauty of a capitalist system is that property owners must compromise to reach mutually beneficial arrangements, since private transactions are voluntary.

Now after individuals enter into these voluntary arrangements, what happens if the government swoops in and invalidates them? There will be short term winners and losers, naturally. And most Americans have no problem with this, because it seems fair to help struggling homeowners at the expense of Wall Street fat cats.

Yet this conclusion is very superficial. Lenders will learn the lesson that their contracts aren’t safe; contrary to popular belief, the government will not serve to enforce the law. (Or rather, the “law” can change on a dime, depending on the public’s mood.) Lenders won’t simply shrug their shoulders, say “aww shucks,” and continue with business as usual.

No, lenders will rationally respond to the new environment, by being much pickier in giving new loans. After all, it becomes much riskier to grant a mortgage to a young couple with little job experience, if the government will shield them from the consequences of default on the loan. Many people say that “the American dream” involves homeownership, yet this will be harder to achieve if the government introduces yet another uncertainty for lenders.

I am aware that the real world process of home buying and financing has its share of shysters and shady practices; every human enterprise does. But the recent proposals aren’t merely about prosecuting outright fraud; no, the politicians want to grant a mulligan to hundreds of thousands who bought homes they couldn’t afford.

Such a move seems generous and noble, but in practice it will prevent true reform of the mortgage industry. Especially in light of the artificially low interest rates in the early 2000s that fueled the housing boom, politicians are the last people we should trust to restore integrity and soundness to the mortgage industry.

By Robert Murphy
Townhall.com

14 Questions I'd Ask Hillary After I Hooked Her Up to a Lie Detector

Few politicians in America have as much scandal, sleaze, and controversy surrounding them as Hillary Clinton and perhaps none of them, with the exception of her husband, has been given a bigger free pass.

As Peggy Noonanonce said, "People have pointed out (Hillary's) ethical lapses for so long that they seem boring, or impossible to believe. ‘That couldn't be true or she wouldn't be running for president.’ This thought collides with ‘And we already know all this anyway.’ Her campaign uses the latter to squash the latest: ‘old news,’ ‘cash for rehash.’

That is indeed how it works with Hillary Clinton's campaign, but nobody who is running for the presidency in the era of the blogosphere and YouTube should be allowed to skate on the controversial issues.

With that in mind, here are 14 yes or no questions I'd like to ask Hillary after I hooked her up to a polygraph machine, assuming that she hasn't gotten so good at lying that she could beat the machine.

A Culture Of Corruption

1) Your former friend and business partner, James McDougal, claimed that "he and a longtime businessman at McDougal's S&L, Henry Hamilton, 'developed a system to pass money to Clinton.' Did you or your husband ever take payoffs from your friend James McDougal?

2) While you were with the Rose Law Firm, you personally worked on a document that was used to "obfuscate and hide the fraudulent nature" of a piece of the Whitewater land swindle. Did you know that the document you were working on was going to be used for illegal purposes?

3) Your Rose Law Firm billing records were removed from Vince Foster's office after his death. Those records were "(m)issing and under subpoena for two years (and) they turned up in January 1996 in the Clintons' private quarters at the White House." Whoever took those records committed a crime by obstructing justice. Despite the fact that your records were taken and eventually turned up in your private quarters, you have denied taking the records or having anyone take them for you. Is that true?

4) Clinton supporter David Hale claimed that your husband pressured him into making a "fraudulent $300,000 federally backed loan to Susan McDougal, some of which went into Whitewater Development Corp." Did your husband pressure David Hale into making that fraudulent loan?

5) You once turned $1,000 into $100,000 in less than a year in the cattle futures market. The odds that this was done legitimately have been put, in some estimates, as high as 250 million to 1. It has been alleged, and seems likely, that the $100,000 was actually bribe money that was paid to you while the cattle futures market was merely used as cover for the payout. With that in mind, were your cattle futures winnings actually bribe money?

6) During the Clinton Administration, Craig Livingstone, the Director of the White House Office of Personnel Security, improperly looked through the FBI files of hundreds of your political enemies. There are allegations that you got Livingstone hired, that he went through those files on your orders, and that you also read some of those files. Are any of those allegations true?

7) In his report on the Travelgate firings, Independent Counsel Robert Ray said your testimony was "factually false," and said that he didn't go after you for perjury because there was "insufficient evidence to prove beyond a reasonable doubt that Mrs. Clinton's statements to this Office or to Congress were knowingly false." Did you commit perjury in your testimony about Travelgate?

8) Your brother, Hugh Rodham, pocketed $400,000 (which was returned) from people who later received pardons from your husband. At the time, you claimed that you had not discussed those pardons with your brother or your husband beforehand. Is that true?

9) You have been tied to a surprising number of shady fundraisers including Peter Paul, Norman Hsu, John Huang, Johnny Chung, and Charlie Trie just to name a few. Were you ever aware that any of these men were engaged in illegal activities that benefited you and your husband before it was brought to your attention by law enforcement authorities or the press?

No Wonder She Kissed Arafat's Wife

10) Former Clinton consultant Dick Morris said that in a dispute over money, you said to him, "That's all you people care about is money." He took that to be a slap at him because he is a Jew. Did you say that to Dick Morris?

11) Former Clinton adviser, Paul Fray, claims that you called him a "Jew B*stard" after Bill lost his congressional bid in 1974. Is that true?

12) Larry Patterson, an Arkansas state trooper who also acted as your bodyguard says that he heard you, "use the term 'Jew B*stard' and call (your) husband a 'Jew Boy' and a 'M-----rF--king Jew.'" Is that true?

Are You "Experienced?"

13) You've been portrayed as an extremely talented lawyer, but isn't it true that you flunked your D.C. Bar Exam, that James McDougal said that he only hired you as a lawyer "because Bill came in whimpering (that) they needed help," and that you only were able to become a partner at the Rose Law Firm because your husband was the Governor of Arkansas?

14) According to Newsweek's Jonathan Alter, who's certainly no conservative, "Hillary negotiated nothing and was present at no major meetings on foreign policy and national security after 1994. ...On domestic policy, Hillary was essentially sidelined after her disastrous 1994 health-care plan." Is that true?

John Hawkins is a professional blogger who runs Conservative Grapevine and Right Wing News.

Christianity and Islam: How Common is the Ground?

As this column goes to press, hundreds of presumably Muslim protestors in Sudan are shouting for the execution of a British school teacher. Her offense? Insulting Islam because her class of 7-year-olds named a teddy bear Muhammed. According to the New York Times report:

The protesters, some carrying swords, screamed, “Shame, shame on the U.K.!” and “Kill her, kill her by firing squad.” They were calling for the death of Gillian Gibbons, the teacher who was sentenced on Thursday to 15 days in jail. Under Sudanese law, she could have spent 6 months behind bars and received 40 lashes.

It’s events like this—and similar ones around the globe—that add to my skepticism about the value of a recent exchange pleading for peace between Muslim and Christian leaders.

Last September, 138 of the world’s most prominent Muslim theologians, scholars and leaders sent an “open letter” addressed to Christians worldwide. The document titled, “A Common Word Between Us And You” is an extraordinary communication from the Muslim world. In it the Muslim leaders plead with Christians to recognize in two of the world’s great monotheistic religions their essential “common ground” namely, love to God and neighbor. Only by recognizing this common ground, the letter submits, will Muslims and Christians learn to live in peace. (Of course, by the very existence of this letter, these Muslim leaders are assuming Christians are not at peace with Islam.)

Ecumenicists around the world have undoubtedly leapt for joy at the offering of this “olive branch” to Christianity from Islam. As expected, there were quick and positive responses from the Vatican, the Archbishop of Canterbury and several mainline American denominations.

In response to the “Common Word” document, Yale Divinity School drafted its own “open letter” to Muslims on behalf of Christians everywhere. (While most of the signatories of the Yale letter are a “who ’s who” of today’s theological left, there are a number of evangelicals on board.) The letter titled, “Loving God and Neighbor Together: A Christian Response to ‘A Common Word Between Us and You,’” heaps praise on the representative Muslim scholars for their efforts to bring about peace among Muslims and Christians. In addition, the letter agrees that the essential “common ground” between Islam and Christianity is love to God and neighbor. A closer analysis of both documents, however, should give Christians pause.

The Yale-drafted response begins by begging for forgiveness from the Muslim community for the evils of the Crusades and the “excesses of the war on terror.” Can someone explain why American Christians are responsible for the Crusades? And as far as the “excesses of the war on terror”—when did the Christian world get together and vote to kill a bunch of Muslims in the name of the war on terror? (It is naïve at best to think that a group of Christians “admitting” that the war on terror has been at all motivated by hatred toward Muslims will somehow help pacify the hard-liners within Islam.)

This blatant political statement is followed by paragraph after paragraph of ecumenical jargon about “our common ground,” “your courageous letter” and “our common good.” Most concerning, however, is the following theologically unsound statement:

It is therefore no exaggeration to say, as you have in “A Common Word Between Us and You,” that “the future of the world depends on peace between Muslims and Christians” … The future of the world depends on our ability as Christians and Muslims to live together in peace. If we fail to make every effort to make peace and come together in harmony you correctly remind us that “our eternal souls” are at stake as well.

The future of the world and our eternal souls depends not on interfaith dialogue, but on the sovereign plan of God (cf. Psalm 115:3, Isaiah 46:8-11; Ephesians 1:11). Our confidence is not in our ecumenical efforts, but in the finished work of Christ.

In addition, while the Muslim document is filled with quotations from the Qur’an proudly proclaiming that their god is the one, true god and indirectly attacking the deity of Jesus Christ, the Yale document uses almost no Scripture and omits a clear proclamation of the deity of Christ.

Finally, in the light of recent global events, it seems reasonable to question whether or not the heart of Islam really is love to god and neighbor in the same sense that Christianity teaches love to God and neighbor. True, the Muslim document does say that “Muslims, Christians and Jews should be free to each follow what God commanded them” and that justice and freedom of religion are a “crucial part” of love to neighbor. However, whether or not this sentiment is pervasive in the global Muslim community is vigorously debated today.

No true Christian desires conflict between Christians and Muslims. A Christian who follows the directives of the Bible will love Muslims and respect them—and seek to tell them about the saving love of God in Christ. They will not, however, compromise the truth of Scripture to start a dialogue, for to do so would not demonstrate love to God or love to our Muslim neighbors.

Bob Burney
Townhall.com

Is Iran Irrational?

The most interesting point in the new National Intelligence Estimate, which reports that Iran halted its nuclear weapons program four years ago, is not about what Iran did or did not do in developing nuclear weapons. It is about how Iran makes decisions about such things.

The U.S. intelligence community does not believe Iran is a madman.

"Our assessment that Iran halted the program in 2003 primarily in response to international pressure indicates Tehran's decisions are guided by a cost-benefit approach rather than a rush to a weapon irrespective of the political economic and military costs," says the NIE. "This, in turn, suggests that some combination of threats of intensified international scrutiny and pressures, along with opportunities for Iran to achieve its security, prestige and goals for regional influence in other ways, might -- if perceived by Iran's leaders as credible -- prompt Tehran to extend the current halt to its nuclear weapons program."

Whether American politicians accept or reject the assumption that Iran acts rationally will have tremendous consequences for the fate of the Middle East and for our security.

The case for believing that Iran is an irrational actor largely rests on the shoulders of its current president, Mahmoud Ahmadinejad. This is because Ahmadinejad routinely says irrational things, especially when it comes to Israel.

In 2005, Ahmadinejad convened a conference called "The World Without Zionism." Here, he laid out an Apocalyptic vision in which Israel -- or the "Zionist regime," as he invariably calls it -- becomes the final battleground in a long struggle between Islam and the West.

"The establishment of the Zionist regime was a move by the world oppressor against the Islamic world," he said. "The skirmishes in the occupied land are part of the war of destiny. The outcomes of hundreds of years of war will be defined in Palestinian land."

"Israel must be wiped off the map," Ahmadinejad said.

A Congressional Research Service report published in August referenced reports that contend "Ahmadinejad believes his mission is to prepare for the return of the 12th 'Hidden' Imam, whose return from occultation would, according to Twelver Shiite doctrine, be accompanied by the establishment of Islam as the global religion."

"I have a connection to God," Ahmadinejad said at a Tehran mosque last October. He added that President Bush "also receives inspiration -- but from Satan."

All this inevitably suggests a chain of thought: A leader who believes it is his job to usher in an Apocalyptic age, where Israel is destroyed and Islam becomes the global religion, cannot be deterred from constructing, or using, a nuclear weapon. Therefore, an Ahmadinejad-led Iran must be pre-empted from obtaining one.

This chain of thought draws us toward another pre-emptive Middle Eastern war and counsels that we risk all the horrendous unintended consequences that could flow from such a war.

But is Ahmadinejad really Iran's decider? If he had personally driven Iran's nuclear-weapons policy, the NIE released this week would make no sense. Admadinejad was elected president of Iran on June 24, 2005. The NIE says Iran halted its nuclear-weapons program in the fall of 2003 and had not restarted it by the middle of this year. During the whole time Ahmadinejad has been president, in other words, Iran's nuclear-weapons program has been halted.

Apparently, the madman did not call the shots.

His predecessor, Mohammad Khatemi, could have warned him of that. Khatemi, a moderate "reformer" (by Iranian standards) was elected and re-elected Iran's president by super-majorities of the popular vote. For four of his eight years in office, his supporters controlled a super-majority in parliament. They never enacted their reform agenda, however, because it was vetoed by the Council of Guardians, which is comprised of six clergymen appointed by Supreme Leader Ayatollah Khamenei and six secular lawyers appointed by the Iranian judiciary.

"In January 2007," the Congressional Research Service reported, "an Iranian newspaper owned by Khamenei admonished Ahmadinejad to remove himself from the nuclear issue."

The intelligence community assumes a certain long-term stability among Iran's real deciders. "This Estimate does assume that the strategic goals and basic structure of Iran's senior leadership and government will remain similar to those that have endured since the death of Ayatollah Khomeini in 1989," says the NIE.

President Bush seems to agree. "The NIE talks about how a carrot-and-stick approach can work," said Bush at his Tuesday press conference. "And it was working until Ahmadinejad came in. And our hope is that the Iranians will get diplomacy back on track."

Bush's bet is simply this: The ayatollahs may be immoderate, but they are not irrational.

Terence Jeffrey
Wednesday, December 5, 2007 CNSNews

Where every label reads, 'Made in USA'

Buying American can be tough.

The mass recalls of tainted toys from China have been a reminder of how much we buy that's made overseas.

A month ago, Manhattan native George Hanos made buying American products easier through usab2c.com, a Web site that sells products made only in the good ol' USA.

"I felt that because jobs were quickly evaporating from the manufacturing base in the U.S., what we're losing is that know-how," said Hanos, 53, who retired as an accountant from Pfizer in 2004.

Hanos, who grew up in Washington Heights and now lives in New City, N.Y., launched his site, America's Business to Consumers, to sell more than 6,000 American-made products ranging from sunglasses to wooden toy trains.

To make it onto the Web site, an item needs to be comprised of at least 80% of U.S.-produced materials, including its packaging. It also needs to be manufactured in the U.S. by Americans or documented workers, and the company that makes the product needs to be at least 51% American owned.

Hanos, whose father was a Greek immigrant and restaurateur, said that he's not against globalization, but wants to see traditions of American craftsmanship endure.

Being American-made doesn't eliminate the possibility an item could have safety issues. Still, But Hanos believes U.S.-produced products, while often more expensive because of higher labor costs, are of better quality.

Through his Web site, "you as a consumer can make a difference and vote with your paycheck," Hanos said. "The trickle-down effect of that spending will hopefully provide the incentive for manufacturers to reemploy people for goods that could be made here so that we can stop that exodus of know-how."

ELIZABETH LAZAROWITZ
DAILY NEWS BUSINESS WRITER

U.S., China Settle One Of Their Trade Disputes

WASHINGTON (Dow Jones) -- The U.S. and China have settled one of their trade disputes, the United States Trade Representative Susan Schwab announced Thursday.

The agreement ends a seemingly interminable dispute that the U.S. eventually took to the World Trade Organization. It involved alleged Chinese tax breaks for exports and benefits to Chinese companies that use domestic goods in their manufacturing process instead of imports.

"I am very pleased that today we have been able to sign an agreement with China that should lead to full elimination of these prohibited subsidies," Schwab said in a statement.

"As a result of such subsidies, a range of domestically produced goods in the United States, from steel to wood products to information technologies, are denied the opportunity to compete fairly in the United States, in China, and in third country markets," Schwab said.

According to the U.S., 58% of Chinese exports received some form of favorable tax treatment in 2005 and the percentage has been growing over the past two years.

Under the agreement, China has committed to ensure that the subsidies are eliminated by the start of the New Year.

If the U.S. believes that China has not met this commitment, it can re-start WTO proceedings in Geneva.

Schwab could not resist making a jab at Congress, where criticism over the White House China policy has been unrelenting.

"Members [of Congress] with whom I have spoken appreciate the value of results over rhetoric," Schwab said.

But the U.S. Business and Industry Council, a trade group of manufacturers upset with China's trade practices scoffed at suggestions that the agreement was a breakthrough and said Chinese negotiators continue to run circles around the USTR.

In a statement, the USBIC called the agreement "utterly useless" because China had already planned to end the tax-breaks in question due to opposition from domestic Chinese companies.

And the secretiveness of China's government makes it impossible to know for sure whether the companies are receiving other favorable treatment, the group said.

The agreement comes roughly two weeks before top Bush Administration economic officials will travel to Beijing for the twice-per-year policy dialogue.

The U.S. is pressing the Chinese government to end its historic role controlling the economy, especially quick action from the leadership to relax China's control over the foreign exchange value of its currency.

For its part, Chinese leaders want to end U.S. restrictions over Chinese purchases of high-tech equipment and also want to use some of their huge reserves to invest in American companies without opposition from Congress.

The bilateral talks will take place Dec. 12-13 outside Beijing.

Copyright 2007 Dow Jones & Company, Inc.

Eliminate the Federal Gas Tax

The 18.4 cents a gallon Federal gas tax is perhaps the single worst influence on the development of rational transportation policies in the United States, and it should be eliminated.

For many, even those on the right, those are fighting words. Gas taxes are usually portrayed as “user fees,” and there is no question that there is a legitimate Federal interest in fostering interstate commerce and ensuring a first-rate transportation infrastructure that serves as the backbone of our national economy.

Unfortunately, in today’s political climate gas taxes serve neither as legitimate “user fees” nor do they effectively serve to improve the overall efficiency and effectiveness of the movement of goods, services, and people. In fact, they often do just the opposite.

Everybody by now is familiar with the infamous “earmarks” that plague the appropriations process in Washington. In the latest transportation bill over 6000 earmarks diverted billions of dollars away from investments in basic infrastructure to the preferred projects of powerful Congressmen.

Cont... townhall.com

by David Strom
Tuesday, December 4, 2007