CtTaxed.com

How Governments Makes Things Worse

Look no further than the ethanol and sub-prime mortgage messes to see why conservatives and libertarians distrust Government solutions.

It’s not that we don’t like our Government, it’s just we see them as lacking finesse, slow and prone to missing the target when it comes to solving society’s ills.

People can fix problems quicker by voting with their feet and wallets. When Congress gets involved rarely do they hit the bullseye.

Cases in point.

But now comes word that expanding ethanol use is likely to mean not less CO₂ in the atmosphere, but more. Instead of reducing greenhouse gas emissions from gasoline by 20 percent - the estimate Congress relied on in requiring the huge increase in production - ethanol use will cause such emissions to nearly double over the next 30 years.

Sorry, we have just mandated the use of ethanol. Got to use ethanol, it is the LAW. How long before Congress fixes their mistake and kills the law requiring us to send vast amounts of our money to Iowa? Probably years. But now is the time to do, before we hit another Presidential cycle and loan all our Senators to Iowa’s Congressional Team.

The subprime mortgage collapse is another tale of unintended consequences.

The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent “redlining” - denying mortgages to black borrowers - by pressuring banks to make home loans in “low- and moderate-income neighborhoods.” Under the act, banks were to be graded on their attentiveness to the “credit needs” of “predominantly minority neighborhoods.” The higher a bank’s rating, the more likely that regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition.

But to earn high ratings, banks were forced to make increasingly risky loans to borrowers who wouldn’t qualify for a mortgage under normal standards of creditworthiness. The Community Reinvestment Act, made even more stringent during the Clinton administration, trapped lenders in a Catch-22.

“If they comply,” wrote Loyola College economist Thomas DiLorenzo, “they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties . . . which can cost a large corporation like Bank of America billions of dollars.”

An article today on MSNBC.com estimated the sub-prime mess could be as high as 322B$. Ouch! That is going to hurt. Hmmmm wonder why the dollar is tanking???? Could be?

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