Re: Socialism lends free enterprise a hand | Oct. 31 guest column by James Pettican
The writer holds the belief that "once again an American Crisis is solved by socialism." He fails to mention that the cause of this crisis in the first place was the social engineering by the federal government in its enactment of the Community Reinvestment Act which compelled banks to grant mortgage loans to applicants irrespective of their financial inability to repay those loans in an orderly manner.
The writer lectures us that the current financial crisis has resulted from too loose a rein on the financial institutions that granted these loans.
With all due respect to his views, the fact of the matter is that federal regulators in league with such organizations as ACORN hammered banks into granting sub-prime loans under threat that if they did not do so, they would be sanctioned by the regulators. To be certain, along the way a great deal of profiteering occurred as these mortgage securities moved through the global marketing chain, all of which is traceable back to the coercive measures instituted and enforced by the federal government in hatching this irresponsible specie of commercial paper in order to assuage pressure groups who could care less about the ultimate damage to the economy that was certain to transpire in due course.
Add to the foregoing the bundling of these subprime mortgages, largely through the auspices of Fannie Mae and Freddie Mac, into mortgage backed securities that were sold throughout the global financial markets and it's not too hard to visualize why this crisis has ensued.
Predictably, when sound and prudent underwriting practices were shoved aside and became subservient to political correctness and the coercive powers of the federal regulators, risky mortgages flooded the market on a scale that has yet to be plumbed and measured accurately due to the sheer immensity of their volume. The more these loans proliferated, the greater became the construction and housing boom that unfortunately rested on unsound mortgages as a foundation.
Yes, indeed, we are in a financial crisis and yes the federal government is now required to pump billions of dollars into financial institutions in order to prevent a worldwide financial collapse. The phenomenon has now moved full circle — the federal government caused this problem through social engineering and now that same government must alleviate the crisis by pumping copious amounts of taxpayer dollars into the economy at large and the financial sector in particular.
And while we're on the subject of socialism, we now see that Congress is working on a multibillion-dollar package calculated to rewrite the terms of sub prime mortgages for the benefit of those who couldn't afford such mortgage loans but nevertheless received them in deference to political correctness. This proposal is consistent with socialism where the government rather than being the benefactor is actually the autocratic authority that confiscates the earnings from those who produce wealth and redistributes it to those who do not.
The insidious aspect of this entire debacle is the burden on the American taxpayers who, in the final analysis, will be forced to shoulder this albatross. If this is the "American crisis being solved by socialism" that the writer has in mind, I can see why his socialist icons, Eugene Debs and Norman Thomas would approve of such tomfoolery.
Jack B. McPherson is a New Port Richey attorney.