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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Sept. 19, 2008 / 19 Elul 5768

The two presidential candidates took the opportunity of thefinancial melodrama to engage in senseless babbling

By Robert Robb

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http://www.JewishWorldReview.com | Well, that didn't last long.


Last weekend, the federal government finally mustered the fortitude to allow a big boy, Lehman Brothers, to go bankrupt.


By Tuesday, the Federal Reserve had basically bought an insurance company to which no one else was willing to lend money.


At this point, it's clear that Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are flying by the seat of their pants, making sequential ad hoc decisions that are roiling markets rather than calming them.


There is simply no rationale or standard by which it is OK for Lehman to go through bankruptcy but taxpayers have to assume huge liabilities and risks to prevent Bear Sterns, Fannie Mae, Freddie Mac and AIG from doing so.


The systemic risk allegedly posed by AIG wasn't its main insurance business, which is subject to separate capitalization requirements that by all accounts are adequate. Instead, the alleged systemic risk was the role AIG played in guaranteeing the debt instruments of others, including mortgage-backed securities.


But if those guarantees were put into question by AIG going into bankruptcy, the mortgage-backed securities held by others wouldn't suddenly become worthless.


They would become worth less, since defaults might not be covered. But they would still be producing income. After all, over 90 percent of mortgages are still current. Even two-thirds of subprime mortgages are still current. Revaluating such debt instruments is something markets can do, if given the chance and time.


Meanwhile, the two presidential candidates took the opportunity of the financial melodrama to engage in senseless babbling.


According to Barack Obama, the difficulties in the financial sector were caused by Bush administration deregulation. This is a falsity of breathtaking and brazen scope.


There has been no material change in the regulation of the financial sector under Bush. The Bush administration, however, did propose increased regulation of Fannie Mae and Freddie Mac. It wanted to increase their capital requirements and limit the amount of mortgage-backed securities they could own for investment.


If the Bush regulations had been adopted when proposed, putting taxpayers on the hook for their mortgage-securities guarantees might have been avoided. But congressional Democrats, supported by too many Republicans, said no.


Preventing this meltdown from occurring through regulation would have required making it more difficult for people to buy homes. Don't recall any Democrats proposing that.


John McCain, for his part, is saying he should be elected because he is a tough guy who will go beat the crap out of all those Wall Street bastards who did this. He's even taken out an ad in which he boosts: "I've taken on tougher guys than this before."


Contrary to Obama and McCain, the turmoil in the finance sector wasn't caused by corruption, fraud or dishonesty. It was caused by an overinvestment in housing and excessive and imprudent use of debt.


The federal government is significantly complicit in this. A persistently loose monetary policy favored debt. And a favored relationship with Fannie and Freddie stifled the development of more responsible ways to create a secondary market for mortgages, in which originators stay on the hook for defaults.


Market corrections are necessary to wring out these excesses. Housing prices have to find a bottom. Credit has to shrink.


These corrections will be painful. But government efforts to smooth or ease them run a large risk of prolonging them and making them worse.


Ideally, government would let these market corrections run their course, perhaps increasing income supports for vulnerable populations, but letting big boys go broke.


If the federal government is simply incapable of doing that, as appears to be the case, a much better approach than Paulson and Bernanke's ad hoc decisions about who lives and dies, would be the proposal floated by former Fed Chairman Paul Volcker and others.


That is for the federal government to set up an entity that would purchase distressed debt instruments, particularly mortgaged-backed securities. The entity could hold the paper, collect the income from performing mortgages, and exercise forbearance on foreclosures.


This would require a substantial upfront capital contribution from taxpayers. But it's better than continuing to proceed ad hoc, with unknown costs and results. And it's better for the federal government to hold paper than owning mortgage and insurance companies and being in the business of providing mortgage refinancing and guarantees.


Meanwhile, there's a presidential election going on. And on this issue, the choice appears to be between Tweedledum and Tweedledee.

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.

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