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Obama Wars Title: Obama's Financial 'Reform' Doesn't Fix Anything Obama's Financial 'Reform' Doesn't Fix Anything By John Lott Published July 15, 2010 The 2,319 page financial regulation bill that just passed Congress is filled with vague, complicated language. Some language will weaken our financial system and make it less efficient. Other language appears to mandate racial and gender employment quotas in dozens of Federal agencies. In the name of making sure that there is not another financial crisis, the bill does nothing to address what caused the mortgage problems created by government regulations that forced banks to make risky loans that they didn't want to make. It does nothing to rein in the $400 billion in losses created by government entities Fannie Mae and Freddie Mac. What Democrats don't understand is how everyone from farmers to small and large companies use derivatives to decrease their risks. When a farmer plants his crops in the spring he has to worry about what the price of his crops will be when they are harvested in the fall. If prices plummet before the harvest occurs, farmers face real financial peril. So farmers sell a portion of those crops even before they plant them. They know what price they will get and they greatly reduce their risk. That is what a derivative is. The same thing happens when Southwest Airlines agrees to the price that it will pay for jet fuel months in advance. Among the new rules is that these derivative transactions must be standardized and traded on exchanges. Democrats claim that this will make deals more transparent. But what business is it of the government whether the farmer or Southwest Airlines makes that deal with another company or over an exchange? If farmers and companies really benefit from using these exchanges, why does the government have to force them to make agreements that way? What should be obvious is that the costs of trading derivatives will increase. The contracts traded over these exchanges will also not be as flexible as they are now. Making derivatives more costly is simply another way of saying that the cost of farmers and companies buying insurance will rise. When some farmers stop buying this higher cost insurance will anyone seriously argue that really reduces their financial risks? Regulations that restrict bank size ignore one critical question: why are the banks the size that they are now? The most likely reason is that the most efficient banks grew, the ones that could offer customers the best services at the lowest costs attracted more customers. Larger banks presumably could also offer services that smaller banks couldn't. So how does forcing banks to have higher costs and be less efficient make them less risky? Won't that make them more likely to go out of business? Proponents of regulating derivatives point to the losses from AIG or Goldman Sachs supposedly ripping off its customers. A simple solution for AIG would have been to let it go bankrupt and make shareholders bear that loss. For Goldman Sachs, even if the questionable fraud charges are true, the fraud could presumably occur with any financial instrument, not just derivatives. Just as President Obama is driving oil rigs out of American waters to other nations, he is going to drive some financial operations overseas. He is going to raise company costs and make it costly for them to buy insurance. We have yet another example of government financial regulations begetting more regulations. Regulations that force financial institutions to make risky mortgages remain in place. John R. Lott, Jr. is a FOXNews.com contributor. He is an economist and author of More Guns, Less Crime (University of Chicago Press, 2010). Fox Forum is on Twitter. Follow us @fxnopinion. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 38. #11. To: Badeye, war, All (#0) BWAHAHAHAHAHAHA You want to talk farmers and derivatives? And then equate that to the Banksters and Fraudulent Horse Race Tickets? BWHAHAHAHAHAHAHA
Tyler Durden's picture University Of Michigan Consumer Sentiment Plunges To One Year Low Of 66.5, Versus Expectation Of 74.5, Previous 76 Submitted by Tyler Durden on 07/16/2010 09:01 -0500
See, that's the problem with the 'Toxic Assets', BE's 'Farmers/soy/futures' bs. $1.5 Quadrillion. And a World GDP of, what, maybe $70 Trillion? You can only find a % of the % of those Toxic Assets, and Only by destroying the planet. That's where we are. And another, btw. When farmers hedge their crops? They have to have the margin. And pay off with the grain or $$$ on delivery. BWAHAHAHAHAHA 8D
#12. To: All (#11) ©©Manipulating interest rates and keeping them artificially low (often below the rate of real inflation) in order to ‘create jobs’ is a con game. We know that job losses are actually attached more to trade policies which is why our country lost nearly 10 million in industrial production jobs in the last 35 years of trade deficits, for example. The Fed was created to make jobs, keep the $ stable. It's failed at both. eliminate it and Public Banking. We're so far away from that. Might as well talk about eliminating Corporations. In ten years. ;}
#13. To: mcgowanjm (#12) (Edited) We know that job losses are actually attached more to trade policies which is why our country lost nearly 10 million in industrial production jobs in the last 35 years of trade deficits, for example. Shhhh...you're slaying the Myth o' Reagan Being A Great POTUS in one fell swoop... He gave away American jobs to Japan and TIGERS by the MILLIONS.
#26. To: war (#13) He gave away American jobs to Japan and TIGERS by the MILLIONS. Wrong. He got the Japanese to open their auto plants in the US. Man your disinformation machine isn't firing on all cylinders War.
#28. To: Nebuchadnezzar (#26) (Edited) He got the Japanese to open their auto plants in the US. Bzzzzt...Carter...the guy who was "inept", remember? He opened the door in the late 70's with Honda in Marysville. The plan was to tool it first for motorcycles and then for cars which it did a year into Red Ink's term.
#30. To: war (#28) Bzzzzzzzzz....wrong. In '82/'83 when Japanese imports were flooding the place, Reagan told the Japanese to limit their imports or he'd ask congress to put quotas on them. THAT is when the real move by the Japanese occurred and saw the up-tick in jobs from Japan. What time did you wake up this morning? Whatever it was, it wasn't early enough to get past me!!! HAHAHAHA!
#32. To: Nebuchadnezzar (#30) If you voted for Obama in 2008, you're too blame for this rotten mess we're now in. That is a completely moronic statement. Overall, the US is better off now than it was in 2008 with one exception: There are more unemployted now. But that is a by product of the economic dynamics that were in place when Obama came into office. The rate stablized and has since moved down.
#36. To: war (#32) That is a completely moronic statement. Overall, the US is better off now than it was in 2008 with one exception: There are more unemployted now. But that is a by product of the economic dynamics that were in place when Obama came into office. The rate stablized and has since moved down. the deficit is starting to come down as well, a 7.2% drop so far this year.
#38. To: go65 (#36) Its amusing you leftwingers think record foreclosures and bankruptcy's aren't part of the equation comparing 08 to 2010. Its why your side is about to lose congress, and why Owe-bama is a one term failure. And its laughable, this insane claim about the deficit 'coming down' give what the Democrats in power want to do with spending - increase it - and the death blow to the teetering economy, cap and tax.
Replies to Comment # 38. Its amusing you leftwingers think record foreclosures and bankruptcy's aren't part of the equation comparing 08 to 2010. I'm able to see that by virtually all measures things are better off now then they were when Bush was in charge. Maybe YOU want to return to losing 700k jobs a month, I don't.
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