A Grim Fairy Tale

Once upon a time there were people who dwelled in a huge forest. They cared for the forest and in return had many kinds of trees to use for shelter for them and their livestock. Then one day a man from a distant marshy land having no forests came through their forest realm. The man said I have with me seeds for a very special tree. This tree will satisfy all your needs and much more so than your forest.

At the sound of his words, the forest dwellers became very excited. “What must we do to have this tree?” they asked. The man said they need do only one thing. They had to promise they would decorate the tree with fancy ornaments as long as it grew. In fact the life of the tree depended upon these ornaments. Then the man showed them examples of ornaments and said anything like them, especially those they hand made, would help the tree grow.

So the forest dwellers agreed to this condition and in return the man planted the seeds and left some ornaments. And the tree grew and grew. And as it grew the forest dwellers added more and more ornaments to the tree. As they did so they failed to notice that the branches of the tree turned black and became twisted. They also did not see the runners cast out by the tree which soon infested the forest around it. Then one day when the infestation had reached its peak, the forest died. Then winter came and the forest dwellers, having no shelter, froze and like the forest also died. Only the tree remained with its branches sagging under the weight of so many ornaments.

Moral: Sometimes it pays to give close attention to the trees as well as to the forest.

Regulator, regulate thyself

One of the most obvious conflicts of interest regarding the "mortgage meltdown" crisis which we hear little, if anything, about is the role of the Federal Government as monetary policy czar vs. its role as a potential big time investor/player in the mortgage market. The gang that couldn't shoot straight when involved in a less limited role through the quasi government entities FannieMae and FreddyMac would have you believe they could do much better than they have by jumping with both feet into the mortgage market as full participants. Some, a very few holdouts these, conservative House Republicans (why isn't "conservative Republican" a redundancy?) recognize the "bailout" for what it is, the opening act of probably irreversible socialism.

The Fed, if a bailout similar to what is now on the table is passed, will infect private markets in a unprecedented manner. Not only will the Fed own mortgage assets, they will have the regulatory power needed to directly alter the price of those assets. As anyone who has any knowledge of reality knows, the Fed controls the supply of money entering the financial markets which directly affects interest rates for things such as mortgages which are nothing more than indicators of the supply and demand for money needed to, among other things, finance such mortgages. So it is not difficult to imagine that the Fed would actively seek to manipulate interest rates to serve its purposes. And what purposes might those be? How about, say within a few weeks of an election, artificially restricting or increasing the amount of money available so as to increase the value of mortgage assets it holds and thus look like financial geniuses just before people vote. If this is not socialism then Nancy Pelosi is not a political partisan. Partisan or not, Pelosi is so stupid that she does not see that passing the bailout would give Barack Hussein Obama, or anyone else for that matter, extraordinary powers should he become President. Obama says he would review the passed bailout when he becomes President. Review indeed. He would not be able to contain his laughter at being so fortunate as having such power given to him without having even had to take a position on it.