Canadian MP explaining Freedom

On April 4, 2012, Pierre Poilievre, MP for Nepean-Carleton, in Canada spoke on behalf of the Government Budget 2012, and most importantly stood up to defend Economic Freedom for all Canadians.  He vowed to never make the same mistakes as the United States and Europe.  He states “Canada is strong, … we should never repeat the mistakes of the United States or Europe”. 

The video can be seen here and thanks to Patriot Fred for passing along and the inspiration for this blog:  http://www.youtube.com/watch?v=wWkUaJId7pM&fb_source=messagehttp://

Unfortunately, this Canadian MP seems to understand my country better than too many of my fellow American citizens.    

In less than 5 minutes this Canadian MP explains our country’s mistakes and the financial collapse of 2008, in plain language.  

 “What went wrong in the United States?”, posits MP Pierre Poilievre, and then, like a six sigma expert, he articulates his view of the problem, not the symptoms.  

“Many believe the 2008 financial collapse & recession were the irresponsible behavior by businesses and banks.  In fact, this behavior was merely the symptom.  The illness was massive government intervention to turn the mortgage business into a social program”.  

He correctly points out that massive government intervention, to make it a social program, is the problem, and that the “roots” of this behavior goes back over three decades, and has been championed by progressive central planners from both political parties.  The goal of these state central planners:  expand home ownership.  Everyone should own a home, it’s a “right” is the new mantra.  And, how did the statist attempt to achieve this collectivist goal? 

“To do this, they [the government) mandated government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac to cover the risks of loans to people who otherwise would not qualify for them.  We call these subprime mortgages”.

They are called subprime mortgages for a reason, they are below prime, or loans that would not under normal circumstances be made without government intervention and assumption of risk (zero down, no job, no problem is not normal, not prime).  They are also called toxic mortgages or toxic assets.  Most of these toxic assets are now owned by we the tax payers.  Bailout talk today:  $90-150 billion dollars to be charged to we the people near term. 

“According to a 2010 World Bank Report, Freddie and Fannie, both GSEs bought 47% of these  toxic mortgages.” and a “2007 study shows that between 1980 and 2012 GSEs grew from $200 million dollars to now over $4 trillion dollars.  (see figure)

In essence, our Federal government dictates to the banks who qualifies for a loan, no matter the risk.  A sorta “no risk mate, this debacle is on us” strategy.  Codified, and enforced by law particulary the change to the CRA under Bill Clinton. 

“Furthermore, the American government not only encouraged, but forced banks to provide these loans.  According to the world bank report, in the mid 1990’s the government changed the way the CRA was enforced, and effectively compelled banks to initiate risky mortgages. 

The MP rightly points out, that banks, through coercion were forced into this behavior, and that once American’s were in debt, our government would encourage/incentivize them to stay in debt by affording we the people a tax deduction/incentive for our mortgage interest. “The bigger your debt, the lower your tax”.  Some consider this a tax loophole that should be closed.   Some consider this tax relief they do not want to give up, as they are taxed enough already.  Remember when you could deduct credit card interest.   

“In sum, the U.S. government encouraged millions of Americans to spend money they did not have, on homes they could not afford, using loans they could not repay, and then given a tax incentive to never to repay it. 

The state pumped so much air into the mortgage bubble that it burst.  Financial institutions collapsed, taxpayers were on the hook, millions are jobless, and one in five American households are under water.

To make matters worse, these same American households have trillions of dollars in debt which they are not even likely aware of.  Government debt.”

Seems apparent, our progressive government under both parties believed everyone should own a home, and the government should actively intervene to make that happen; no matter the risk and cost, financial or human.  Blame for the 2008 financial crisis is a team award.  But MVP must go to President Clinton for getting the CRA law changed to compel loans, through government guarantees that were subprime, or in plain language, no good.   Qualification requirements for a home loan were more logical, risk aware prior to this law change.   

Think about it, our government colluded wh, and told banks and financial institutions to not worry about risk, and boy oh boy they didn’t.  Why would they?  Like a mafia boss, the government basically commanded “Just loan to who we tell you to, no matter the risk or we’ll bring you up on charges, we’ll shut you down; and don’t worry, we’ll take care of you, we own the risk of the subprime loan not you,”.   Meanwhile, interest rates from the government to banks dove to zero.  

Sooooo, the cost to borrow money is zero, and the government is assuming all the risk for the subprime loans, and people wonder why banks and financial institutions acted like Ferris Bueller and Bernie Madoff.   

Thanks to our government, the lives of millions of people have been ruined for this utopian home ownership ideology, and it has chained generations of Americans to a debt they did not incur for a benefit they did not receive.  Some would suggest leaving an enormous debt to future generations is immoral.  Some would suggest it’s pragmatic and ok because after all, children can’t vote, especially those not yet born.   

A Bastiat example of what is seen, and what is not seen. 

one ctserf