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The Tentacle


September 23, 2008

Demand Answers, Expect None

Farrell Keough

When Congress, the president, and the Federal Reserve come together to make a huge new plan with very little dissent or public discussion, it is time to worry. That is what occurred last weekend.

 

By the time this article is posted, it is very likely that grand changes in the new plans and legislation will have occurred. But for now, here is one view you can take or leave. Either way, this is yet another debacle played upon the American people that you should do your best to keep abreast of.

 

First, let’s have a quick and very simplified review of some background. While the name may imply otherwise, the Federal Reserve is not – in fact – a government agency. It is a private company composed of backroom and shadow figures. Most of the general public has no idea who actually sits on this board.

 

We get a front man who does his best to pacify the public. Our Founding Fathers were well aware of these kinds of organizations and did not want this nation to follow this course. But, in the early 20th century, it was created and – realistically – there is no going back.

 

Second, after World War II, one of our main requirements of the nations we either helped or secured victory over was very simple: our dollar would be the basis of their currency. That was a major aspect which propelled us into the status of Super Power. As our nation prospered, our dollar became more valuable and this played out throughout the world. Times were good and we were leading the world in industry and prosperity.

 

During the Nixon Administration, we encountered issues with our economy never before faced. Numerous government experiments were attempted, but nothing seemed to work. Finally, President Richard Nixon determined a new course of action. He took us off the Gold Standard.

 

In short, nothing backed our dollar but the full trust and faith in our economy and system. This was the beginning of a radical change in the International Monetary System; in a word, a ponzi scheme. As long as we and other nations trusted that our dollar had value, it did.

 

Since then, the idea of homeownership became virtually a “right” in the minds of politicians throughout this nation. Various administrations and Congresses worked to ensure the populace could own a home. The rules and regulations to make such a purchase continued to have reasonable oversight and ensured people were able to make their mortgage payments.

 

But, as is so often the case with politics and politicians, that was not enough. Various studies, (some of which have been debunked) lead the Congress and the citizenry to believe that many were deprived of the ability to own a home. Hence, new organizations and relaxed regulations were instituted to allow more people – many of whom did not have the financial ability or stability – to purchase a home.

 

Organizations like Fannie Mae and Freddie Mac were created which allowed for ‘creative’ financing. These two organizations are representative of the worst of these creations; not really private and not really public. The people who ran them were often friends of politicians and this was their payoff. Rules became more and more relaxed. No oversight was enforced and what we are facing now was evident to many. It became a third rail in politics and no one would touch it.

 

So, now we are facing a collapse. Because we made an agreement to back the loans from Freddie Mac and Fannie Mae, we have no recourse but to pay out the losses. Other ‘bail outs’ or ‘special deals’ are not in fact our responsibility. Of course, many will argue if we do not prop up these companies, the faith and trust in our United States currency will be lost and this will be the demise of our nation. This is far from a simple decision or a black and white issue.

 

Now, our Treasury Department and the Congress are working out a deal to create yet another organization to deal with the domino effect of this situation and prop up yet more companies. And, Fannie Mae and Freddie Mac will soon be back in business.

 

We will hear from many experts in the industry how very important this new plan is to fund these companies. We ‘may’ hear from others that this is too far reaching, but it seems doubtful – everyone seems to be on board.

 

No one likes to hear of the distress of others and no one wants to face the potential economic failures these mortgage loans will cause. But, the discussion of solutions is necessary and a very important aspect to yet another major event occurring in this nation; the election of a new President of the United States.

 

This is nub! Listen to the presidential candidates. See who they blame and – more importantly – see how they determine to fix this situation so it does not raise its ugly head yet again. Both are calling for ‘reform’ and ‘more regulation.’ But think through that. Those who got us into this situation in the first place would be those who write the new ‘reforms’ and ‘regulations’. Is that a good plan?

 

It seems this is a time when truly new ideas are ripe for the picking. Should we not create a new group, with legitimate authority, to determine what changes need to made? Should we not get well-established thinkers, as well as those in the trenches who have actually been involved in this debacle, to help us rid ourselves of both the existing burdensome and foolish requirements and create an outline for a reasonable and workable program?

 

While Congress is in charge of the purse strings of this nation, the president can and should set a course of action. Keep these issues in mind when you hear the rhetoric, blame, and generalized solutions. It is highly doubtful we will hear specifics – this election has been amazingly bereft of specifics.

 

Finally, take the time to read this description of an event from the 19th Century. It is one of the most compelling descriptions of the use of our tax dollars juxtaposed with ever present plea for those in need. This is not a new mechanism to increase our government and taxes. But, it is one of the most logical and honest replies you will see.

 

fkeough@hotmail.com

 



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