Part 2
Newsweek magazine is in dire financial trouble and is seeking to survive by cultivating a liberal, urban audience. There is nothing wrong with that, as long as the editors are up-front about it. But this sneaky media stuff is harming America, and it must be unmasked.
With Barack Obama in the White House, the country is facing profound change. America is already on the verge of bankruptcy and federal intrusion into private business, health care, and the environment is unprecedented. The far left is trying to create a huge federal apparatus that will promote income redistribution and "social justice." Also, the left sees a major opportunity to knock out Judeo-Christian traditions, replacing them with a secular philosophy.
In order to accomplish this, the left-wing media is marginalizing people like Sarah Palin who oppose the strategy. Under the guise of hard news reporting, the media is pushing rank propaganda on the citizenry. Dr. Joseph Goebbels, the Nazi propaganda minister, successfully developed this tactic in the 1930's.
Americans need to wake up and smell the corruption. If crazy ideologues have infiltrated the news business, we need to know about it. And now you do.
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Third, it would change some rules of financial markets. For example, financial firms issuing securitized bonds — bundles of mortgages, auto loans and other credits — would be required to hold 5 percent of the bonds themselves. Because they would have to keep some bonds, it's argued, sellers would scrutinize the underlying loans more carefully.
Though these proposals sound sensible, they have potential drawbacks. Writing in the Wall Street Journal, Peter Wallison of the American Enterprise Institute argued that the very largest financial institutions would become the protected and pampered wards of the state. "Larger firms will squeeze out smaller ones," he said. Consumer regulation sounds great. But if the protections are cumbersome and expensive, lenders will compensate by raising interest rates or lending only to the safest borrowers, and consumer credit will, paradoxically, become costlier.
Up to a point, some retrenchment of the financial sector is healthy. It absorbed too much of America's talent while pursuing strategies that, in hindsight, misallocated the nation's investment capital. But there are perils to overregulation. It could dampen the normal risk-taking required for solid economic expansion.
However the debate concludes, regulation isn't a panacea against future crises. The idea of "enlightened regulators" who are vastly more perceptive than the bankers, traders and money managers they regulate is a fiction. Even in early 2007, when the problems of subprime mortgages had emerged, few regulators or economists foresaw a wider financial meltdown. They didn't see the impending chain reaction. The problem wasn't a lack of regulation; it was a lack of imagination.
So the next crisis could come from anywhere — perhaps the follies of government, not finance. Between now and 2019, the U.S. federal debt could rise to $11 trillion , projects the Congressional Budget Office. U.S. Treasury bonds are the bedrock of the global financial system; they're considered safe and reliable. What if a glut of bonds causes investors to lose faith? What are the implications? Good questions. The seeds of the next crisis almost certainly won't be found in the debris of the last.
© 2009
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