Famously, the new president, Barack Obama, argued in his inaugural address last week \u201cThe question we ask today is not whether our government is too big or too small, but whether it works. … Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.\u201d <\/p>\n
Given that not even Ronald Reagan was able to shut down such obviously counterproductive federal programs as the Department of Energy and the Department of Education (Are American youths now \u201cbetter educated\u201d than when Jimmy Carter formed this Department of Schoolmarm Subsidies as a sop to the unions, 30 years ago?) — accompanied by the fact there is not a trace of evidence anywhere in Sen. Obama\u2019s modest legislative history to indicate he has ever seen the need to so much as freeze the funding for a pointless government program, let alone \u201cend it\u201d — we may perhaps be excused a small chuckle at this attempt by the Senate\u2019s most leftist recent alumnus to pose for an early fitting of his \u201cRon Paul\u201d Halloween costume. <\/p>\n
But on the off chance he means it, allow us to point out that in order to know whether the federal government is \u201cworking\u201d we need to know what it was designed to do. Fortunately, the federal government comes with an instruction manual, called the Constitution. <\/p>\n
One will look in vain through that document in search of a mandate — even \u201cpermission,\u201d for that matter — for the federal government to meddle in our lives in all sorts of ways which are now held to be normal and proper. <\/p>\n
But surely it should be possible to judge how good a job Washington is doing at accomplishing those limited goals actually set down for it in writing by the Founders. <\/p>\n
Congress, for instance, is supposed to \u201ccoin money (and) regulate the Value thereof.\u201d <\/p>\n
From the 1790s until the ascent of the Tyrant Roosevelt, long-term inflation was impossible in these United States, because if I loaned you 100 silver dollars at 2 percent interest, a year later you owed me 102 dollars of the same weight and fineness. You preferred to deal in paper money? No problem. A one-hundred-dollar bill and two one-dollar bills could be exchanged at any bank for 102 silver dollars of unchanged weight and fineness. If the dollars didn\u2019t weigh right, someone was going to prison for counterfeiting or fraud. <\/p>\n
Since 1913, though, the Congress has abdicated this power to the Federal Reserve, a private banking consortium which is cranking out unlimited mountains of supposed \u201cdollar notes\u201d not redeemable in gold, silver, or anything else. Is this \u201cworking\u201d to prevent inflation and maintain public confidence in the monetary system? Since the \u201cNo\u201d answer becomes clearer each day, this interpretation of the Congressional responsibility to \u201ccoin money (and) regulate the Value thereof\u201d is clearly \u201cnot working.\u201d <\/p>\n
So the new president just vowed that the experiment in Federal Reserve fiat paper currency \u201cwill end\u201d during his term of office. Did he not? <\/p>\n
The Constitution also establishes the federal courts (unlike say, the EPA and the Departments of Labor and Agriculture.) These courts exist to create lawful channels through which men can resolve their differences without resorting to pistols at dawn, or drive-by Tommygunnings. <\/p>\n
The courts are established, for one thing, to enforce contracts. Providing a contract is lawful (commitments to sell a certain number of slaves are not binding), and was made voluntarily between adults of normal mental acumen, the courts encourage orderly commerce by assuring lenders that they can enforce a contract for payment by going to court. <\/p>\n
(Or they did, until they decided to stop enforcing contracts requiring payment in gold, which once allowed a lender to hold down interest rates by eliminating the need to take up his crystal ball and make his best guess as to the forthcoming rate of government-caused paper-money inflation.) <\/p>\n
But now there re-surfaces the recurrent bad idea that the courts should actually do just the opposite. <\/p>\n
The quickest way to arrest plummeting home values and soaring eviction rates, both President Obama and Democratic House and Senate leaders now contend, is to approve a proposed bill to give judges authority to alter loan terms on primary residences. <\/p>\n
Currently, bankruptcy courts have no authority to alter the terms of a home mortgage. If the borrower can\u2019t pay, the lender forecloses on the collateral — the home — and is free to re-sell it. Providing the lender didn\u2019t loan more than the house is worth — another problem, in a falling market — the bank is thus made whole. <\/p>\n
This scheme to allow bankruptcy judges to rewrite mortgage terms might allow many Americans to stay in homes on which they can\u2019t currently afford to make the payments. Those Americans would presumably welcome such a change. <\/p>\n
But what else would it do? First, it would encourage hundreds of thousands — perhaps millions — of financially strapped Americans to file for bankruptcy and seek such a \u201cnew deal.\u201d Mortgage holders would have to send attorneys to attend each of those proceedings, arguing for some lesser share of what they\u2019re owed — assuming they could even find them all. <\/p>\n
Meantime, those homes would remain in the hands of Americans who can\u2019t afford them — and thus almost certainly can\u2019t afford to maintain them. Neighborhoods would likely deteriorate. New would-be home-buyers \u201cplaying by the rules\u201d and saving a down payment would not be allowed to buy those homes, which would be prevented from coming on the market. <\/p>\n
But perhaps that wouldn\u2019t matter, since lenders — unable to count on the courts to enforce duly signed contracts — would either halt mortgage lending entirely, or would require jacked-up down payments and interest rates to indemnify themselves against the increased risk of mortgage contracts being mailed back with \u201cYou lose, sucker\u201d scrawled across them. <\/p>\n
Want to freeze the home sales market for years to come? <\/p>\n
Vital to economic recovery is predictability under the rule of law. To \u201cunfreeze\u201d investment capital, potential investors must be reassured that \u201cthe deal\u201d as to their tax liabilities, the enforceability of contracts — even their assumption that an investment made today will remain legal tomorrow — won\u2019t be changed, overnight. (Witness the New York Stock Exchange\u2019s recent overnight ban on \u201cshorting\u201d bank stocks, which was enforced retroactively by brokerage houses, and the Treasury Secretary\u2019s recent edict that it\u2019s now \u201cillegal\u201d to melt down nickels and pennies, both of which activities had been legal the day before.) <\/p>\n
Stability and predictability. Are those concepts so hard to understand? <\/p>\n
Yet, when it comes to the sanctity of a mortgage contract, President Obama and congressional Democrats now propose to sweep any such stability aside — just as Franklin Roosevelt used to literally wake up each morning and dictate a new price of gold — changing the home-loan business into a cross between \u201cLet\u2019s Make a Deal\u201d and \u201cThe Family Feud.\u201d <\/p>\n
\u201cYour new monthly home payment will be? Survey says. …\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"
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