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This is hard to watch.

There's been a lot of talk in the last couple years how prophetic Ayn Rand's Atlas Shrugged is. Many have noted the parallels, but one that I haven't seen made anywhere are the ones between Colorado of the book and North Dakota of today.

In the midst of a widespread recession, North Dakota is booming. The oil industry is leading the way with ripples in air traffic, rail traffic, lodging, and even higher education. It's attracting industry and the industrious just like Colorado did in the fictional work.

In the book, what did Colorado desperately need? Reliable rail transportation. The government and its crony capitalist collaborators fought tooth and nail against the heroes of the story, Dagny Taggart and Hank Rearden, as they tried to supply it to the state.

And in real life, we have the spectacle of Obama "delaying" the start of the Keystone XL pipeline. Aside from linking the booming shale oil industry in Canada with the Texas refineries, it was also going to be a vital transportation vehicle for the Bakken Formation.

I'm more than a little worried to see what else might come to pass from Atlas.

I am very excited by Gary Johnson—he's the best candidate I've come across since Steve Forbes. Moreover, he has all the pedigree you'd want in a presidential candidate: two-term popular governor, successful businessman, outdoorsman, and no hint of scandal.

Everything I've heard from suggests that he's the best of Ron Paul without all the crazy. He wants a self-interested foreign policy; supports abortion rights; wants to abolish HUD, the TSA, and the Department of Education; and thinks the government has no business in traditional social conservative issues.

Unfortunately, he's been routinely ignored by the media. That doesn't bode well: it seems like the media wants the Tea Party portrayed as being represented by the likes of Michele Bachmann, Ron Paul, and Sarah Palin. The thinking seems to be that independents will recoil (rightly so) at those candidates and end up selecting Mitt Romney during the primary.

That would be a travesty, as Johnson is the best choice for Tea Party types. He doesn't want to enforce any religion or morality, and he seems to understand the role of individual rights in government. Also, he has an actual plan for balancing the budget and a track record in New Mexico for cutting spending.

The students at an elementary school spontaneously asked for their school to be renamed Barack Obama Elementary School. At least, some fifth graders who held a mock debate and who came to a school board meeting to request the change. And then the school board unanimously and immediately accepted the change.

I can't say anything else about this. Do I comment about the sorry state of education, the deification of The One, or cynical manipulation of children? I'm at a loss.

Interesting news is coming furiously since the election and I just can't muster enough wherewithal to write whole entries about it. So here's another del.icio.us barf:

• So Obama's plans for enlisting teenagers and college students into national service morphed from "require" to a "setting a goal" after a few hours of bad publicity. I saw this on Friday too and was aghast at the thought, but it was something that both Obama and McCain had campaigned on all along. I don't understand the furor and I was glad that he was finally coming clean about "expecting you to work." Does this mean that he'll be the panderer everyone right of him hoped he'd be? I had considered him to be a closet Marxist given the company he kept, the statements he casually dropped, and the path by which he had risen. This incident plus the hint that he's going to pull from the Clinton dugout for his Cabinet makes me hopeful, but not too much so.
• The encomiums continue as writers gush over the ascendance. I love how they delude themselves into thinking that he's writing these speeches himself. And I'm sure they're off the cuff. And those teleprompters are there just in case he gets distracted by a flash of inspiration. Bush is routinely accused of being anti-intellectual, but who looks to the president for inspiration or validation? Oh, collectivist writers.

• Earlier I linked to an inspiring call to action by Representative Jeff Flake the day after the election. It was clear to me during the entire campaign (and really during the whole Bush administration) that the GOP had strayed far from its Goldwater days. Back then, it was a party in favor of limited government and individual freedom. (For the most part, that is, because there was a sizable states' rights faction that fought desegregation. Goldwater wasn't a part of that at all.) The neoconservative movement had systematically taken over the Republican Party, reorienting it towards big government. I had (and have) high hopes that this defeat will bring about a shift or retrenchment away from the neocon philosophy. There are now a lot of voices joining Flake's in calling for a refocusing and a return.

  But I worry that Republicans might get the wrong lesson from this election. I worried that they might conclude that they weren't religious enough (Pence, I retract my earlier praise), that McCain was too moderate, or that they should veer left to get back in power. Reading this conservative post-mortem, only Richard A. Viguerie nailed the proper conclusion. We must take back the GOP and put it on a principled footing of individual rights and limited government. Only then can the voters make a valid choice between two opposing viewpoints.

• One of the oft-repeated canards of this election cycle is that voter turnout was unprecedented. The story goes that Obama is such a charismatic and inspiring leader that he aroused the average apathetic American out of electoral slumber. More people voted, but the turnout was about the same. It appears that the average apathetic American was just as apathetic—rightly so, given the contest between Socialism and Socialism Light—as ever, but the average Democrat was much more involved. And the youth really came through for Obama. This alarms me somewhat, but I think their expectations are so high that they're in for a rude awakening. There's already been some move to cushion the fall for when Obama Claus can't deliver.
• I don't know whether to laugh or to cry about Al Gore's recent editorials. On the one hand, I'm heartened by his need to disguise his eco-fascism as "capitalism." That suggests that he thinks he couldn't get away with baring his teeth openly. On the other, the prescription he lays out for making capitalism "sustainable" is so nakedly anti-capitalistic that I can't believe anyone would be snookered by it. Yet surely they must be. "100% carbon-free electricity within 10 years" WTF? HFS! "At this moment, we are faced with the convergence of three interrelated crises: economic recession, energy insecurity and the overarching climate crisis. Solving any one of these challenges requires addressing all three." Solving any of these "problems" will require massive dislocations, inconceivable expenditures, and unprecedented government interventions. None of these "crises" are legitimate: the bugaboo is but a dodge to distract while the statists expand their power. Taken together, it's of a piece with 9/11 and the rise of Homeland Security—fear overcomes many people's natural aversion to government intrusion.
• This cartoon illustrates one of the things that Americans just don't understand about immigration: it is almost impossible to do it legally. Yet hundreds of thousands do every year and a decent percentage of them go on to become American citizens. Freedom isn't something that depends on where you popped out of the uterus; it is inherent in our humanity. If people want to come to America, then we should welcome them so long as they are not contagious or criminal. It worked—for the most part—the first hundred and fifty years so why not re-open our borders?

A House committee is considering nationalizing 401(k)s but you wouldn't know it from the press release they put out. Luckily, the Carolina Journal, a publication of the John Locke Foundation, investigated more deeply and has publicized the testimony of Theresa Ghilarducci. To read the aforementioned press release, the only notable outcome from the two witnesses was that the situation has workers and retirees spooked. (The later field hearing in San Francisco was much more muted and reasonable in its calls to action.)

Thus far, a call for better information and education is the only thing that has come from committee chairman George Miller. But he's "considering" all options, including those of Ghilarducci and Weller. Their preference is for the government to offer Guaranteed Retirement Accounts to those worried about their retirement and eventually phase in a replacement of everyone's 401(k) with a GRA, which is fully "invested" in Treasury bonds guaranteeing a 3% annual return.

But with a statement of commitment like the following, how long will Miller hold out?

"We will fight to restore workers' rights, so that every American can benefit from economic opportunity. And we will make the preservation and strengthening of retirement savings a priority, so that all Americans can enjoy a secure retirement after a lifetime of hard work."

The whole retirement savings sector is suffused with government meddling and distortion. It needs to exit in an orderly fashion, protecting commitments already made but leaving those without such guarantees to make their own decisions. People earn the money that they segregate for their later years; why can't they be allowed responsibility for managing it?

Let's compare how I voted to how the rest of my Arizonans voted. Outside of my district and county, I pretty much am out of step. I'm glad they voted down the "homeowner's bill of rights" and took a tax on home sales off the table permanently, but they also stopped same-sex marriage with a constitutional amendment, snuffed payday loans out of existence, and enabled a Masschusetts-style denial of private insurance.

My wife thinks that the proposition voting mirrored the spending trends on commercials. I cannot believe that, but it's a compelling argument. Some of the proposition wording was very precise and commercials about those measures were very deceptive—did people not look into the matter further?

It's done finally, so now's the time to move on and start accepting the outcome. I have got a couple of months to lay low, relax, and study before I join the Kulturkampf. An Obama presidency is a grand opportunity to publicize Ayn Rand and Objectivism since he represents such a stark contrast to us.

Barack Obama is president.

I listened to John McCain's concession speech with disgust. It succinctly summed up McCain: a pragmatist and compromiser to the end. A principled opponent would have conceded the battle but laid the groundwork for the larger war. He would have pledged to relight the flame of liberty during the dark times ahead.

In today's climate, such a speech is unthinkable. Unity is the buzzword of the day. Like many times during his flawed, unprincipled run at the presidency, I sought comfort in the 1964 campaign. After listening to McCain's terrible convention acceptance speech, Goldwater's was a palliative. I figured that his concession in that same year might provide the inspiring call to action that McCain's wasn't. There's some of that but I think there must be a pattern of graciousness in these matters that I was unaware of. Or maybe the losing candidates are just as sick of campaigning as we are.

I've waited 'til now to make any statement about this election because I wanted to find out more of the details of the vote—not just the total but the spread of it, what it might portend at this very early date.

I know many of you expected me to make some statement last night but I held that off. I sent the President the following wire, which I think will be available for you if you don't have it now:

"To President Lyndon Johnson in Johnson City, Texas.

Congratulations on your victory. I will help you in any way that I can toward achieving a growing and better America and a secure and dignified peace. The role of the Republican party will remain in that temper but it also remains the party of opposition when opposition is called for. There is much to be done with Vietnam, Cuba, the problem of law and order in this country, and a productive economy. Communism remains our No. 1 obstacle to peace and I know that all Americans will join with you in honest solutions to these problems."

I have no bitterness, no rancor at all. I say to the President as a fellow politician that he did a wonderful job. He put together a vote total that's larger than has ever been gained in this country.

However, it's interesting to me and very surprising to me that the latest figures that I can get do not reach the totals of the 1960 election. I am disappointed in this because I thought that the American people would have turned out in greater numbers than they seem to have done.

But he did a good job and I have to congratulate him on it.

Also I want to express my gratitude to the more than 25 million people in this country who not necessarily voted for me but they voted for a philosophy I represent, a Republican philosophy that I believe the Republican party must cling to and strengthen in the years ahead.

I want to thank all of you across this nation who turned out in those numbers to support my candidacy and that of Bill Miller and the Republican party.

I don't think that I've ever seen more dedicated people in my life, people who worked as hard or who worked as long and produced the results that they did. These people are dedicated to, as I say, the Republican philosophy.

There is a two-party system in this country and we're going to keep it. We're going to devote our days and the years ahead to strengthening the Republican party, to getting more people into it and I feel that the young people coming along will provide the army that we need.

This effort that we engaged in last January 3 turns out to be a much longer effort than we thought. It's not an effort that we can drop now nor do we have any intentions of dropping it now.

I will devote—being unemployed as of January 3 or thereabouts—I'll have a lot of time to devote to this party, to its leadership and to the strengthening of the party, and that I have every intention of doing. I want to just ask the people in this country who worked so hard in this election not to be despondent, that we have a job to do and let's get along with it, because there are many questions that have to be answered.

I'm very hopeful that the President will, now that the election is over, get along with the answers that we've sought during the campaign—the answers about Vietnam, about Cuba, about Communism—Communism's continuing growth all around the world—about the growing tendency to the control of our economy and our daily lives in this country.

As I said in my wire, anything that I can do—and I'm sure that I speak for all Americans—anything that we can do to help the President get along with the solutions to these problems, we're ready, willing and able to do.

Now with that I have nothing further to say. I will entertain a few questions—not any prolonged period at it. Mr. Wagner will recognize.

Election fatigue has really set in this last week. I have started several blog entries only to feel dispirited and end up canceling them. I have dutifully collected dozens of links for those entries, and I feel like I should share them in rapid-fire fashion just to get them out of my consciousness:

• "How Capitalism Will Save Us": Steve Forbes weighs in on the current financial crisis. This is a great explanation of how we came to be where we are along with a prescription for what we need to do once the crisis is resolved, which he predicts will be by next spring. Reading this essay, I lapsed into a daydream about what if he had been elected president back in 1996 or 2000. He makes every presidential candidate of either party seem like an intellectual lightweight (except for maybe Al Gore). I may disagree with him at times, but I know that his arguments are genuinely held, well informed, and thoughtful. I hope he runs again; if he did, I would volunteer much more hardily than I did in his previous presidential adventures.
• "Checks on 'Joe' more extensive than first acknowledged": this plus the legal intimidation (the entry's a little hard to read, but the controversy seems to surround temporary Obama campaign workers registering and voting) and the media freeze plus spells out how dissenters might fare under an Obama administration. He does not handle opposition well.
• "Obama's Moving Tax Threshold": when someone says that they want to close the gap between the rich and poor, there's only two ways to do it: spread the rich's wealth around to make the poor richer—the Robin Hood model—or redefine rich down so that the spread is nominally smaller. It's a rare candidate indeed who does both.
• Obama's Constitution: it discusses Professor Cass Sunstein's infatuation with FDR's Second Bill of Rights, which is the clearest statement of economic collectivism that I've seen from an American politician. Sunstein was the Obama campaign's go-to guy over Obama's 2001 radio interview wherein The One implicitly confirmed what he meant by spreading the wealth.
• Prepared Remarks of Senator John McCain in NH: it's a decent speech complaining about Obama's tax plan. It's just too bad that he contradicts it all the time by wanting to tax "windfall" profits and denouncing corporate greed. That's McCain in a nutshell: a contradictory, unprincipled demagogue.
• "White People Shouldn't Be Allowed to Vote": this will be a common refrain should Obama somehow lose. The racist voters just weren't up to the challenge of voting for a black man. It's definitely not that he's the most liberal candidate put up by either party in the last twenty years or that he associates with anti-American radicals, or that he's a Chicago politician of the worst kind. Nope, we're just as racist as ever.
• "Obama's Carbon Ultimatum": and this is one of the biggest reasons I'm afraid of an Obama administration. He's bad enough, but the people he'll bring to Washington amplify and expand his reach. The Senate is already prepared to fast track any nominees he puts forth. That includes packing the courts.

That's about half the links I've been collecting, sadly. So expect another link dump in a few days.

[UPDATE (11/1/2008): You mean the checks on Joe's child support records were politically motivated? No way!]

Much has been made about how the nine largest banks were coerced into accepting the federal equity purchase, but it appears that regulators will also decide which of the smaller banks are unduly suffering and must accept government ownership:

Federal regulators said they did expect some banks to volunteer, though none stepped forward yesterday. But they added that they would not rely on volunteers. Treasury will set standards for deciding which banks can be helped, and the regulatory agencies will triage the banks they oversee: The institutions faring best and worst will not receive investments. The institutions in the middle, whose fortunes could be improved by putting a little more money in the bank, will be pushed to accept the money from the government.

I can't even begin to describe the problems this is going to create down the road. The Treasury and the Federal Reserve are floundering: taking action where none is warranted, overreaching their Constitutional bounds, and moving the center of American finance from New York City to Washington. All on the pretext of averting another Great Depression, even though almost nothing outside of the stock market points to a general economic slowdown. Unemployment is up, but that could still be the lingering effects of a market adjusting to the minimum wage increase. Retail sales are down, but uncertain times lead people to hold back on purchases.

I sincerely believe that the next president will usher in an era of malaise and bad times, no matter which candidate wins. We may in fact be in for another Great Depression since, like the first one, government intervention will deepen and prolong any downturn.

[UPDATE (10/23/2008): I was most disappointed to hear that John Kovacevich, CEO of Wells Fargo, folded but I'm not surprised. Even Henry Rearden signed away Rearden Metal. The parallels between today's political environment and Atlas Shrugged are many and distressing.]

Something's going on over at The Washington Post. First, they publish an article entitled "Don't Blame Capitalism". Now there's an unsigned editorial affirming that the "unregulated free-for-all financial sector" wasn't free. This represents a different tack from the one taken earlier.

I'm not going to go crazy and get all hopeful about this turn, but I am glad that the editors at WaPo are willing to acknowledge the government's role in both catalyzing and aggravating this financial problem.

"It's not the proper role of government to prop up stocks, housing or any other market. Yet like the vaudeville performer on the old Ed Sullivan show, politicians now see their duty as to keep the plates spinning just a few more months, maintaining constituents in their homes and jobs at least until after the elections, without any thought to the long-term cost being paid to do so."

"What Americans don't get, however, is that the goal of the bill isn’t to help Wall Street or Main Street, but to centralize power in Washington. Not surprisingly, that's where its biggest proponents just happen to reside." – Jonathan Hoenig "Politicians Use Bailout to Grab More Power"

Statists may want to tiptoe around the N-word, but when the federal government buys equity stakes in private firms and dictates how they should be run, that's nationalization.

I read an article on the parallels between today's financial crisis and the Panic of 1873 with considerable interest. I got my bachelor's in history and am halfway through a master's degree with an emphasis on business history and the post-Civil War American Industrial Revolution. And two of my personal side interests are in banking and railroad history. But I'm pretty out of practice, having set aside plans for my master's and doctorate to raise my children and work in software, so I read that article uncritically.

I reconsidered the subject when I read this New York Times blog entry following up on the earlier article. Suddenly memories of my research on the Great Depression flooded back into my consciousness and I realized, as usual, that only half the story was being told—perhaps completing the parallels to today's situation.

Scott Reynolds Nelson (tellingly) never mentions the Northern Pacific by name and only casually refers to Jay Cooke, instead laying the blame for the panic on rampant European mortgages, a bubble that depended on ever-increasing land valuations. Bank failures there spread across the Atlantic where investors lost confidence (inexplicably) in complex railroad bonds and the stock market crashed, he alleges. It's all very tidy and one is left in awe at Santayana's maxim, tut-tutting how we never learn.

Jennifer 8. Lee (aside, what's the story with the number for a middle initial) doesn't have the luxury of omitting the Northern Pacific since she's looking through contemporaneous newspaper accounts—where the railroad and Jay Cooke were demonized. She breezed over the issues in Europe, again because the Times wouldn't have particularly covered them at the time.

But both omit the underlying accelerant in the panic: government subsidy of the railroads on a scale unprecedented in American history. I don't know anything about European economic history of the nineteenth century except to note that there's a reason everyone over there was migrating over here—it was pretty dismal except for the landed. Moreover, I know that no- to low-down payment mortgages are a very recent phenomenon: any mortgage of that day would have a substantial equity component that would make it difficult to lose money on a foreclosure.

The transcontinental railroad race was wholly the creation of the federal government, which wanted at least three lines built to link the east to the west as quickly as possible. It meted out cash payments, enormous land grants, and generous loans over the course of nearly 20 years. Despite its best efforts and oversight, each of the transcontinental lines was rocked by financial scandal, bankruptcy, and bribery. But the federal government had a mission and was prepared to spend handily to achieve it.

Each of the railroads, and especially the Northern Pacific, were paid based on how much track was laid. So the main line took precedence and quality of track was of minor importance; this meant that the railroad couldn't be viable unless goods were transported to stations built on that main line. After the quick buck, which was right in line with the government's desires, railroad builders of the time spurned branch lines to mines, farming centers, and manufacturers and sited their lines along the easiest grades as straight as possible.

But even doing business that way proved too capital-intensive for the companies so they issued copious quantities of bonds to get the money for building. These bonds, far from the unfathomable financial instruments Nelson would have you believe, were straightforward and relatively short-term. The railroads hoped to complete sections of track in time to pay the interest portions of the bonds and thus stay one step ahead of receivership. Sometimes they made it; sometimes they didn't.

The country had invested a lot of its hope in the railroads, for they were truly the most modern and mammoth institution America had ever seen. The race across the frontier was followed by everyone in every town across the east. They eagerly bought railroad bonds because they seemed like a prudent investment—the railroads weren't going anywhere and the government was backing the whole enterprise.

The whole thing was a house of cards. Once the main line track was completed, there were operating expenses of an unprecedented scale and very little freight to generate revenue. With the 1872 Crédit Mobilier scandal fresh in the public's memory, the bankruptcy of the Northern Pacific in 1873 brought everything crashing down.

Jay Cooke prophetically said in 1869: "Why should this Grand and Glorious country be stunted and dwarfed—its activities chilled and its very life blood curdled by these miserable 'hard coin' theories—the musty theories of a bygone age. These men who are urging on premature resumption know nothing of the great and growing west which would grow twice as fast if it was not cramped for the means." (Murray Rothbard, The Mystery of Banking, p. 231-2) Four years later, his bond bubble would result in chilled activities and a stunted country.

The problem at its root was the distortion and perverse incentives of government subsidy. As Ayn Rand put it:

It is not a matter of accidental personalities, of "dishonest businessmen" or "dishonest legislators." The dishonesty is inherent in and created by the system. So long as a government holds the power of economic control, it will necessarily create a special "elite," an "aristocracy of pull," it will attract the corrupt type of politician to the legislature, it will work to the advantage of the dishonest businessman, and will penalize and, eventually, destroy the honest and the able. "Notes on the History of American Free Enterprise" from Capitalism: The Unknown Ideal

It is convenient to blame the Jay Cookes and mortgage brokers of then and now, but getting rid of them while leaving the underlying system untouched will not address the problem. The well-run and well-planned railroads of the day, like James J. Hill's Great Northern Railway, did not need government assistance and financed their trek across the United States slowly but safely. The well-run banks of today, like BB&T or Wells Fargo, did not drink from the subprime trough and they're still around, as viable as ever.

The government needed to get out of the railroad financing business then and it needs to get out of the mortgage finance business now. For starters.

"It's not that I want to punish your success. I just want to make sure that everybody who is behind you, that they've got a chance for success too. My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody … I think when you spread the wealth around, it's good for everybody." – Barack Obama, Response to a Plumber

[UPDATE (10/16/2008): Uh oh, McCain and Obama talked about Joe (the plumber above) and now the liberal goon squad is all over him: he's had a tax lien, he's a registered Republican and probably a plant, he's a racist, he's a nutjob, he's lying. The message is "dare to question The One publicly and you'll get people around the country digging into your past to post online." It's so disgusting and I see it often among liberals, who revel in finding and airing dirty laundry about their opponents.]

"Well, it's [Fannie Mae and Freddie Mac] really an incredible case study in regulation because something called OFHEO was set up in 1992 by Congress, and the sole job of OFHEO was to watch over Fannie and Freddie, someone to watch over them. And they were there to evaluate the soundness and the accounting and all of that. Two companies were all they had to regulate. OFHEO has over 200 employees now. They have a budget now that's $65 million a year, and all they have to do is look at two companies. I mean, you know, I look at more than two companies.

"And they sat there, made reports to the Congress, you can get them on the Internet, every year. And, in fact, they reported to Sarbanes and Oxley every year. And they went—wrote 100 page reports, and they said, 'We've looked at these people and their standards are fine and their directors are fine and everything was fine.' And then all of a sudden you had two of the greatest accounting misstatements in history. You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was that after it all came out, OFHEO wrote a 350–340 page report examining what went wrong, and they blamed the management, they blamed the directors, they blamed the audit committee. They didn't have a word in there about themselves, and they're the ones that 200 people were going to work every day with just two companies to think about. It just shows the problems of regulation." – Warren Buffett, CNBC Interview from 8/22/2008 {via}

I haven't had a chance to fully digest the recent turn of events that have seen the Senate pass the massive bailout (and then some) one day, the House of Representatives reverse its previous decision on the next, and President Bush sign the bill the same day. This strikes me as eerily similar to the justification for the Iraq War proffered by the Bush Administration: the financial markets have WMD, we must invade them, and there is no time to dawdle or falter. Only maybe they don't have the liquidity crisis we thought they did.

This interview with John Stumpf, CEO of Wells Fargo, lays out a better understanding of the situation from one of the major players on the ground, so to speak. There are some great insights (sorry that they're big quotes, but I liked them so much that I didn't want to trim them):

On why Wells Fargo isn't in trouble, while others are:

We never participated in some of the real exotic things that the industry and others participated in. For example: we never understood why it made sense to make someone a loan, a home mortgage with negative amortization. So you would owe more on the home later than what you started with. That didn't seem sensible to us. We don't do it in any other credit products, not in credit card, why would you do it on someone's home? Because you don't know what's going to happen in the future. You don't know what's going to happen to home values, so you owe more than what you start with some time later, or you underwrite somebody so they can pay a 'teaser rate' … part of the rate, and they can't afford the full rate. How can that possibly make sense? So as we saw, and we probably didn't see as early as we should have, but as you see 5-6 years of unprecedented appreciation, some time it is going to go down. So we started to trim back and thank goodness we didn't do a lot of those things, but here's the real secret … many companies not only did that for their portfolio, they also structured off balance sheet vehicles known as 'SIV's and CDO's and CLO's. I thought a SIV was a four-wheel drive; I had no idea what it was! And they put these products, and they leveraged their balance sheets with these off-balance sheets things, these vehicles that add NO value and now they're coming back on-balance sheet. And that's where the 380 billion dollars of losses have happened around the industry and we didn't participate in that.

On the blame for the subprime mortgage crisis:

Yes, but they [mortgage brokers] get paid when someone signs a loan, and they're out of it. Well you can imagine the opportunities for not telling the truth; the so-called 'liar loans'. A number of borrowers said and thought themselves, this thing is going to the moon. And they told fibs about their occupancy interests, in other words … they said they were gonna live there but they really weren't. It was their fifth loan. Or they lied about their income. Or they expected that somehow this would all work out, and it didn't. So the originators are part of the problem. Over-aggressive borrowers have some blame. The rating agencies, the syndicators … So, and what happened to the days I used to borrow money, I still borrow money for home loans … I went to a bank or an S & L and that person took your application, reviewed all your information, verified your income, verified all of what you could afford and said, "here's how much you can afford to borrow." And then they put that loan on their books. Today, many times you go to … the originator says, "What would you like to buy and I'll figure out a way to make the paperwork justify it." It was done in just the opposite way in a lot of situations. So, but let's also keep this in perspective. I'm not minimizing the problems at all. But the Treasury Department recently shared information that's pretty interesting. There are 80 million homes in America. Of those 80 million homes, 25 million have no debt on them at all. Of the 55 million that have debt on them, 51 million are fully current. 4 million are in some situation of past due and of that 4 million, 1 million are in foreclosure. Now that's a big number. It's problematic. Congress is working on that, regulators are working on that, the banks through help now are working on that. These are big issues, but it has to be kept in perspective.

On the "liquidity crisis:"

I'm not sure that I would buy that statement [that people with really good credit are having trouble getting loans]. Now maybe that's true but what I'm hearing more from customers is, "I want credit on the same terms that I got at 3 or 4 years ago." With no documentation, no income verification and at the rate, and frankly, we didn't put mortgages in our books or even a lot of credit in our books a few years ago because there was no return built in for risk. These were viewed as riskless assets, and they're not. So today, we are getting paid for the risk and frankly for some of the liquidity. So it's built into the rate, but for the most part … and while credit, there's always this talk about credit crunch and liquidity crunch, I'm not so sure there's a liquidity crisis. There's plenty of money out there. Now on the credit side, if you qualify, you can get credit.

Well, there can't be [a liquidity crisis]. Look at what happened … 380 billion dollars of losses in the industry have been recapitalized. I mean, just look around. Capital is flowing everywhere. We saw in our industry where Wamu got 7 or 8 billion dollars of capital recently, and Citigroup has raised capital, and National City has raised capital; I mean there's capital all over the place.

The bailout plan failed to pass the House. I didn't have a chance to comb through the text of the straight-out-of-Atlas Shrugged-named Emergency Economic Stabilization Act of 2008 but I read the highlights and it seemed to match quite well with Reich's plan. I think my arguments against that plan also work against the House's version.

House Republicans successfully repulsed this corporate welfare program—man it sounds weird saying that—but this isn't the last we've heard of this plan. Democrats see an opportunity for increased regulation over a sector that they particularly despise and the Bush Administration sees a chance to transfer wealth over to its cronies on Wall Street. The Republican objections generally were not on principled grounds so they may not have the wherewithal to stop the next iteration. I encourage you to write your representatives in both houses to let them know of your opposition.

Here's what I just wrote to Representative John Shadegg:

I am glad to read of your opposition to the bailout plan. You are my Representative and I have voted for you in the past at every opportunity. If you maintain your opposition, I will vote for you in November.

My only wish is that you base your argument against the bill on better grounds. Your statement reads like your disagreement is based on technicalities, not any firm defense of constitutional principles or freedom. I think your soft dissent, while producing the same end result, leaves open the possibility of a subsequent bill's passage.

I admire your father's work for Barry Goldwater. I expect you to maintain the family name as a bastion of freedom and individual rights. While the government has largely created this mess, it is not its place to absolve those who took advantage of their responsibilities. It is time to truly deregulate the financial sector, which has been one of the most regulated parts of our economy since the New Deal.

Please oppose future bills on the premise of limited government.

And here's what I wrote to Senator Jon Kyl:

In your press release dated 9/15 entitled "Bail Out" you speak of "allowing the free market system to work" and opined that you weren't going to support "writing a blank check with American taxpayer dollars." Yet in your weekly column of 9/22 entitled "Stabilizing the Economy" you contradict those very same statements.

I have voted for you ever since you started in the Senate. I think you are generally an advocate of the free market and you represent your state well in that regard. I think you are tremendously wrong in supporting this bailout, though.

This crisis was not the result of the housing bubble as you suggest in "Kyl on the Economy, Housing, Financial Markets." The housing bubble masked the consequences of the "moral hazard" of guaranteeing and encouraging fiscally irresponsible actions on the part of mortgage lenders. When housing valuations were on the rise, there were no problems because equity ratios were sufficient to make these mortgages look good. Once housing valuations returned to reasonable levels, the truth was laid bare and the risks inherent in the shaky loans were inescapable.

Bailing out these irresponsible lenders sends a horrible message and further insures that the "moral hazard" you rail against becomes enshrined as precedent.

But that's not the worst of it. In bailing out anyone, you are supporting the writing of a blank check on the taxpayer. I am more than my wallet: I am an American with individual rights that I elected you to protect. I am not the Peter you may shake down to help Paul out when he makes bad choices.

This is a government intervention not seen since the days of the New Deal. If you are truly in favor of a free market, you must oppose this bill (and inevitable subsequent bills) with every fiber and sinew of your convictions. If you do not, I may find myself having to vote you out. And I'd rather not do that.

And finally, here's my letter to Senator John McCain:

I have grudgingly voted for you ever since I've been eligible to vote. I am a Republican of the Barry Goldwater variety: we stand for limited government and individual rights. Your support of the bailout plan as put forward by Secretary Paulson and Congress is repugnant to Goldwater Republicans, as it should be to any individual who professes to support the free market.

The financial crisis was caused not by the greedy Wall Street financiers, though they took advantage of the situation, but by the very government regulations that were supposed to forestall such a calamity. In encouraging questionable mortgage lending and providing lenders a guarantee of immunity from the consequences of such irresponsibility, the federal government caused the situation in which we find ourselves.

The answer to this problem is not more government power or regulation. It is deregulation: the financial markets need to be left to succeed or fail on their own accord. The government prop has proven itself useless on countless occasions and it needs to be removed.

I know that it's politically expedient to play the demagogue and pander to what you think the American people want to hear about Wall Street fat cats. You are wrong: the American people don't want to be a wallet for the government to loot. They respect those who get rich of their own accord, who work hard and earn every penny they own. The thing they don't like are people who get rich through government-provided incentives and then cry when those dislocations come back to bite them.

I am going to vote against Barack Obama come November. Please don't make me reconsider that decision by supporting future bailout proposals.

I don't know if it will do any good, but it certainly can't hurt.

The Antiplanner takes on some meltdown myths. His perspective is microeconomic so it's a little more like Allison's than much of the other economic analysis I've linked to.