Economy & Trade

By Sanjai Bhagat and Roberta Romano

A myriad of factors have been identified as contributing to the ongoing global financial crisis, running the gamut from misguided government policies to an absence of market discipline of financial institutions that had inadequate or flawed risk-monitoring and incentive systems. Such government policies include low interest rates by the Federal Reserve and promotion of subprime risk-taking by government-sponsored entities dominating the residential mortgage market so as to increase home ownership by those who could not otherwise afford it, which fueled a housing bubble, and bank capital and institutional investor holding requirements dependent on credit ratings by entities which were either conflicted or incompetent (or both), providing triple-A ratings to securitized packages of subprime mortgages. 

By Hilary Masell Oswald, Contributing Editor
It’s hard to keep up with the federal dollars flying hither and yon these days. And it’s especially hard to keep track of how many dollars the government spends on means-tested welfare (read: aid to the poor), in part because welfare spending is stretched across 13 government departments and agencies, 17 budget functions, and 71 separate programs.

By Hilary Masell Oswald, Contributing Editor

Like most government programs, Cash for Clunkers—officially dubbed “the Car Allowance Rebate System”—sounds good, if you don’t think about the details. A consumer with a vehicle that gets fewer than 18 miles per gallon—a “clunker”—could trade in that vehicle, regardless of worth, and receive as much as $4,500 (payable to the dealer by the government) toward the purchase of a new more fuel-efficient car. If the consumer bought a car that gets at least 4 mpg better than his old car, his voucher was worth $3,500; at least 10 mpg better, his voucher was worth $4,500.  The program required that the clunkers be crushed or shredded—to keep the less-efficient cars off the road—and officially ended August 24 after $2.88 billion was spent.  U.S. Transportation Secretary LaHood declared it “wildly successful".

By Congressman Darrell Issa (R-CA)
This passed week, I’ve released a report that chronicles how the politicization of Fannie Mae and Freddie Mac paved the way for today’s financial crisis.  The truth is, Fannie and Freddie had a unique relationship with the federal government that created an environment in which the market viewed them as an extension of the U.S. government and therefore ‘too big too fail.’

By Congressman John Carter (R-TX)
Americans are witnessing an unprecedented federal takeover of one major segment after another of what once was our free market economy. First the financial and investment industries, now the auto industry. At stake are thousands of local car dealers nationwide, and the savings of stock and bondholders of General Motors and Chrysler.

By Rich Sokol, Contributing Editor
Unemployment continues to rocket upwards, reaching 9.4% of the American workforce in May 2009.  American families are suffering.  Many Americans have turned with hope to President Obama.  What is his plan?  Obama has directed the federal government to borrow trillions of dollars (and yes, I meant “trillions”, not measly “billions”).  These dollars are to be showered on auto companies, “green” pursuits and other favored constituencies.  And the bottom line, according to Obama, is that good paying American jobs will be created or saved.  The President’s actions should benefit millions of American families.  Or so the script goes.

By Mark Hillman, Contributing Editor
President Obama claims to "have no interest" in running General Motors.  He does so with a straight face — and the same monotonous cadence that he employs whether condemning North Korea for nuclear explosions or joking with Jay Leno.  But his actions, as well as his words, betray him.

By Rich Sokol, Contributing Editor

In the 1980s movie “Top Gun”, Tom Cruise plays a charismatic but reckless military pilot bent on “pushing the envelope” beyond anything his predecessors had done.  He has incredible innate talent as a pilot, but repeatedly violates safety protocols in an effort to become a legend.  One time, he pushes too far.  The plane crashes, and his best friend is killed.  Cruise’s character learns from the mistake, but it is too late to bring back his friend.

By Kevin E. Holst

Let’s begin by thanking Berkshire Hathaway, Inc.’s Chairman Warren Buffet, a well-known investor and supporter of President Barrack Obama, for acknowledging the reality of cap-and-trade.  Recently, Mr. Buffet responded to a question about cap-and-trade by conceding that regulated utilities would pass the additional costs down to customers.  Specifically, he argued, “In the utility business, it’s going to be borne by customers.  And it’s a tax like anything else.”  This so-called “carbon tax” is yet another troubling example of climate change policies that pilfer from Americans’ rapidly declining pocketbooks.

By Rich Sokol, Contributing Editor
The news is bad.  I won’t cite the litany of economic statistics here proving this is the worst economic crisis the world has faced since the Great Depression.  We all feel it.
When the only thriving businesses are pawn shops, and the only thriving professionals are bankruptcy attorneys, you know something is very wrong in the economy.

By Hilary Masell Oswald, Contributing Editor
In the midst of the clamor over the federal stimulus package in late January, the Government Accountability Office released a report with grim news about Medicaid’s fiscal management. The report states that more than 10 percent of Medicaid payments were improper in 2007, resulting in overpayments of $32.7 billion in one year. The federal share of this amount was $18.7 billion.

By Rich Sokol, Contributing Editor
On February 13, 2009 Congress passed the American Recovery and Reinvestment Act (“ARRA”), commonly known as the Economic Stimulus package.  President Obama has stated he will sign the legislation into law on February 17, 2009.  It is the latest in a series of government actions designed to pull the US economy out of a deepening recession.  It is also a colossal mistake.

By Bob Beauprez, Editor in Chief
For the last month or so, the CEOs of Detroit’s big three auto makers have shamelessly prostrated themselves in various humiliating positions in front of Washington lawmakers begging for tens of billions of taxpayer’s dollars to bail them out of their self-inflicted non-competitive distress.  The only thing clear at this point is that the Democrats will bail them out; the unknown is when and on what terms. 

By Kevin Holst, Contributing Editor
Imagine for a moment that you are a business owner.  Your revenues are down and only one of your products is selling profitably.  However, it is a product line you dislike, but it allows you stay in business and invest in other areas ripe for future growth.  You have two options:  A. Increase the price of the product and tell your customers that is a bad product; or B. Find ways to increase sales of the product and invest the profits in other areas of your business.  Unfortunately, the State of Colorado and, in particular, Governor Bill Ritter's Administration (the “Administration”) has chosen option A to the detriment of State and the oil and gas industry (the “Industry”).  Rather than turning a cold shoulder to the State's primary growth industry, the Administration must give the Industry a reason to stay and invest.

A Narrarated Presentation by Rich Sokol, Contributing Editor
Editor’s Note:  America embraced “change” on Election Day, but it remains to be seen just how Barack Obama and the increased majorities on Capitol Hill will actually govern.  One thing we can be sure of is that we’re in for more government.  More taxes, more spending, more regulation. 

By Jon Anderson, Editor in Chief
The American people are about to find out just how left the Obama Administration and Democrat controlled Congress will lean over the next two years.  The initial bellwether will likely be card-check legislation.  This legislation would strip employees of their right to decide whether to unionize by a private ballot election and replace it with a system that empowers union organizers to pressure employees to sign a union authorization card in public.  The legislation was introduced in 2005 and 2007 and union organizations have made clear that card-check legislation is their legislative priority with a Democrat controlled Congress and White House.

By William Moloney, Contributing Editor
Not for nothing has Economics long been known as the “dismal science”.  Not only is it inherently boring, but hardly anyone truly understands it.  Even among the few with some understanding, rarely are they able to communicate it to others.

By Rich Sokol, Contributing Editor
On Friday October 3, 2008, the US House of Representatives passed the “Emergency Economic Stabilization Act” (“EESA”) which was immediately signed into law by President Bush. The measure creates the Troubled Assets Relief Program (“TARP”), intended to restore liquidity and stability to the financial system. Under TARP, the Treasury Department is authorized to spend up to $700 billion to purchase mortgage-related securities from eligible financial institutions.

By Kent Holsinger, Contributing Editor
In 2007, Governor Ritter pushed sweeping changes to the Colorado Oil and Gas Conservation Commission (Commission) through the legislature. HB 07 1298 and HB 07 1341 dramatically changed the make-up of the Commission (from industry experts to a majority of government appointees, environmental interests and others) and mandated new rules to impede oil and gas production in Colorado. Following a series of public meetings, the Commission issued draft rules (Rules) in March of 2008.

By Sanjai Bhagat, Contributing Editor
The current global credit crisis has its origins in the problems of the subprime mortgage market in the U.S. Until the turn of the millennium, most mortgage loans were made to borrowers with good credit histories conforming to underwriting standards set by government sponsored agencies; these loans are referred to as conforming loans. However, as noted in Table 1 and illustrated in Figure 1, subprime loans and Alt-A rapidly increased their market share. Subprime mortgages refer to borrowers that have poor credit histories. Alt-A loans are made to borrowers with good credit histories but with aggressive underwriting, such as, no documentation of income.

By Congressman Adam Putnam (R-FL)
Survey after survey shows that the American people are losing confidence in Congress, with approval ratings falling to near historic lows. Congress' approval ratings have fallen even lower since the new Democratic majority has taken control. While this should certainly not be cause for rejoicing among Republicans, it is an opportunity for us to remind the American people what it is that Republicans stand for.

Some surprisingly good economic news recently released suggests that the gloom-and-doom crowd might have to wait a little longer for the economy to go in the tank.

American workers have long lamented the "off-shoring" of jobs to places like China. American industry has often struggled to compete with Chinese manufactured goods produced with much lower labor costs. That is partially the reality of an increasingly global competitive economy and a function of capitalism and free-market societies, which I support. However, the playing field is far from always level and fair.