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Progressives’ new ‘state bank’ as the rocky road to serfdom

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Why does a bank robber rob banks?

“Because that’s where the money is.”

Or so goes the legendary response by the infamous bank robber Willie Sutton (who later denied ever saying it).

So why is the new progressive Governor-Elect of New Jersey (a former Obama Administration Ambassador to Germany and Goldman Sachs executive named Phil Murphy) proposing a “state bank”?

Why, maybe that’s because taxpayers are where the money is?

Can Gov.-Elect Murphy Make a Go of His Public Bank? – NJ Spotlight

http://www.njspotlight.com/stories/17/11/12/can-gov-elect-murphy-make-a-go-of-his-public-bank/Gov.-elect Phil Murphy often told a story on the campaign trail about how, as a relative newcomer to statewide politics, few people in New Jersey had even heard of him before he jumped into this year’s governor’s race. After his victory last week, the same could be said about one of Murphy’s core fiscal-policy proposals — a plan to launch a state-run public bank in New Jersey. The type of financial institution envisioned by Murphy would take state-government funds now deposited in accounts with large commercial banks, including those based overseas, and use them to back low-interest loans that would serve the public’s interest in New Jersey, including student debt, infrastructure investments, and small-business lending.

New Jersey already has the third-highest state and local taxes in the nation (behind only its neighbor New York and nearby Connecticut), thanks to a double whammy in an income tax and high property taxes generally credited with supporting the largesse of generous salaries and benefits for legions of public-sector employees.

One problem is where that state bank will get its money. The progressive Governor-Elect Murphy declares, “That’s our money!” Yet there is no thought to returning it to overtaxed taxpayers — not when there’s votes to buy and a money pot whose bottom is not yet visible. Because when Murphy and his progressive do-gooder allies use the first-person plural pronoun, they are referring to the government and not the people.

As politicians in the bluest of the blue states learn that promising endless “free” stuff, particularly when it’s paid for by political opponents and disfavored constituencies, is a recipe for getting elected, perhaps attacking liberals and progressives for wanting to raise taxes will no longer be a winning campaign argument. Not when many voters are net recipients of government monies, meaning, they simply don’t pay taxes. However, a “state bank” could cause numerous undesirable effects beyond taxes to infinity, beyond encouraging inflation.

Consider how banks work, and then consider the very premise of Murphy’s “state bank” is that it would step in where greedy conventional for-profit banks supposedly fail “to serve the community.” The suspicion here is that the state bank will be giving “low-interest” loans to people or businesses which otherwise are not getting loans on the terms they want, or at all.

When you seize the money earned and saved by the homeowner with an 800 FICO score, to underwrite a loan for his deadbeat neighbor in foreclosure who’s got a 520 FICO score, you aren’t being generous or compassionate. You are creating a moral hazard, and an immoral condition.

The second problem arises from a fundamental misunderstanding of — no, it is a fundamental disregard for — how a conventional bank works. A bank makes loans, because it makes money off the interest. It must put the capital to use. However, there’s the risk of nonpayment, of borrower defaults. Banks “fail” when they suffer too many nonperforming loans. No one wants to talk about this, because it involves acknowledging that the collateral is bad, that the bank made a mistake, that it issued a mortgage worth more than the underlying collateral to a bad credit risk on even worse terms (like the infamous no-income-no-assets-no-problem mortgages).

The lesson of the last decade’s housing bubble and nonperforming mortgages (of which many still are on the books of the largest lenders) apparently is going to be ignored for as long as there is a large supply of “marks” available to shoulder the eventual burden. So we can expect that the New Jersey state bank — and its copycats in other states, of that you can be certain — will soon start making bad lending decisions to borrowers of either questionable credit risk or otherwise connected to various “social justice” initiatives.

Then, when the loans start to “go bad” and go into default, you can expect the state bank to start playing “winners and losers” when deciding whose collateral to go after. Your car dealership may be seized, while the marijuana farm may be allowed forbearance on its defaulted loan. And just think what mischief can be made by politically-connected local prosecutors who can use their “discretion” to choose whom to investigate and prosecute, all to serve a progressive political agenda whose singular goal is to transform the society.

Taxpayers across America should shudder at the thought of government-run banks. Because those banks would be deploying our capital, raised from taxes and from government debt, often sold to foreign bond buyers like the Russians and Chinese. But without the nasty profit motive — which in plain English also amounts to old-fashioned accountability to savings account depositors like you and me — to ensure loan officers only make loans most likely to be repaid, the state bank is likely to accomplish only three things.

A new set of winners: tomorrow’s sellers of assets at inflated prices due to the availability of new credit for car loans, home loans, college loans and small business loans, often with no regard for the terms or creditworthiness of the borrower (and perhaps little to no expectation of repayment).

A new set of losers: Since the premise of a state bank is, we are told, to serve the poor and often first-generation immigrants or members of traditionally-underserved “minority” communities, we can expect the debt and wrecked credit scores from defaulting loans to be shouldered by these same groups. Tomorrow’s college students may be in greater debt than the current generation’s. More people may end up renting, as bad credit is no guarantee of affordability against inflated and rising home prices.

The result? Another generation headed for practical indentured servitude. The difference? This time, the lender will be the government.

A second set of repeat losers: These will be the owners of anything which can be indirectly collateralized to cover those loans. We’re talking property owners and the middle-class income producers. Future tax streams can — and in all likelihood must — be “securitized” to cover delinquent loans.

Again, the party able to place liens on stressed property owners for unpaid taxes? The government.

The rich white guy ex-Goldman Sachs may be able to escape checking his privilege while playing Robin Hood. The reality is that he’s playing the Pied Piper, but only as long as he plays the tune called by his decidely unmerry band of progressive, envious knaves, rejects and scalawags who now threaten to turn New Jersey today — and your state tomorrow — into a land of serfs beholden to the do-gooder lords of the manor.

Conservative corporate lawyer, commentator, blockchain technology patent holder and entrepreneur. Headquartered in a red light district in the middle of a deep blue People's Republic.

Economy

The number of companies helping employees thanks to tax cuts is 164 and rising

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The number of companies helping employees thanks to tax cuts is 164 and rising

Republican tax cuts were met with instant success on the business front when the President signed them into law last month. Companies across the nation rewarded their employees and customers by passing on some of the saving they’ll get. It’s helping to push the economy even higher than it was last year.

As Nick Givas covered over at Daily Caller, the total number of companies giving back to their people is 164 and rising:

164 Companies Credit Tax Reform For Bonuses And Pay Raises

One hundred sixty-four companies have gone on record stating they gave bonuses and pay raises to employees because of the new tax reform law, according to Americans for Tax Reform. The list has been continually updated and jumped from 40 companies to 164 in 10 days, The Washington Examiner reports. The businesses include: American Airlines, AT&T,… (more…)

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Democrats

With both sides wanting more spending, Wednesday’s government funding discussions end in a stalemate

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With both sides wanting more spending Wednesdays government funding discussions end in a stalemate

There was no movement Wednesday as top Republican and Democratic leaders met at the White House to lay down their ultimatums for funding the government. With two weeks of funding still allotted, neither side seemed to be in a hurry to compromise.

One of the main sticking points was purely political. Democrats wanted something written into the spending agreement that would give certain guarantees to “Dreamers” who they say are having their futures jeopardized by President Trump’s rescinding of President Obama’s DACA executive order. This is purely for show to try to win back some of the Hispanic voters they lost in 2016 and into 2017. With the President showing more compassion for “Dreamers” than anticipated by preemptively demanding that Congress put together a permanent fix, Democrats needed to regain ground and act as if they’re the ones fighting on behalf of illegal immigrants.

Republicans were equally theatrical with their opposition to such an addition to the funding agreement, claiming they wanted to first fund the government, then address DACA before the March deadline. They could just as easily allowed something in the funding agreement, knowing they’re going to pass some variation of amnesty in the next month and a half, but instead chose to draw the red line.

The more alarming sticking point in the funding deal is that both sides want to spend more and are actually leveraging the other side’s spending increases to negotiate for spending increases of their own. Republicans want to raise defense spending. Democrats are opposed unless they can raise non-defense spending as well. In the end, it’s very likely that this “impasse” will result in both sides getting what they want: move spending across the board.

Further Reading

No spending deal after GOP, Dems meet with White House officials Wednesday

http://www.washingtonexaminer.com/no-spending-deal-after-gop-dems-meet-with-white-house-officials-wednesday/article/2644897“It is important that we achieve a two-year agreement that funds our troops and provides for our national security and other critical functions of the Federal government,” the White House, House Speaker Paul Ryan, R-Wis., and Senate Majority Leader Mitch McConnell, R-Ky., said in a joint statement. “It also remains important that members of Congress do not hold funding for our troops hostage for immigration policy.”

“We’ve been clear about these budget priorities from the beginning and hope that further discussions will lead to an agreement soon,” they added.

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Economy

Leon H. Wolf on both major parties growing government and budgets

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Leon H Wolf on both major parties growing government and budgets

Leon H. Wolf, managing editor at The Blaze, is a big fan of limited government. Unfortunately most Republicans and all Democrats on Capitol Hill tend to favor expanding government. It’s no wonder Wolf is opposed to the way leaders in the two major parties are attempting to fund government.

In a recent article, he went after the parties and the whole process being initiated with the new year. One line in particular is worth highlighting:

“It should be noted that almost no one in either branch of government on either side is attempting to actually reduce the size of the government or its budget.”

Source: The Blaze

Republicans and Democrats open 2018 by arguing over how much to grow the size of government

http://www.theblaze.com/news/2018/01/01/republicans-and-democrats-open-2018-by-arguing-over-how-much-to-grow-the-size-of-governmentAs the holiday season comes to a close, Republicans and Democrats are opening the new year by resuming debate over a measure to fund the government through the end of 2018. The two sides failed to reach a compromise before the end of the year on such thorny issues as protection for Deferred Action for Childhood Arrivals (DACA) recipients and funding for a wall on the southern border. But in addition to these sticking points, the two sides also appear to disagree over exactly how much the government should grow.

According to Reuters, the White House is pushing for massive increases in military spending along with a 7 percent increase in overall non-discretionary non-military spending, while Democrats are holding out for an 11 or 12 percent increase in non-discretionary spending.

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