Integrating Missionally

A couple of quick notes on the defeated bailout bill.  This bill scared me to death.  Why?  Because it was the institution of full-blown socialism.  From an article today entitled, “Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout,”

In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

From another article:

Another possible change to the bill would modify “mark to market” accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

Some House Republicans say current rules forced banks to report huge paper losses on mortgage-backed securities, which might have been avoided.

This is the most disturbing aspect of what has happened.  Changes were made so that the value of assets had to be assessed at what they could be currently sold for, not what they were valued.  So if the bank made a $150,000 loan, but could only sell it for $30,000, that had to be reflected on the balance sheet of the bank, despite the fact that the bank may not want to even try and sell it for ten or thirty years.  Thus, banks were taking huge write-offs, despite the fact that over 90% of the mortgages were being paid.

In addition, the credit rating agencies (S&P, Moody’s) changed how they rated the credit value of lenders.  They tied credit worthiness to stock price.  As the stock price dropped, banks had to raise capital to maintain their credit rating.  Now banks won’t loan money because they need that cash to maintain a credit rating.

The last thing we need is the government trying to control banking or create a national bank.  Healthy regulation needs to be in place.  What that should look like is not socialism, or even marxism.

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