This entire mess with the economy started with the Community Reinvestment Act enacted by President Carter. Designed to reduce discriminatory lending practices, which I support, it had the unintended consequence of placing the government in the position of evaluating the banks low income lending practices whenever that bank wanted to expand.

If you wanted to open a branch in another state, merge with another bank, or simply acquire an asset, you had to demonstrate your CRA compliance. No, not the part where you are eliminating discriminatory practices, but the part where you show what percentage of loans are to lower income areas.

Even so, there was progress for a while. Discriminatory practices were reduced and banks started to move into areas they had previously stayed away from. Of course whenever the government gets a toe hold, it wants more. It seized on the CRA score and started using it to force banks to increase the amount of loans to lower income people.

In 1989 the Financial Institutions Reform Recovery and Enforcement Act required banks to publicize their CRA ratings. This gave community organizations the ability to pressure banks into giving loans they may have felt were shaky.

Then along came President Clinton. In 1992, 1994, 1995, and 1999 he signed into law various bills that further increased the need for a bank to have a good CRA score. He removed interstate banking regulations for banks that had a good CRA score (I thought Bush was into deregulation). So by loaning money to people who may not be able to pay it back you could grow into a multi-state bank instead of a local one.

He directed Fannie Mae and Freddy Mac to devote a percentage of their money to buy these CRA mortgages. Now a bank could give out a sub-prime loan to increase their CRA rating and then sell it to reduce their risk in case of a default. And sell they did.

His whole purpose was to use the government to force banks to loan money to lower income people thinking it would improve their lives with home ownership. Over the following years, this idea was encouraged by several Democrat leaders. Even though the warnings were out there, this policy was followed, leading us into the current financial crises.

Of course, loaning money to people who cannot pay it back doesn’t help them. If you want to put a person into a home they cannot afford, get them a better job. Don’t change sound banking policy and put everyone at risk. The role of government should not be to force a social agenda onto the public, but to provide opportunities for the people.

When times are tough, get me a job. When times are good, promote growth so I can find a better job. As long as the banking process is fair, I can get my own mortgage and I will not default. This mess we are in now can be weathered as long as the government finds a way to help businesses expand and provide us with the jobs we need. We’ll take care of the rest.

 In his televised infomercial, Senator Obama let loose with one of the magic words. He said that her wants to make sure everybody makes a “living wage”. Sounds good doesn’t it? If everyone makes a living wage then there is no more poverty and all will be able to afford health care insurance and send their kids to college. What could be better that that?

So, what is a living wage? How much do you need to provide a decent living for your family? If you are married and have 2 children, how much will you need to earn? Would you need $40,000, $50,000, or maybe $60,000 to live on?

Let’s say a family of 4 needs $50,000 a year to own a home, a car, a 401K plan and health insurance. That’s nearly $25 an hour. Does the phrase “make a living wage” mean that everyone will make at least $25 an hour? A family in the Midwest might be able to live on that, but I doubt you could live in New York or San Francisco on that.

What if your job is cooking french fries at the local McDonalds. A mandated living wage could mean you have to pay that person $25, or more, to cook those fries. Good work if you can get it. I had to get training in computers and electronics before I made it to that level.

I have to wonder though, what effect will tripling the wages for your fry cook do to the price you have to charge for those fries? Will you still be able to get a small fry for only a dollar? When you last were in a McDonalds at lunchtime, I am certain there were several people working there. If they were all making $25 an hour (more for the managers) what will the price be for your lunch? Will you be able to walk in there with $6 and still get a meal? I don’t think so.

For most businesses, wages are their highest expense. Tripling wages for the lowest level will force them to also raise wages for skilled workers. When your largest expense grows, so does the amount you have to charge for your product. It’s either that or lay people off. If you are having problems now with inflation, what will you do when everything doubles in price? What will the new living wage be when prices double?

Entry level jobs are meant to not only help businesses keep prices down, but to provide non-skilled workers an entrance into the work force. It gives them experience and shows them what additional schooling and training will do for them. If you can make a living wage without even graduating from high school, what motivation is there for you to improve yourself? My first job paid me $1.70 an hour and I was glad to get it. But I knew even then it was time to finish school and get moving. I am a better provider for my family because of it.

I realize that Senator Obama wants to get elected and saying “living wage” automatically triggers sympathy in many voters. But what will the true cost of such a policy be for America? What will happen with inflation? How will that policy affect the desire of our kids to attend college if they can make that “living wage” without even graduating from high school?

 

Many have made a lot about the choices that Senator Obama has made in the people he associates with. He has chosen people like Jeremiah Wright and William Ayers and has had those choices questioned. Senator Obama replies to those questions by saying that they were not the people he knew or, in the case if Ayers, he assumed that repentance had happened.

If we take the Senator at his word, we can say that he has made some bad choices. People do make bad choices. Your knowledge of a person may be incomplete when you choose to associate with someone and this may lead to a bad choice. I have made that mistake myself. Of course an association requires the choice of both people. To maintain an association or friendship, both partners must choose to do so.

We have heard Senator Obama’s reasons and assumptions but we have not heard from the other people in question. We have not heard why someone who preaches “God d@mn America” would chose to introduce Obama to influential people in the community. Nor have we heard why someone who talks about the “KKK of America” would choose to give the opening prayer at an Obama event. Even though he was later asked not to give that prayer in public, he still chose to do so.

One could also question the motivation behind the decision of Ayers to associate with Obama. Why did a person who was glad to be photographed standing on the American flag, host a fund raising party for the Senator? Do you raise money for people you know nothing about?

Why did someone who said he was not sorry about his past terrorism, but wished he could do more ask Barack Obama help him distribute money for his project? William Ayers and 2 others were authors of a proposal for grant money from the Annenberg Foundation. He was then instrumental in creating the organization to distribute the money. One of the people chosen to run the organization was Barack Obama. Ayers went on to attend many of the meetings even though he was not on the board. It would be difficult to say that he had no say in the choice of board members.

Let us not forget Tony Rezko. More than once he tried to get Obama to work for him. Did he have a flash of insight that if only Obama would work for him he might refrain from wire fraud and solicitation?

As I have said before, people can make mistakes in their associations. Senator Obama has attempted to explain how he came to make those mistakes. Now, can we hear from the other side? Why did those people all decide to associate with Barack Obama? What did they see in him that would encourage them to include the Senator in their lives?