So, you want to take money from people who have earned it and give to others, but do it in a way that makes everyone think that it’s a good idea? It’s easily done. Of course it will take a couple of years and cause a terrific amount of damage but your goal will be accomplished.

Let’s start with banks. They have all the money so we need to force them to loan it to people who don’t have any. We will get the government to change the normal banking rules and tell the banks if they want to expand they will have to authorize loans to people who ordinarily would not qualify. If you want to survive you need to expand so many banks will start giving out these Less Than Prime (LTP) loans.

Of course LTP loans can cause problems for the banks since they want to be repaid. So let’s have the government step in again and buy those LTP loans from the banks. We will create a government mortgage agency and, for this experiment, call it Daisy Mae. The role of Daisy will be to buy loans from banks so they have enough cash to create more LTP loans. Thus, the banks fulfill their legal obligations and make money through fees and interest. We’ll even staff Daisy with officers who are gung ho on the plan and whose bonuses depend on making the plan work.

Now even with government support, Daisy can run short of money too. They will need to unload these loans as well. Here is where it gets stupid, or smart depending on your goals. We will have Daisy package these LTP loans into securities and sell them back to the banks as investments. As long as the economy is good and housing prices are going up, these investments are making money. With an increase in their assets and a government partner, the banks find that they are able to make even more LTP loans. We have now created a self-perpetuating doomsday device.

As we know, economies go up and they go down. The housing market does as well. All we have to do now is wait until a downturn in the economy triggers our device. As the economy goes down people get behind in their mortgages and those who bought more than one home as investments cannot sell them, so they stop their payments as well. We now have a government induced crisis that supposedly can only be solved by the government.

But they tell us that all will be okay. They will borrow money and buy the bad loans from the banks. The program will cover all the banking system like a tarp to keep them in business and help the economy. Included in this program will be system to refinance your mortgage with a lower government determined interest rate. The government will save your home and will take control of your mortgage from those evil banks that wanted to foreclose on you.

We are now primed for the last stimulating step. Let’s have the government borrow even more money and spend it on socially irresponsible programs that will do little to create the jobs we need. This will prolong the floundering economy and increase the cries for help. What better way to help you out when you cannot pay your new government mortgage than for the government to just forgive the loan and deed your house to you free of charge. Now you will be free from the mortgage and can spend your money to revitalize the economy. What a wonderful, kind, caring, and compassionate action for your government to take. How can anyone not be impressed and call it the best action any government has taken.

You now have a home that you did not pay for at the cost of massive government borrowing. But don’t worry about that. The government will repay those loans by getting money from where they always get money, the taxpayer. They will just raised taxes on those who do pay taxes, not you of course, and use it to repay those foreign countries that hold the notes. You get a home and the government uses another Americans’ money to pay for it. How could that be bad?

 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.