Hillary Hoover

Democrats like to keep reminding us about Herbert Hoover. In our revisionist history we all know that Herbert Hoover single handed caused the Great Depression and FDR was the savior. Now of course Hoover deserves blame, but not for the reason that the nanny state party would like.

After the stock market decline and the downturn in the economy, Hoover gathered business leaders to get them to agree not to fire people until things got better. This was a monumentally bad action. While not single handed causing the Depression it did contribute.

Today Hillary Clinton is advocating the same type of policy in the housing slump. She is advocating a moratorium on foreclosures on sub-prime mortgages and a freeze on interest rates for five years. By the way, this is supposed to fix the crisis.

Politicians of all stripes need a victim and a villain (another legacy of the New Deal and the Great Society. Government as savior. A piece for another day). Cases like this where there are no sympathetic characters don't play well for them. While there are exceptions to the generalization, we have banks in the interest of larger profits offered high interest loans to people that usually would not qualify for financing. Used as a way to increase their credit score by responsible people I believe these loans have a legitimate purpose. Banks sold too many of these to bad risks. No sympathy here.

On the other side the vast majority of these were either people who could not afford the loans or people that thought they were going make millions flipping houses. Of course when the sales of homes slowed down these people were stuck with properties they could not afford. Once again few sympathetic characters. When the government steps in to help them out, these borrowers will learn that no matter how bad your judgement is, the government will step in to save you. The banks will learn the same thing. No incentive to practice good judgement.

Besides the fact that neither side deserves to be bailed out, this will have disastrous financial consequences. The banks that issued these loans now have to absorb the losses. if prevented from moving to foreclose on these properties in default we will be forcing more strain on their balance sheets. For this sector of the economy to recover it has to get back to receiving money on solvent legitimate loans. Forcing them to tie up this money in bad loans is prolonging the sectors' recession.

The actions by Hoover helped prolong the downturn that turned into the Great Depression. I am not saying if enacted the plan by Ms. Clinton would do that, but for that sector of the economy it could do just that. It could push the duration of this housing slump out years. Presently the economy may be able to withstand the housing slump, but if actions like this stretch its duration and maybe make it worse, the economy may also slip into recession. These are exactly the wrong actions for our economy. We must demand more from our elected leaders than hollow emotional responses to problems. We need adults in Washington. Ms. Clinton clearly is not.