Tuesday, October 12, 2010

NINJA loans

In another discussion yahoogrouops where I belong, a friend commented about the Sydney and Jakarta conferences that I attended the past two weeks as "Free Market junket", and that

being a free market guy lets you travel around the world espousing the unabashed "free market" ideas when the whole world right now is reeking with government interventions left and right from - trade sanctions on China, the recent currency war between China, and the U.S.... Unabashed capitalism has led to the sub-prime crisis in America in 2008. Borrowing too much, while the economy was not making new money...

One of the greatest lies of statist thinking is that the recent global economic turmoil that started in the US was a product of free market policies. Wrong. The financial turmoil -- or what most would call as financial "crisis" -- happened precisely because of heavy state intervention and coercion in an otherwise private transactions between banks and borrowers. In particular, between home lenders and home borrowers.

Why? The "NINJA loans" explain it: "No Income, No Job or Assets" loans. The US government -- through the Federal Housing Administration (FHA), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) -- coerced private banks to give housing loans even to NINJA people. Yes, it was declared a criminal act by private banks if they will refuse to lend housing loan to certain NINJA people.

For instance, FHA lowered the downpayment to get a house, traditionally at 20 percent, to only 3 percent early this decade, down to 0 in 2008. If there is no downpayment required, why rent? Why not get a house, even if you have no stable income? That's plain state intervention and coercion, pure and simple.

See such discussion by Tom Palmer here.

And it is no junket travel. The Americans for Tax Reforms (ATR) money is purely, 100 percent, private money -- from individuals, foundations, corporations, and other fund raising activities by ATR. If donors stop supporting them, end of story. It was ATR money that paid for my plane fare and hotel in Sydney. In return, organizers and participants have to show to ATR donors that the expenses are worth it.

Compare such travel on UN or WB or ADB or RP government or any government money -- well, taxpayers money actually -- that is where most junket travels occur.

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