Archive for May 13, 2008

Ron Paul
Tuesday, May 13, 2008

The House passed two bills attempting to rehabilitate the housing and mortgage market this week. There doesn’t seem to be any shortage of criticism and blame for the bad decisions, and rightly so. Lenders and banks do share much of the blame for the overheated market. Lending standards were relaxed, or even abandoned altogether, creating an exaggerated pool of homebuyers that led to ballooning home prices that many, especially real estate investors, expected to continue forever. Now that the bubble has burst, the losses are staggering.

However, many in Washington fail to realize it was government intervention that brought on the current economic malaise in the first place. The Federal Reserve’s artificially low interest rates created the loose, easy credit that ignited a voracious appetite in the banks for borrowers. People made these lending and buying decisions based on market conditions that were wildly manipulated by government. But part of sound financial management should be recognizing untenable or falsified economic conditions and adjusting risk accordingly. Many banks failed to do that and are now looking to taxpayers to pick up the pieces. This is wrong-headed and unfair, but Congress is attempting to do it anyway.

These housing bills address the crisis in exactly the wrong way, by seeking to hide the problem with more disastrous government bail-outs and interventions. One measure, HR 5830 the Federal Housing Administration (FHA) Housing Stabilization and Homeowner Retention Act would allow the FHA to guarantee as much as $300 billion worth of refinanced home loans for those facing threat of foreclosure. HR 5818 the Neighborhood Stabilization Act, would provide $15 billion in loans and grants to localities to purchase and renovate foreclosed homes with the object of then selling or renting out those homes. Thankfully, President Bush has vowed to veto both of these bills. It is neither morally right nor fiscally wise to socialize private losses in this way.

The solution is for government to stop micromanaging the economy and let the market adjust, as painful as that will be for some. We should not force taxpayers, including renters and more frugal homeowners, to switch places with the speculators and take on those same risks that bankrupted them. It is a terrible idea to spread the financial crisis any wider or deeper than it already is, and to prolong the agony years into the future. Socializing the losses now will only create more unintended consequences that will give new excuses for further government interventions in the future. This is how government grows – by claiming to correct the mistakes it earlier created, all the while constantly shaking down the taxpayer. The market needs a chance to correct itself, and Congress needs to avoid making the situation worse by pretending to ride to the rescue.


DHS Now Considering the Sale of Plum Island

According to the latest  Congressional Research Service Report to Congress on issues relating to the Nation Bio Agro Defense Facility, the Department of Homeland Security (DHS) is toying with the idea of selling off Plum Island (PIADC) and using the proceeds for a future biohazard facility, the NBAF or  other future operations. The big question is how much is it going to cost us taxpayers to clean up this pathogenic “Chernobyl? I mean let’s face it the clean-up  of this island will make a  Superfund  site look like a theme park. According to the report the preparing Plum Island for “dispostion” could top $100 million and  there is no way we, the taxpayers should have to foot the bill for the clean-up. Honestly truth is really stranger than fiction isn’t it?

From pages CRS-19 & CRS-20 of the report.  

Selling Plum Island

  One option raised by DHS has been to sell Plum Island and use the profit from such a sale to offset the construction costs of the NBAF, the decontamination and remediation costs for the island, and the demolition costs for the PIADC. Under this proposal, DHS would sell Plum Island in FY2009 or FY2010, arrange with the purchaser to allow operations to continue until the NBAF construction was finished, and transfer Plum Island to the purchaser only after clean up of the island had been completed. Most sales of surplus property are handled by the General Services Administration and any funds received redirected into the Treasury

The DHS has proposed to add statutory language to the FY2009 DHS appropriations act providing express authority to liquidate the Plum Island assets and retain the proceeds of the sale. The proposed language indicates that these funds could be used to offset costs associated with construction of the NBAF; however, the proposed language would also allow the DHS Secretary to use the net proceeds of the Plum Island sale for “other real property capital asset needs.”


Under this proposed language, the net proceeds from the sale of Plum Island would be retained by DHS until fully spent rather than reverting to the Treasury at a future date. The amount of money that might result from liquidation of the Plum Island assets is uncertain. Fluctuations in remediation costs for environmental clean-up of the island and property values, for example, contribute sizeable uncertainty to any estimate of a future sale’s proceeds. The sale might provide net funds insufficient for the construction of the NBAF or might provide substantial surplus funds even after the NBAF construction is complete.

Policymakers, in considering DHS’s proposed language, may weigh the value of having offsetting revenue for current and future construction performed by DHS against the potential for lessened congressional oversight of DHS capital construction projects. By providing such authority, Congress may be lowering DHS’s burden for justifying construction projects, as new appropriations might not need to be requested for each project. In contrast, having a secure, readily available source of funds might allow DHS great flexibility and efficiency in planning and executing future construction projects.


Want to know more about the origin and the operations of Plum Island watch this special report.

Any thoughts?


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