RELAX AND DO NOTHING

By John Tamny

Calvin Coolidge once said, "If you see 10 troubles coming down the road, you can be sure that nine will run into the ditch before they reach you." The 30th president's words are particularly prescient in light of hand-wringing by our political class over subprime mortgages, our "problem" du jour.

Sen. Charles Schumer, New York Democrat has said, "There's going to be a significant role for Congress" in working out the alleged subprime mess, while Sen. Christopher Dodd, Connecticut Democrat, has suggested that Congress should curb what he deems predatory lending. Mr. Dodd has also spoken of finding ways to help "millions of families" facing foreclosure, which, when translated, means Congress will seek to fleece millions of U.S. taxpayers to bail out those who sought financing in the subprime market. Given Congress' track record in dealing with past problems in the banking sector, investors and taxpayers should hope any legislation is stalled in committee. Indeed, the S&L debacle of the late 1980s should make even those in Congress wary of wading into more banking legislation.

Nearly 30 years ago, the savings and loan (S&L) industry was on life support. Amidst skyrocketing interest rates between 1979 and 1982, S&Ls lost $4.6 billion in 1980, and $4.1 billion in 1981. By 1982, S&Ls had a negative net worth of $100 billion. Rather than allow the industry to die a slow death, Congress stepped in to save the day.

The slow death of the S&Ls began in the 1970s when interested rates skyrocketed in response to the weak dollar. In previous decades, the S&L sector was a prosaic one where its assets were long-term mortgages paying higher rates, while its liabilities consisted of short-term, lower-rate deposits. This worked well until short-term rates rose sharply. Unable due to regulations to pay depositors more than 5-1/2 percent, S&Ls gradually lost deposits to money-market funds paying well in excess of 51/2 percent, while the falling dollar eroded the value of their fixed-rate mortgages.

Regulations and poor Fed policy surely hindered the S&L industry, still the explosion of the mortgage-backed securities market and worldwide banking competition rendered S&Ls obsolete.

But like most long-established industries in the U.S., the S&Ls had powerful political benefactors interested in keeping them alive. Congress passed the Depository Institutions Deregulation and Monetary Control Act of 1980, and the Garn-St. Germain Depository Institutions Act of 1982 to keep them afloat. Both acts served to privatize any deregulation successes, while socializing the inevitable failures.

Whereas S&Ls were previously limited in terms of the interest rates they could offer depositors, the aforementioned legislation removed all caps on rates they could post to attract deposits. Capital requirements were reduced from 5 percent to 3 percent, plus S&L loans were no longer limited to home mortgages. To pay the high rates offered on deposits, S&Ls had the incentive to make higher-risk loans and equity investments in areas beyond traditional home mortgages, including commercial and construction loans. If the S&Ls had been left to fend for themselves in this newly deregulated world, the new legislation would have been fine.

The problem, as previously mentioned, was that Congress also chose to socialize any failures. The Garn-St. Germain bill raised the level of federal deposit insurance from $40,000 to $100,000. This created enormous moral hazard in that depositors could place their funds at high rates of interest with the S&Ls worry-free. And just the same, S&L executives could be lax in their lending and investment standards with full knowledge that U.S. taxpayers were on the hook if their investments soured.

Importantly, the weakest S&Ls had the greatest incentive to swing for the fences in making loans, and this made it even more difficult for the healthy S&Ls to compete. The rest, as they say, is history. More than 1,000 S&Ls failed in the 1980s. The bloodbath continued into the 1990s; much of it on the dime of U.S. taxpayers.

Returning to the existing subprime situation, according to a recent report from Morgan Stanley, there are slightly more than $600 billion of subprime mortgages outstanding. If there were defaults on half that (thought by many to be the worst-case scenario), it would work out to 2 percent of the $15.7 trillion U.S. bond market. Considering how active foreign investors are in U.S. debt, this number shrinks to 1 percent of the $33 trillion global market. Further, $300 billion is only 1.3 percent of the U.S. housing market, and constitutes only 0.5 percent of the $55.6 trillion net worth of U.S. households. In short, $300 billion is pretty tiny in the big picture, and something the markets can easily handle. And as this is public information, stocks have already priced any presumed fallout.

Not yet priced is the governmental response to something it should best stay out of. The Bush administration has joined the echo chamber in saying it will vigorously prosecute any cases of predatory lending -- meaning future homebuyers on the riskier end of the lending curve will find it tougher to get financing in the future.

If the heads of failed subprime firms face prosecution, there will be an even greater incentive for successful firms in the subprime space to exit the industry. To the extent either lenders or borrowers are bailed out, U.S. taxpayers will eventually have to pay for the inevitable carelessness that government guarantees engender.

Still, as evidenced by the numbers involved, this is a very small problem. To avoid making it a bigger one, Congress should let the subprime scare slide into the ditch.

TINHORN DICTATOR VISITING UN

Iranian President Mahmoud Ahmadinejad is going to be in New York this weekend to address a UN Security Council meeting most likely aimed at imposing sanctions on his country. How about we arrest him while he's here and send him to Gitmo? He is an Islamic terrorist, you know. What's most outrageous is that here you have the president of a country that is our sworn enemy....stepping onto our soil. If America is such a terrible place, he sure doesn't seem to mind visiting. Must be the high-heeled shoes.

But visit he will....and just what good tidings will the good Iranian president bring? He says he has new proposals for the U.N. They must be feeling the pinch just a bit in Tehran. Must be that Russian collection agency breathing down their necks. Ahmadinejad says Iran still won't give up uranium enrichment.

It's also incredible that the American State Department has issued Visas to Ahmadinejad and his entourage. This is a country that still supports terrorism...that's training insurgents and sending them to Iraq. He's killing our troops...and we're welcoming him to New York. What's next...inviting Castro? Oh wait...we already did that. Perhaps The Gargoyle will visit us soon. At least we could get some more use out of the official U.N. booster seat.

UNNECESSARY SCANDAL

By Charles Krauthammer

WASHINGTON -- Alberto Gonzales has to go. I say this with no pleasure -- he's a decent and honorable man -- and without the slightest expectation that his departure will blunt the Democratic assault on the Bush administration over the firing of eight U.S. attorneys. In fact, it will probably inflame their bloodlust, which is why the president might want to hang on to Gonzales at least through this crisis. That might be tactically wise. But in time, and the sooner the better, Gonzales must resign.

It's not a question of probity, but of competence. Gonzales has allowed a scandal to be created where there was none. That is quite an achievement. He had a two-foot putt and he muffed it.

How could he allow his aides to go to Capitol Hill unprepared and misinformed and therefore give inaccurate and misleading testimony? How could Gonzales permit his deputy to say that the prosecutors were fired for performance reasons when all he had to say was that U.S. attorneys serve at the pleasure of the president and the president wanted them replaced?

And why did Gonzales have to claim that the firings were done with no coordination with the White House? That's absurd. Why shouldn't there be White House involvement? That is nothing to be defensive about. Does anyone imagine that Janet Reno fired all 93 U.S. attorneys in March 1993, giving them all of 10 days to clear out, without White House involvement?

The Bush administration fired eight. Democrats are charging this was done for reasons of politics, and that politics have no place in the legal system. This is laughable. U.S. attorneys are appointed by the president -- and, by tradition, are recommended by home state politicians of the same party, not by a group of judges or a committee of the American Bar Association. Which makes their appointment entirely political.

OK, say the accusers, but once you've made the appointments, they should be left to pursue justice on their own. It's nice to see that Sen. Charles Schumer, who is using this phony scandal to raise funds for the Democratic Senatorial Campaign Committee, has suddenly adopted a Platonic view of justice. But the fact is that there are thousands of laws on the books and only finite resources for any prosecutor to deploy, which means that one must have priorities about which laws to emphasize and which crimes to preferentially pursue.

Those decisions are essentially political. And they are decided by elections in which both parties spell out very clearly their law enforcement priorities. Are you going to allocate prosecutorial resources more to drug dealing or tax cheating? To street crime or corporate malfeasance? To illegal immigration or illegal pollution? If you're a Democrat today, you call the choice "political'' to confer a sense of illegitimacy. If you're a neutral observer, you call the choice a set of law enforcement priorities reflecting the policy preferences of the winner of the last presidential election.

For example, both voter intimidation and voter fraud are illegal. The Democrats have a particular interest in the former because they see it diminishing their turnout, while Republicans are particularly interested in the latter because they see it as inflating the Democratic tally. The Bush administration apparently was dismayed that some of these fired attorneys were not vigorous enough in pursuing voter fraud.

There is absolutely nothing wrong with this. Pursuing voter fraud is not, as The New York Times pretends, a euphemism for suppressing the vote of minorities and poor people. It is a mechanism for suppressing the vote of (among other phantoms) dead people. Conservatives have a healthy respect for the opinion of dead people -- conservatives revere tradition, which Chesterton once defined as "the democracy of the dead'' -- but they draw the line at posthumous voting.

If the White House decides that a U.S. attorney is showing insufficient zeal in pursuing voter fraud -- or the death penalty or illegal immigration or drug dealing -- it has the perfect right to fire him. There is only one impermissible reason for presidential intervention: to sabotage an active investigation. That is obstruction of justice. Until the Democrats come up with any real evidence of that -- and they have not -- this affair remains a pseudo-scandal. Which would never have developed had Gonzales made the easy and obvious case from day one.

DEMOCRATS THROW IN THE TOWEL

Out of Iraq Caucus members Reps. Lynn Woolsey (D-CA), William Lacy Clay (D-MO), Barbara Lee (D-CA), Maxine Waters (D-CA), Stephanie Tubbs Jones (D-OH), Neil Abercrombie (D-HI), Dennis Kucinich (D-OH), and Barney Frank (D-MA).

Democrats are still trying to find the votes to pass a measure setting a timeline for surrender in Iraq. They're still a couple votes short...and as for the $124 billion funding bill that does everything from fund the war to bail out the spinach industry in California? They're all going to vote for it. So much for principle...I guess everything does have a price.

The Out of Iraq caucus...a group in Congress dedicated to surrender in Iraq....was evidently appeased enough by a timeline attached to the appropriations measure that they've now decided to not block the measure. The real reason is they don't have the votes to stop it. With Democrats loading up the bill with pork, it is destined to pass. Forget about stopping the war....this is is all about buying votes and cashing in.

But here's the absolute best part. As a result of the Democrats' inability to stop the war in Iraq and cut the funding for it, ultra, anti-war leftists have begun protesting at campaign events and showing up at members' offices in Congress. The latest victim of a protest? House Speaker Nancy Pelosi. Just yesterday a bunch of crazies were arrested outside Pelosi's office yesterday afternoon.

The name of the demonstration? "Pin the war on the donkey." Priceless.

GORE'S GLOBAL WARNING RELIGION

by Ann Coulter

No matter how much liberals try to dress up their nutty superstitions about global warming as "science," which only six-fingered lunatics could doubt, scratch a global warming "scientist" and you get a religious fanatic.

These days, new religions are barely up and running before they seize upon the worst aspects of the God-based religions.

First, there's the hypocrisy and corruption. At the 1992 Democratic Convention in New York, Al Gore said: "The central organizing principle of governments everywhere must be the environment." The environment would not, however, be the central organizing principle of Gore's own life.

The only place Al Gore conserves energy these days is on the treadmill. I don't want to suggest that Al's getting big, but the last time I saw him on TV I thought, "That reminds me -- we have to do something about saving the polar bears."

Never mind his carbon footprint -- have you seen the size of Al Gore's regular footprint lately? It's almost as deep as Janet Reno's.

But I digress. As has been widely reported, Gore's Tennessee mansion consumes 20 times the energy of the average home in that state. But it's OK, according to the priests of global warming. Gore has purchased "carbon offsets."

It took the Catholic Church hundreds of years to develop corrupt practices such as papal indulgences. The global warming religion has barely been around for 20 years, and yet its devotees are allowed to pollute by the simple expedient of paying for papal indulgences called "carbon offsets."

Americans spend an extra $2.2 billion on gas a year because they're overweight, requiring more fuel in cars to carry the extra pounds. So even with all those papal indulgences, Gore may have a small carbon footprint, but he has a huge carbon butt-print.

Further proving that liberalism is a religion, its practitioners respond with the zeal of Torquemada to any dissent from the faith in global warming.

A few years ago, Danish statistician Bjorn Lomborg wrote a book titled "The Skeptical Environmentalist," disputing the hysteria surrounding global warming and other environmentalist scares. Lomborg is a Greenpeace anti-war protester -- or, as he is described on liberal websites, he is a "young, gay vegetarian Dane with tight T-shirts." His book was cited favorably in The New York Times.

But for questioning the "science" behind global warming, Lomborg was brought up on charges of "scientific misconduct" by Denmark's Inquisition Court, called the "Ministry of Science, Technology and Innovation." I take it Denmark's Ministry of Truth was booked solid that day.

The moment anyone diverges from official church doctrine on global warming, he is threatened with destruction. Heretics would be burnt at the stake if liberals could figure out how to do it in a "carbon neutral" way.

Climatologist Dr. Timothy Ball is featured in the new documentary debunking global warming, titled "The Great Global Warming Swindle." For this heresy, Ball has received hate mail with such messages as, "If you continue to speak out, you won't live to see further global warming."

I'm against political writers whining about their hate mail because it makes them sound like Paul Krugman. But that's political writers arguing about ideology.

Global warming is supposed to be "science." It's hard to imagine Niels Bohr responding to Albert Einstein's letter questioning quantum mechanics with a statement like: "If you continue to speak out, you won't live to see further quantum mechanics."

Come to think of it, one can't imagine the pope writing a letter to Jerry Falwell saying, "If you continue to speak out, you won't live to see further infallibility."

If this is how global warming devotees defend their scientific theory, it may be a few tweaks short of a scientific theory. Scientific facts are not subject to liberal bullying -- which, by the way, is precisely why liberals hate science.

A few years ago, The New York Times ran an article about the continuing furious debates among physicists about quantum mechanics, which differs from global warming in the sense that it is supported by physical evidence and it doesn't make you feel good inside to "do something" about quantum mechanics. It is, in short, science.

Though he helped develop the theory of quantum mechanics, Einstein immediately set to work attacking it. MIT cosmologist Max Tegmark called the constant testing and arguing about quantum mechanics "a 75-year war."

That's how a real scientific theory operates. That's even how a real religion operates. Only a false religion needs hate mail, threats, courts of inquisition and Hollywood movies to sustain it.

LET THE SUBPOENAS FLY

The showdown is beginning between the Congress and the administration over these U.S. Attorney firings. Soon they Democrats say they will actually issue subpoenas to White House officials. The president will claim executive privilege and it will be thrown into the courts. All over nothing. So far, there is absolutely no charge that anything illegal took place. There is no crime in firing U.S. Attorneys for political reasons. These are political jobs. Maybe what President Bush should have done was fire all 93 like Bill Clinton did. Then nobody would have noticed.

This really has nothing to do with the U.S. Attorneys. It's all about the Democrats #1 agenda: embarrassing the White House and diverting attention from their empty agenda. Really..what have Democrats done since taking over Capitol Hill in January? Does anybody remember any landmark legislation from their first 100 days? Raising the minimum wage, well there was that. Yawn.

So now the White House says if the House issues subpoenas for Karl Rove and Harriet Miers, the deal of being able to meet with them both in private is off. Still, there are signs Democrats may be backing down, just a bit. John Conyers and Chuck Schumer say they are continuing to negotiate with the administration. Is this because they know their subpoenas won't hold up in court? Perhaps.

This is just like the Valerie Plame non-affair. A lengthy, expensive investigation into...nothing. Welcome to the Democratic Washington.