Contributor Post Created with Sketch. Today in Misguided, Counterproductive, Onerous, Pernicious Federal Regulation

 

As the presidential primaries dominate the news, under the radar the Obama administration continues its unilateral assault on the economy and civil society. Consider the news from just this week.

1. We start with HUD, courtesy of the Wall Street Journal: “The U.S. Department of Housing and Urban Development on Monday released guidance that could give ammunition to tenant advocates, saying the practice of excluding tenants based on their criminal or arrest records could violate the Fair Housing Act where it has a disproportionate impact on blacks and Hispanics.” The argument is basically that use of criminal history in this way is discriminatory because African Americans and Latinos are disproportionately represented in the prison population.

2. Of course, one way to avoid discrimination in renting is to buy your own home. From the Washington Post, we learn that the FHA is spearheading an effort to increase mortgage lending to low-income borrowers:

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Banks are damned if they do and damned if they don’t. If they lend imprudently, they are open to legal and regulatory action. However, if they avoid lending to risky borrowers, they are also open to legal and regulatory action. Yet the Obama administration has confidence that it can direct those in the business where to find the golden mean.

3. On Wednesday, the Department of Labor released its long-anticipated new “fiduciary rule” for retirement plans. Although the new rule was less severe than the industry feared, it is nonetheless far-reaching and changes the landscape for 401(k)s and IRAs. At its core is a new requirement that people offering retirement advice must act as fiduciaries — i.e., for the exclusive benefit of their clients — instead of merely being honest and ensuring that products are suitable. This change may sound good on the surface, but will have unintended and counterproductive side effects. The rule will not only require changes to compensation practices, it will require considerably more time on the part of anyone who offers investment advice, and will substantially increase their liability. This makes it not worth the cost or the risk for advisors to serve middle-income clients. A rule put forward ostensibly to help the less-sophisticated will make it harder for those savers to get reasonably-priced products and advice.

Tellingly, the DOL is proposing waivers so that state governments do not have to adhere to the new standard.

4. The Obama administration has won its war on Pfizer.

Top U.S. drugmaker Pfizer and Irish rival Allergan are charting independent futures after scrapping a record $160 billion deal torpedoed by new Treasury Department rules meant to block American companies from moving their corporate addresses overseas — on paper — to avoid U.S. taxes.

The rules issued Monday, aimed at stopping the companies’ “tax inversion” deal, wiped out its financial incentives and rationale for Pfizer Inc., though they had no impact on Allergan PLC.

That led Pfizer and Allergan to walk away “by mutual agreement” on Wednesday. Pfizer, which is based in New York, will pay Allergan $150 million as reimbursement for its deal-related expenses.

Lest you think a large corporation deserves whatever it gets when it tries to reduce its tax bill, consider how the regulations were developed. The new rules were suspiciously narrowly written to apply to Pfizer. Moreover, as the Wall Street Journal notes, “[Treasury Secretary Jack] Lew has decided to reinterpret a 1969 law to propose a new rule in 2016 that changes longstanding conceptions of the difference between debt and equity in order to raise corporate tax bills,” making it “ugly for everybody, not merely ‘serial inverters.'” Lew has made legal activities retroactively illegal. And because of longstanding legal doctrine, Pfizer’s only recourse would be to merge, get slapped with IRS penalties, and then sue to recover them.

The examples above are from only the past week. A Google search for “new regulation” turns up countless more, large and small, state and federal. In contrast, a search on “new invention” or “innovation” turns up much less consequential results — or news from freer foreign shores. And that’s aside from the many articles describing how innovation is being hindered by… that’s right, regulation.

The relationship between regulatory caprice and our slow-growth economy is the subject of a must-read editorial in today’s Wall Street Journal. They write:

Pfizer CEO Ian Read de­fends the com­pa­ny’s planned merger in an op-ed nearby, and his larger point about capri­cious po­lit­i­cal power helps explain the eco­nomic malaise of the last seven years. “If the rules can be changed ar­bi­trar­ily and ap­plied retroac­tively, how can any U.S. company en­gage in the long-term in­vestment plan­ning nec­es­sary to com­pete,” Mr. Read writes. “The new ‘rules’ show that there are no set rules. Po­liti­cal dogma is the only rule.”

He’s right, as every CEO we know will admit privately. This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.

Cap­i­tal in­vest­ment in this re­cov­ery has been dis­ap­point­ingly low, and one ma­jor rea­son is po­lit­i­cal in­tru­sion into every cor­ner of busi­ness de­ci­sion-mak­ing. To adapt Mr. Read, the only rule is that the rules are what­ever the Obama Ad­min­is­tra­tion wants them to be. The re­sults have been slow growth, small wage gains, and a growing sense that there is no le­gal restraint on the po­lit­i­cal class.

Which brings us back to the elections. The Democratic candidates (and some Republican ones) share the underlying mindset of the Obama administration: the barrier to success is always other people — landlords, banks, insurers, big corporations. So while neither Sanders nor Clinton has any private-sector experience to speak of in their 145 combined years, both insist that they can fix whatever ails America by further regulating us.

But shared prosperity does not come from regulations. For that matter, it does not come from government at all. Prosperity comes from freedom — the freedom to trade and transact voluntarily for mutual benefit; the freedom to innovate; the freedom to pursue happiness. The “inversion” we should worry about is not a company moving offshore; rather, we should worry about how a government instituted to secure our rights has become destructive of these ends.

There are 51 comments.

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  1. Victor Tango Kilo Member

    I lost out on a house because of the Federally mandated waiting period between loan approval and closure. The waiting period caused the sales contract to expire and the house was sold out from under me. All because Government bureaucrats thought requiring a “cool down” between mortgage approval and signing the papers would avert another “housing bubble.”

    • #1
    • April 7, 2016, at 9:12 AM PST
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  2. MarciN Member

    Son of Spengler: But shared prosperity does not come from regulations. For that matter, it does not come from government at all. Prosperity comes from freedom — the freedom to trade and transact voluntarily for mutual benefit; the freedom to innovate; the freedom to pursue happiness. The “inversion” we should worry about is not a company moving offshore; rather, we should worry about how a government instituted to secure our rights has become destructive of these ends.

    We have created this Ayn Rand Atlas Shrugged world in which there are fewer and fewer actually productive people willing to slug it out with the government regulators.

    It’s time to take a lesson from the Communist parties in China and the USSR and give business some breathing room. Although it is fun to envision the regulators going down with the ships they are sinking, it would be better for all of us if we could hold them back from interfering with the business world altogether.

    • #2
    • April 7, 2016, at 9:23 AM PST
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  3. Kay of MT Member

    Thank you for this SoS.

    • #3
    • April 7, 2016, at 9:25 AM PST
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  4. Susan Quinn Contributor

    Son of Spengler: 2. Of course, one way to avoid discrimination in renting is to buy your own home. From the Washington Post, we learn that the FHA is spearheading an effort to increase mortgage lending to low-income borrowers:

    Great post, SOS. Your comment has me nearly stuttering. Are we going to do this again?? Every time we create new legislation, as you so aptly say, we are hurting the “beneficiaries.” And your last paragraph is perfect:

    Son of Spengler: But shared prosperity does not come from regulations. For that matter, it does not come from government at all. Prosperity comes from freedom — the freedom to trade and transact voluntarily for mutual benefit; the freedom to innovate; the freedom to pursue happiness. The “inversion” we should worry about is not a company moving offshore; rather, we should worry about how a government instituted to secure our rights has become destructive of these ends.

    We are digging ourselves in deeper and deeper into a helpless, hopeless society.

    • #4
    • April 7, 2016, at 9:26 AM PST
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  5. C. U. Douglas Thatcher

    V the K:I lost out on a house because of the Federally mandated waiting period between loan approval and closure. The waiting period caused the sales contract to expire and the house was sold out from under me. All because Government bureaucrats thought requiring a “cool down” between mortgage approval and signing the papers would avert another “housing bubble.”

    And what Obama is proposing is a new housing bubble and he’s filling it with the same gas as last time, only now it’s going to be much worse because the banks will be punished no matter what they do.

    Regulation is killing this economy in more ways than just the few listed. Complying with regulations essentially becomes a tax on a business and that cost is always passed on to us, the consumer.

    Democrats are not interested in actually finding solutions to problems. They only want to demagogue supposed villains, convinced that if they pull the right levers they can make the economy work better than any invisible hand could.

    • #5
    • April 7, 2016, at 9:30 AM PST
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  6. Hank Rhody, Missing, Inaction Contributor

    It seems we’re most of the way from a society where the government can regulate a few strictly enumerated things to one where we assume all things must be regulated by the government.

    If anyone can see a path back, let me know.

    • #6
    • April 7, 2016, at 10:07 AM PST
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  7. MarciN Member

    I am hoping Donald Trump will start talking more about the smothering impact of the infinite regulatory authority we’ve given the government. It is the one area in which the Democrats have hurt Americans more than any other so it should be a great competitive strength for Republicans.

    The problem is not new: General Electric, under its founder Thomas Edison, employed more lawyers than the Department of Justice had at that time.

    • #7
    • April 7, 2016, at 10:08 AM PST
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  8. tigerlily Member

    Thanks SOS. I wish conservatives and Republican politicians would spend as much time discussing the pernicious & unconstitutional nature of the administrative/regulatory state as they do with their most recent tax reform proposals.

    • #8
    • April 7, 2016, at 10:17 AM PST
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  9. C. U. Douglas Thatcher

    Hank Rhody:It seems we’re most of the way from a society where the government can regulate a few strictly enumerated things to one where we assume all things must be regulated by the government.

    If anyone can see a path back, let me know.

    The worst part is the false dichotomy we get from opponents. “Well you don’t want a society with no regulation, do you?! That’d be anarchy!”

    Or there’s the false definition. Like “deregulation” of the mortgages back in the Bush administration. They didn’t deregulate as just alter the regulations to allow for what the Democrats wanted. Then they blamed deregulation.

    • #9
    • April 7, 2016, at 10:35 AM PST
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  10. MarciN Member

    SoS, which candidate, Cruz or Trump, do you think would be stronger in reducing the number of regulations?

    I like Cruz’s notion of deleting the federal agencies under the executive branch, but is it realistic? I like the idea of restructuring–I’d let the agencies do it themselves so that they would be so busy they wouldn’t have time left to harass the public!–but I also know they administer the funding and laws put out by Congress. Is deleting these agencies going to accomplish anything other than moving chairs and desks around? Common Core, now defunct, as I understand it, was a means of ensuring that tax dollars paid by people in Florida actually resulted in improving schools and student performance in Mississippi. I don’t think it’s wise to hand out federal dollars without some strings and accountability attached. If we also repeal the laws that go with these agencies, that would make sense to me. As long as my federal taxes went down too.

    To my knowledge, Trump hasn’t said anything specific yet about what he would do to constrain the federal bureaucracy. But I would think he had or would know someone who had the executive ability to carry this out.

    Which candidate do you think would be better in this particular area?

    • #10
    • April 7, 2016, at 11:08 AM PST
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  11. Son of Spengler Contributor
    Son of Spengler Post author

    MarciN:SoS, which candidate, Cruz or Trump, do you think would be stronger in reducing the number of regulations?

    To my knowledge, Trump hasn’t said anything specific yet about what he would do to constrain the federal bureaucracy.

    I think you just answered your own question.

    • #11
    • April 7, 2016, at 11:10 AM PST
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  12. MarciN Member

    Son of Spengler:

    MarciN:SoS, which candidate, Cruz or Trump, do you think would be stronger in reducing the number of regulations?

    To my knowledge, Trump hasn’t said anything specific yet about what he would do to constrain the federal bureaucracy.

    I think you just answered your own question.

    Okay. :) I’m glad I haven’t missed it. :)

    • #12
    • April 7, 2016, at 12:14 PM PST
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  13. Jules PA Member

    V the K:I lost out on a house because of the Federally mandated waiting period between loan approval and closure. The waiting period caused the sales contract to expire and the house was sold out from under me. All because Government bureaucrats thought requiring a “cool down” between mortgage approval and signing the papers would avert another “housing bubble.”

    Me too. Eighteen years ago I made an offer on a home in late December. I went to closing several days before end of January.

    Today, it will take 6 weeks from offer to closing, and my credit is spotless now.

    FU Obama and the nanny state.

    • #13
    • April 7, 2016, at 3:27 PM PST
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  14. C. U. Douglas Thatcher

    Jules PA:

    V the K:I lost out on a house because of the Federally mandated waiting period between loan approval and closure. The waiting period caused the sales contract to expire and the house was sold out from under me. All because Government bureaucrats thought requiring a “cool down” between mortgage approval and signing the papers would avert another “housing bubble.”

    Me too. Eighteen years ago I made an offer on a home in late December. I went to closing several days before end of January.

    Today, it will take 6 weeks from offer to closing, and my credit is spotless now.

    FU Obama and the nanny state.

    Yeah. Between when Amanda and I started looking and by the time we went under contract, the time to close increased. We had a mess of paper to sign including my favorite, “Intent to Proceed”. We signed that paper to indicate we wanted to continue signing papers. Because signing papers makes us think more about signing more papers. Thanks Barney Frank.

    • #14
    • April 7, 2016, at 3:34 PM PST
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  15. Son of Spengler Contributor
    Son of Spengler Post author

    MarciN:

    Son of Spengler:

    MarciN:SoS, which candidate, Cruz or Trump, do you think would be stronger in reducing the number of regulations?

    To my knowledge, Trump hasn’t said anything specific yet about what he would do to constrain the federal bureaucracy.

    I think you just answered your own question.

    Okay. :) I’m glad I haven’t missed it. :)

    Thinking about this further, I’ll make a stronger claim. On Trump’s signature issue of foreign trade, he takes precisely the wrong approach. First, he would rather limit Americans’ freedom by imposing tariffs on the goods they want to buy. More importantly, he fails to recognize that we ship jobs overseas as a consequence of overregulation of our labor markets. We impose huge additional costs on hiring (as well as prohibitive environmental regulation), which necessarily raise the cost of domestically-produced goods. That makes foreign goods cheaper by comparison, even after the costs of shipping. Consider the burden Obamacare places on US employers. Trump is not a knowledgeable advocate of more free-market alternatives that might reduce at burden.

    • #15
    • April 7, 2016, at 3:52 PM PST
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  16. Percival Thatcher

    Susan Quinn:

    Son of Spengler: 2. Of course, one way to avoid discrimination in renting is to buy your own home. From the Washington Post, we learn that the FHA is spearheading an effort to increase mortgage lending to low-income borrowers:

    Great post, SOS. Your comment has me nearly stuttering. Are we going to do this again??

    Yes – yes we are.

    As it will be in the future, it was at the birth of Man
    There are only four things certain since Social Progress began.
    That the Dog returns to his Vomit and the Sow returns to her Mire,
    And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

    And that after this is accomplished, and the brave new world begins
    When all men are paid for existing and no man must pay for his sins,
    As surely as Water will wet us, as surely as Fire will burn,
    The Gods of the Copybook Headings with terror and slaughter return!

    There’s no fire hot enough to burn these fools so that they’ll remember.

    • #16
    • April 7, 2016, at 5:09 PM PST
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  17. Son of Spengler Contributor
    Son of Spengler Post author

    Percival, the leftist narrative of the crisis won out. Last time, the cause was greedy bankers and predatory lenders who operated in a deregulated environment. This time, we have Democrats in government who will regulate properly and prevent any bad outcomes. Right?

    • #17
    • April 7, 2016, at 5:17 PM PST
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  18. Umbra Fractus Lincoln

    “Disparate impact” needs to go. It’s basically imposed a guilty until proven innocent standard on discrimination cases.

    As my coworker said, is there going to be legal protection for the landlords who put their tenants at risk by allowing repeat offenders into their buildings? I doubt it.

    • #18
    • April 7, 2016, at 5:24 PM PST
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  19. Percival Thatcher

    Son of Spengler:Percival, the leftist narrative of the crisis won out. Last time, the cause was greedy bankers and predatory lenders who operated in a deregulated environment. This time, we have Democrats in government who will regulate properly and prevent any bad outcomes. Right?

    The thing that really bugs me is that they’ll be as surprised that lending people more than they can pay back is bad, and they’ll play the exact same blame game, and it will work.

    • #19
    • April 7, 2016, at 5:25 PM PST
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  20. Susan Quinn Contributor

    Percival:As it will be in the future, it was at the birth of Man
    There are only four things certain since Social Progress began.
    That the Dog returns to his Vomit and the Sow returns to her Mire,
    And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

    And that after this is accomplished, and the brave new world begins
    When all men are paid for existing and no man must pay for his sins,
    As surely as Water will wet us, as surely as Fire will burn,
    The Gods of the Copybook Headings with terror and slaughter return!

    I’ve seen The Gods of the Copybook Headings mentioned a few times today, and wasn’t familiar with it (although I’ve read other Rudyard Kipling). For anyone else unfamiliar, you can go here. It makes me so sad and angry to see us go down this road again.

    • #20
    • April 7, 2016, at 5:26 PM PST
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  21. Umbra Fractus Lincoln

    Percival:

    Son of Spengler:Percival, the leftist narrative of the crisis won out. Last time, the cause was greedy bankers and predatory lenders who operated in a deregulated environment. This time, we have Democrats in government who will regulate properly and prevent any bad outcomes. Right?

    The thing that really bugs me is that they’ll be as surprised that lending people more than they can pay back is bad, and they’ll play the exact same blame game, and it will work.

    Their narrative is based on the assumption that experienced capitalists came to the conclusion that giving away money to people with no chance of paying it back was a good business decision. People who are that clueless should not be in charge of dodgeball game, never mind the world’s largest economy.

    • #21
    • April 7, 2016, at 5:44 PM PST
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  22. Saint Augustine Member

    Son of Spengler:

    . . . an effort to increase mortgage lending to low-income borrowers . . . .

    Because that worked out so well last time.

    • #22
    • April 7, 2016, at 7:30 PM PST
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  23. The Reticulator Member

    Why are we talking about this when we could be talking about whether Ted Cruz has a winning haircut?

    • #23
    • April 7, 2016, at 11:57 PM PST
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  24. aardo vozz Member

    Percival:

    Son of Spengler:Percival, the leftist narrative of the crisis won out. Last time, the cause was greedy bankers and predatory lenders who operated in a deregulated environment. This time, we have Democrats in government who will regulate properly and prevent any bad outcomes. Right?

    The thing that really bugs me is that they’ll be as surprised that lending people more than they can pay back is bad, and they’ll play the exact same blame game, and it will work.

    Only until the money runs out…

    • #24
    • April 8, 2016, at 12:35 AM PST
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  25. Randy Weivoda Moderator

    Excellent article, SoS. Is the Obama administration populated by morons, or is it their goal to wreck the economy?

    • #25
    • April 8, 2016, at 2:16 AM PST
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  26. aardo vozz Member

    Randy Weivoda:Excellent article, SoS. Is the Obama administration populated by morons, or is it their goal to wreck the economy?

    Yes.

    • #26
    • April 8, 2016, at 2:19 AM PST
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  27. MACHO GRANDE' (aka - Chri… Coolidge

    I wish I had written this. Nice job, Egon.

    • #27
    • April 8, 2016, at 3:33 AM PST
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  28. Son of Spengler Contributor
    Son of Spengler Post author

    And on cue, from the front page of today’s WSJ:

    Obama Readies Flurry of Regulations

    http://www.wsj.com/articles/obama-readies-flurry-of-regulations-1460077858

    The Obama ad­min­is­tra­tion is rac­ing to make fi­nal a flurry of reg­u­la­tions af­fect­ing broad swaths of the econ-omy, fur­ther ril­ing U.S. busi­nesses in an elec­tion sea­son that has al­ready been tough on cor­po­rate in­ter­ests.

    Planned moves—across la­bor, health, fi­nance and the en­vi­ron­ment—range from over­time pay for white-col­lar work­ers to more ob­scure mat-ters such as re­quir­ing food mak­ers to dis­close added sugar on car­tons of fla­vored milk.

    The ex­pected burst of reg­u­la­tion fol­lows an in­tense few weeks in which the ad­min­is­tra­tion has tar­geted cor­po­rate tax in­ver­sions, im­posed new rules on bro­kers and ad­vanced re­stric­tions on com­pany re­la­tions with union or­ga­niz­ers.

    • #28
    • April 8, 2016, at 5:07 AM PST
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  29. Hank Rhody, Missing, Inaction Contributor

    Randy Weivoda:Excellent article, SoS. Is the Obama administration populated by morons, or is it their goal to wreck the economy?

    Wait, I had something for this.

    “Let us dispense with this fiction that the Obama administration doesn’t know what it’s doing. It knows exactly what it’s doing”…

    • #29
    • April 8, 2016, at 5:28 AM PST
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  30. RPD Member
    RPD

    Son of Spengler:Percival, the leftist narrative of the crisis won out. Last time, the cause was greedy bankers and predatory lenders who operated in a deregulated environment. This time, we have Democrats in government who will regulate properly and prevent any bad outcomes. Right?

    Maybe if they keep the economy in the pits a financial crisis won’t be discernible?

    • #30
    • April 8, 2016, at 5:45 AM PST
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