Saturday, September 27, 2008

China says that we made a lot of bad loans?

A Chinese banking regulator actually used the word "ridiculous" to describe the status of loans in the U.S.. Nothing could more exemplify the pot calling the kettle black!

This imbecile should worry about his own house before decrying others. Recall that China is the country that's sitting on over a trillion dollars worth of bad debt, and those were Ernst & Young's calculations in 2006!

China's government encouraged its nationalized banking system to make bad loans as a matter of policy. Oh, wait a minute, actually the U.S. subprime mess is the result of loans also made as a matter of policy. Bad example.

However, the nature of the loans is different. E&Y calculated "non-performing" loans that will never get paid back. The federal government wants to blow $700 billion in this "bailout," when in fact that figure was simply chosen arbitrarily. As with all federal spending, the wrangling isn't over how much to spend, but how to spend it, and how to finance it (Democrats like taxes, Republicans like passing debt on to our children). Even combined with the $300 billion to bail out actual housing, the dollar value of actual "bad" securities and "bad" mortgages is far less than $1 trillion. So if China were to do a similar bailout, it would have to spend, what, $3 trillion?

I haven't talked about the housing bailout yet, but suffice it to say today that it's not as bad as the federal government claims -- nor would it be as bad if homeowners were held responsible (including prosecution for fraud) when they simply "walk away" from their debt obligations. But if the Bush Administration, Congress, rent-seekers and activists admitted the truth, then that means they couldn't get to spend as much of Other People's Money. As I've noted time and time again, government measures its success by the most money spent and the most people "helped," regardless of how efficiently the money is spent, or whether those "helped" legitimately needed it.

Meanwhile, it's China, not the U.S., that needs to hold a trillion dollars in foreign reserves as collateral for its banking system. And foreigners still look to the U.S. as the best place to invest.

And while I'm at it, we're not the ones putting 14-year-olds on our Olympics team, then faking all necessary documents to "prove" they're over 16. We aren't writing news stories about our spaceflights hours before lift-off, complete with astronauts' dialogue.

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