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It would cost the federal government zero – GSA insurance for municipal bonds

Well, that’s what Barney Frank (D-Ma.), House Financial Services chairman, says about a new program he is pushing.  Although, I doubt you have forgotten, this is the same Barney Frank who said, a few years ago, that Fannie Mae and Freddie Mac were in excellent shape and would never cost the taxpayers anything.

He was wrong then, but undaunted, he is putting his financial acumen on the line again.  Actually, his financial acumen is irrelevant.  He is putting your tax dollars on the line again.  He wants Congress to create an agency (yup, yet another government agency) to act as the insurer of municipal bond issues much like the FDIC is to banks.

Let me tell you how this nifty new program would work.

Let’s say you are the city of Podunk, in the state of Nuzono and you are convinced that if you could just build a new sports arena you could lure a major sports team to Podunk, thus creating “thousands” of jobs, and, more to the point, a huge tax base. But, your city doesn’t have the $100 million needed to build a new sports arena. So, you decide to issue $100 million in municipal tax free bonds to investors to raise the funds. After all, once the arena is built, certainly one major league team will relocate, thus creating the income to pay off the bonds.

However, to sell your bonds you need insurance. Currently there are several companies who, for a premium, will insure these new bond issues. In other words, the insurance companies say to the investors, if Podunk defaults on these bonds, we will repay you. Thus investors who have never heard of Podunk, Nuzono will feel safe investing in the city’s bonds.

Here’s what Warren Buffet has to say about insurance for municipal bond issues.

Insuring tax-exempts, therefore, has the look today of a dangerous business — one with similarities, in fact, to the insuring of natural catastrophes. In both cases, a string of loss-free years can be followed by a devastating experience that more than wipes out all earlier profits.

Enter Barney Frank. He believes this private insurance is too expensive and, that many cities won’t even try to issue bonds because the project is so risky that no private company would ever insure the bonds. Thus, he proposes that the government create an insurance company that will not only insure Podunk’s bond issue, but any municipality’s bond issue, whether risky or not. And, the premiums for this insurance will be less than those charged by the private companies.

Back to Podunk. The sports arena is built, but, after paying interest on the bonds for several years, no major league team wants to relocate to Podunk. And, economic times are not good. The city council can’t pay off the bonds without cutting the salaries of police, firemen, teachers, and the thousands of city retirees with guaranteed pensions. And,

What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?

Guess who that “far-away bond insurer” is?  Well, under Barney’s plan it’s you. And, much like dominoes,when one city defaults (successfully), others will follow.

Zero loss to the federal government, aka, you, the taxpayer, I think not.

Health insurance number one story of the day – clear bias

Talk about a left wing conspiracy. The main stream media mysteriously released more than 200 stories about the lack of health insurance in a 24 hour period. Someone, somewhere is coordinating the effort and the media is in lock step with their agenda.

Doug Ross at his DirectorBlue blog puts the story together for us. Please go read his full post since he took the time to do the research, plus he’s connected the dots between organizations who have coordinated the continuous lies about the uninsured in America.

The following headlines have appeared in newspapers within the last 24 hours. This is not an inclusive list.

Third of Illinoisans went without health insurance in last 2 years: Sun-Times
Report: 2.5M in Michigan lacked health insurance: Chicago Tribune
Study: 29% of Ohioans have gone without health insurance: BizJournals
Report: More NJ residents lacking health insurance: Forbes
Study: Many Kansans are uninsured: BizJournals
Report tallies uninsured in Hawaii: KPUA AM 670
Study: 1 in 3 Alabamians have no insurance: BizJournals
1 out of 4 NH residents lacked health insurance within last two years: WBZ
1 out of 3 Coloradans lacked insurance in past two years: Denver Post
Nearly 1 in 3 Idahoans lack health insurance, study says: Idaho Statesman
One in four nonelderly Minnesotans has been without health insurance, study shows: Twin Cities
1 in 3 are uninsured in Georgia, study says: Augusta Chronicle
1.3 million Louisiana residents uninsured: Independent
Millions in N.C. lack health plan: Winston-Salem Journal
Uninsured are mostly working: Sun-Herald
Nearly one-third of Wyoming residents went without health insurance in past two years: Wyoming Tribune
Report finds health insurance lacking in W.Va.: Charleston Gazette
Nearly 1/3 Of Kentuckians Uninsured Says Report: WFPL Radio
REPORT: 254K Rhode Islanders Uninsured at Some Point from 2007-2008: ABC 6

Hat tip to Gateway Pundit

Every one of these headlines carried news about uninsured Americans.
Each was specific for an individual state.
And, they all ran on the same day in several states.
…Dozens and dozens of them.

Affordable health care

Walter Williams has another great article this week. Kind of works well with my post on why we should not be electing Obama as president.

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Free products and services equal unlimited demand

I’ve been meaning to write a post concerning “free” goods and services. What happens when the government – or any other group – comes in and offers something for a very low cost or free?

I’ve found three events that will show us what happens when you offer stuff for free or at super-low cost, well below the actual market value.

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The True Cost of Employee Health Benefits

During World War II, companies were having a tough time finding well-qualified employees due to wage and price controls. Salaries were artificially kept low, and to solve the problem employers began to offer benefits including health and life insurance, better pensions, and more vacation time to attract employees.

As time went on, employees began to take these benefits for granted. Union leaders took the reigns and bullied employers into providing benefits that could not be sustained. Employees were brainwashed into thinking that employers had to provide benefits. The problems began. (Reference GM net profit margin: -25.85% TTM)

So, what does an employer do? Read more