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December 2, 2014

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review August 16, 2007 / 2 Elul, 5767

Folly and the Fed

By George Will


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http://www.JewishWorldReview.com | Exactly a century ago, panic seized financial markets.


The collateral for perhaps half the bank loans in New York was securities whose values had been inflated by speculation. Then on Saturday night, Nov. 2, 1907, a 70-year-old man gathered some fellow financiers at his home at 36th and Madison in Manhattan. The next morning, a New York Times headline proclaimed:


"BANKERS CONFER WITH MR. MORGAN, Long Discussion in His Library Not Ended Until 4 O'Clock." Both the Times and The Washington Post ("BANKERS IN CONFERENCE: Money Stringency and Remedial Measures Discussed in Morgan's Library") noted that bankers shuttled between meetings at Morgan's mansion and the Waldorf-Astoria in a newfangled conveyance — an automobile. Working 19 hours a day, and restricting himself on doctor's orders to 20 cigars a day, J.P. Morgan seemed so heroic that the president of Princeton University, Woodrow Wilson, said the financier should chair a panel of intellectuals who would advise the nation on its future.


Six years later, however, under Wilson as the nation's President, the Federal Reserve System was created, ending the era when a few titans of finance could be what central banks now are — the economy's "lenders of last resort." Central banks have been performing that role during today's turmoil in the market for subprime mortgages — those granted to the least creditworthy borrowers.


The ill wind blowing through that market has blown two goods: The public mind has been refreshed regarding the concept of moral hazard. And the electorate has been reminded of just how reliably liberal Hillary Clinton is.


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Moral hazard exists when a policy produces incentives for perverse behavior. One such existing policy is farm price supports that reduce the cost to farmers of overproduction. Another is the policy of removing tens of millions of voters from the income tax rolls, thereby making government largesse a free good for them.


And this would be such a policy: the Federal Reserve lowering the cost of money whenever risky lending to a sector of the economy (e.g., housing) makes that sector desperate for lower interest rates. Many banks, hedge funds and other institutions have pocketed profits from their dealings in the subprime market. The losses are theirs, too.


Clinton leapt to explain the subprime problem in the terms of liberalism's master narrative — the victimization of the many by the few.


In a speech favorably contrasting a "shared responsibility" society with an "on your own" society, she said, in effect, that distressed subprime borrowers are not responsible for their behavior. "Unsavory" lenders, she said, had used "unfair lending practices." Doubtless there are as many unsavory lenders as there are unsavory politicians. So, voters and borrowers: caveat emptor.


But this, too, is true: Every improvident loan requires an improvident borrower to seek and accept it. Furthermore, when there is no penalty for folly — such as getting a variable-rate mortgage that will be ruinous if the rate varies upward — folly proliferates. To get a mortgage is usually to commit capitalism; it is to make an investment in the hope of gain. And if lenders know that whenever they go too far and require inexpensive money the Federal Reserve will provide it with low interest rates, then going too far will not really be going too far.


In 2008, as voters assess their well-being, several million households with adjustable-rate home mortgages will have their housing costs increase.


Defaults, too, will increase. That will be a perverse incentive for the political class to be compassionate toward themselves in the name of compassion toward borrowers, with money to bail out borrowers. If elected politicians controlled the Federal Reserve, they would lower interest rates. Fortunately, we have insulated the Federal Reserve from democracy.


The Federal Reserve's proper mission is not to produce a particular rate of economic growth or unemployment, or to cure injuries to certain sectors of the economy. It is to preserve the currency as a store of value — to contain inflation. The fact that inflation remains a worry is testimony to the fundamental soundness of the economy, in spite of turbulence in a small slice of one sector.


Ron Chernow, in his book "The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance" (1990), says Morgan's 1907 rescue was the last time private bankers "loomed so much larger than regulators in a crisis. Afterward, the pendulum would swing decidedly toward government financial management." Happily, Chairman Ben Bernanke's Federal Reserve remains committed to minimal management, which is what government does best.

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

George Will's latest book is "With a Happy Eye but: America and the World, 1997-2002" to purchase a copy, click here. Comment on this column by clicking here.

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