The architect of the bill, Congressman Barney Frank, calls his own bill the payment of an economic ”ransom,” admitting that it rewards irresponsible people by bailing them out.   His excuses for paying this ransom are decidedly lame.  Moreover, his bill contains political pork for left-wing special interest groups like La Raza and the National Urban League. 

Prior to its passage, I criticized GINA’s ban on employment discrimination in the National Law Journal for lacking a “direct threat” exception for public safety.  The Economist’s blog suggested its ban on insurance discrimination could fundamentally undermine insurance markets and the availability of private health insurance in the long run. 

Last month, Congress created a long-run threat to the insurance industry by passing the Genetic Information Non-Discrimination Act (GINA).  GINA also regulates employers in ways that I criticized in 2005 in the National Law Journal.

But there could be an even greater cost from the bill to millions of middle-class investors saving for their retirement or the education of their children. The bill has the Federal Housing Administration guarantee the refinancing of a mortgage in return from a “haircut” from the owners of the loan. The bill requires loans to be guranteed at no more than 90 percent of the value, meaning a 10 percent loss for investors. But this haircut will “shave” billions of dollars off from funds saved for retirement or education.

This bill not only “robs Peter to Pay Paul,” through taxpayers bailout of bad loans by banks and borrowers. It can also be said to “abrogate Paul’s contract to Peter.” This is because many of the mortgages often aren’t owned by the banks that service them, but frequently by millions of middle class investors through their interests in entitities that have mortgage-backed securities (MBS).

Many middle-class folks who have 401(k) accounts, mutual funds, money market funds or defined-benefit pensions are indirect holders of MBS. In fact, according to investment bank Credit Suisse, 14 percent of MBS are owned by pensions and mutual funds that serve middle-class savers.

So, let’s do some math. The bill authorizes the FHA to guarantee up to $300 billion in mortgages. With the 10 percent haircut, the loans were originally worth $333 billion. So $33 billion represents the potential lost savings by the private sector. Now assume a random 14 percent of the loans in this program represent those owned by pensions and mutual funds. 14 percent of $33 billion is $4.6 billion.

The bottom line is that middle-class savers and investors could be left with almost $5 billion less for retirement and education of their children. Another compelling reason this bailout is not worth the cost.

The problem with our political class today is that they build these amazing projects to help poor people, organizations like the UN, the Worldbank, and countless NGO’s create these projects that supposedly will help the people with the fewest options in the world. They are spending millions and millions of dollars and failing miserably.

The Grameen Foundation, with their micro loans and micro utility systems has understood that wealth is created at the individual level. If you help people get credit, so they can do the investments needed to expand their livelihood, their lives will change. Grameen got the Nobel Prize in 2007 for this insight.

Someone else who has understood this is a guy named Paul Polak. After years of being a psychologist, he found that alleviating financial troubles had a profound effect on alleviating their mental illnesses. A trip to Bangladesh inspired him to start up International Development Enterprises, a non-profit that helps adapt modern farming technologies to small rural farms and helps build micro economies and local markets.

In the last 25 years, Paul Polak has helped individuals in the poorest rural communities around the world increase their income by $200 million. No government-to-government program can claim such a success. Polak wrote about his work and his method in a book called Out of Poverty, that was published recently, and you can also learn more about his work by listening to the NPR interview with him.

Courts frequently engage in flagrantly inconsistent legal reasoning in order to first impose liability on employers and then maximize and collect damages in sexual harassment cases, and they often disregard the statutory requirements that harassment plaintiffs seeking compensatory damages show that they were harassed based on their sex, and subjected to intentional discrimination. 

I don’t like raunchy radio programs, but that doesn’t mean the government should ban listening to them, much less do so under the weak argument that they constitute sex discrimination.

The Brady Center to Prevent Gun Violence has claimed that the law violates “separation of powers” by changing the outcome of pending court cases (an argument that, if taken to its logical conclusion, would require invalidating the 1964 Civil Rights Act because it legislatively overturned trespass convictions of civil-rights demonstrators who engaged in sit-ins).  I earlier commented on the Brady Center’s hypocrisy in claiming that it is “judicial activism” for judges to strike down gun bans based on the Second Amendment, but not judicial activism for judges to strike down the democratically-enacted PLCAA based on unwritten separation-of-powers principles.