Last week McKinley appeared on Fox Business News channel after an editorial was published in the Wall Street Journal about his lawsuit.

He wrote an excellent policy analysis released by the CATO institute in April called “Bright Lines and Bailouts: To Bail or Not to Bail, That is the Question“. I requested he summarize his actions leading up to the lawsuit, included below.

McKinley writes:

As part of the analysis for Bright Lines and Bailouts, we tried to answer the obvious question, why were these institutions bailed out. So we looked at the public pronouncements of the agencies involved such as the Treasury, Fed and FDIC. Most of these statements focused on the negative consequences that were avoided by taking the bailout route. However, they used vague phrases to describe the likely consequences, such as instability, contagion, fragility, disorderly, adverse, chaotic, disruption and many of those same or similar terms were used over and over again.

So we thought the logical follow-up question was what specific consequences did the Fed and the FDIC foresee from letting them fail outright? We didn’t know whether that was a string of bank failures or investment bank failures or non-financial institution failures or other consequences. We submitted Freedom of Information Act (FOIA) requests in November and December 2008 to the Fed with regard to Bear Stearns and AIG and to the FDIC with regard to Wachovia and Citigroup. FOIA is intended to assure that government agencies provide access to documents prepared internally and there are select exemptions to the release of certain types of information.

The FDIC was relatively responsive in the sense of focusing in on the precise information we requested and they determined that the information we wanted was in the relevant FDIC board meetings on September 29 (for Wachovia) and November 23 (for Citigroup). However, the board minutes they gave us from these meetings were heavily redacted and in every case where they discussed the negative consequences from failure the information was completely redacted.

The Fed only responded to the extent that they would give dates they expected to get the requested information by, first February 2, 2009 then early June 2009, then June 30, 2009. This led us to conclude that the Fed was not going to provide the information we wanted.

So on July 8, I brought suit against the FDIC and Fed in order to compel them to provide the requested information on the negative consequences that they thought would flow from allowing these large institutions to fail. This seems to be an important question to answer before the Obama Administration makes any changes to the current system of powers and authorities, as they have proposed expansions for both the FDIC’s and the Fed’s authority.

McKinley, showing he truly does care about transparency, has posted many of the documents and correspondence regarding his effort, including the heavily redacted document he received from the FDIC. Read them all here.

McKinley has done policy analysis for the CATO institute in the past and a new analysis he and co-author Gary Gegenheimer collaborated on was recently released by CATO.

“Bright Lines and Bailouts: To Bail or Not To Bail, That is The Question” covers the history of bailouts and aside from being an excellent analysis it is also extremely educational for those of us who lack an economics degree.

Here is an excerpt:

This present crisis has demonstrated that undertaking bailouts of troubled institutions, which involves structuring transactions that attempt to transform the institution into a viable one, while simultaneously projecting the reaction of investors and markets, is a process for which government is ill-suited. These bailout powers should be revoked. Financial angst still hangs over the system as the underlying imbalances that led to the crisis have not been reconciled. The ultimate answer is to place troubled institutions into receivership or the relevant form of bankruptcy—including many of the institutions that have already been bailed out.

The entire analysis is available here at the CATO institute.

For more from McKinley check out the interview with him we did during his Congressional primary campaign to unseat Wolf.

…a primary source for depositor fears has been their effort to acquire a number of what they have called “tools” to address the crisis, including the power to make up to $700 billion of asset purchases. The tools that Paulson and Bernanke have sought have had one characteristic in common: a lack of confidence in markets to resolve the imbalances caused by government policy in the financial markets. In overpromising the soothing effects of one tool, Paulson and Bernanke have then moved on to securing the next tool.

McKinley looks at the implications of other tools such as raising the FDIC insurance limit, the allowance for the FDIC to borrow unlimited funds from the Treasury, and Treasury injecting capital into the banks. He concludes with what we’ve learned from the bailout fiasco.

The big lesson here is that making major legislative changes in times of crisis leads to bad policy (recent examples in the financial sector are the Patriot Act and Sarbanes-Oxley). These “tools” are a euphemism for extraordinary powers that would not be considered in a calm market. They are largely preemptive, and aimed at avoiding bank failures.

I couldn’t agree more. Vern McKinley lives in my district and ran against the incumbent big spending Congressman Frank Wolf in the GOP primary earlier this year. McKinley didn’t win, unfortunately. If he were representing me in Congress during the bailout debate I wouldn’t have had to send emails and make phone calls to him pleading to vote against it. I would have already known that his vote would be an emphatic “NO”, unlike my current so called representative.

Read McKinley’s wisdom in its entirety here at Cato.org.

]]> http://libertymaven.com/2008/10/17/vern-mckinley-says-tools-in-bailout-plan-suggest-no-confidence/2622/feed/ 0 http://libertymaven.com/2008/09/29/blast-from-the-past-vern-mckinley-warned-of-freddie-and-fannie-in-1997/2205/ http://libertymaven.com/2008/09/29/blast-from-the-past-vern-mckinley-warned-of-freddie-and-fannie-in-1997/2205/#comments Mon, 29 Sep 2008 16:39:02 +0000 Jake Towne http://www.libertymaven.com/?p=2205 As the bailouts continue, I urge the Reader to remember the republicans who gave warning decades ago. One is Dr. Paul, another is the “First Ron Paul Republican” Vern McKinley.

by Jake, the Champion of the Constitution
Originally published September 29, 2008 at http://www.nolanchart.com/article5048.html

I recently came across a summary article (full version with sources here) from Vern McKinley on Freddie Mac and Fannie Mae published for the Cato Institute where he warned of its threat to the taxpayer in 1997.

“Although Freddie and Fannie are privately owned, they are what is known as government-sponsored enterprises (GSEs). GSEs don’t have to follow all the rules that true privately owned companies do: they don’t have to register their securities with the government, their securities receive special treatment for investment purposes, they don’t have to pay state and local income taxes and–most important–their government sponsorship gives them the aura of a fully guaranteed government entity. That final benefit means they save billions in borrowing costs, just as lenders are willing to offer low-interest student loans that are guaranteed by the government. That savings alone allows the GSEs to pocket about $2 billion per year, according to estimates by the Congressional Budget Office and the Treasury Department.”

“Allowing Congress to grant such special privileges is a bad idea. Those privileges, which are granted solely to Freddie and Fannie, crowd out other potential competitors in their market. Privately owned companies should not receive such preferred borrowing status, because it redirects investor funds into the middle- and upper-income housing market at the expense of other potential investments. Finally, the failure of either Freddie or Fannie could saddle taxpayers with a huge liability.”

“Congress should immediately revoke all the benefits of government sponsorship: clearly, Freddie and Fannie can be profitable without them. Eliminating special privileges will force mortgage markets to be truly competitive and will eliminate the possibility that the current system of government sponsorship will someday lead to yet another taxpayer-funded bailout.”

Vern also warned that these millions of dollar of savings were recycled into a “high-powered public relations and lobbying machine.” The GSEs also evenly supporting both Democrats and Republicans with $750 million in the latest contemporary election cycle at the time of his article. The article was published in 1998 in USA Today with the title “Privatize Fannie Mae and Freddie Mac.”

Vern McKinley was billed as the First Ron Paul Republican since he decided to run for office before Ron Paul announced his presidential candidacy. Vern ran for a seat in the House of Representatives for the 10^th congressional district of Virginia but lost in the Republican primary against Frank Wolf in June, a fiscally not conservative career politician who has kept a seat warm in Congress for about 28 years. Wolf refused to debate Vern and won with about 91% of the primary votes compared to 9% for McKinley.

Vern has worked with the Board of Governors of the Federal Reserve, the FDIC, the Resolution Trust Corporation, and the Department of Treasury’s Office of Thrift Supervision. He has also traveled extensively internationally, spreading free market ideas to China, Kenya, Afghanistan, and Indonesia among others. You can check out his views here.

As a disclaimer of sorts, I financially supported Vern and wrote a recommendation (see below) in May.  At the time, I only cared that he would not support the War on Terror.  How cute and naive I was back then!  If you have the time, I suggest writing a note to him at vern@mckinleyforcongress.com and encourage him to run again.

In Liberty!

Jake, the Champion of the Constitution

www.CampaignForLiberty.com

[Reach the Author Here!]

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.

Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

________________________________________________________________

Andrea Gibson’s “For Eli”, Vern McKinley and Anti-war Reflections
Published: May 5, 2008
Are you sick of our wars yet? Check out Vern McKinley and a poem from Andrea Gibson – “For Eli” to recharge.

A Speech Barack Obama Could Give to Win the Presidency, Ron Paul, and Carroll Quigley’s “Tragedy and Hope”
Published: September 28, 2008
Senator Obama, free of charge here is a speech you could use to beat McCain. Also, a comment and request for your opinion on Ron Paul’s reference to the historian Carroll Quigley’s Tragedy and Hope.

Henry Paulson – A Quick Look at the Man
Published: September 27, 2008
Everyone in the country is talking about the Paulson Plan, wherein one clause would make Paulson de-facto financial dictator of the United States, accountable to no one. The article is a summary of my brief investigation and asks for help in finding out WHO IS THIS GUY?

WaMu Gets the FDIC WHAM-O!
Published: September 26, 2008
The Seattle-based Washington Mutual Bank is shut down by the FDIC. The Raiders from the last Great Depression, JP Morgan, Strike Again. Have you protected yourself?

US Treasury Seizes Fannie Mae and Freddie Mac! And What It Means
Published: September 8, 2008
“You poor kid, there have been centuries of philosophers plotting to turn the world into just that – to destroy people’s minds by making them believe that that’s what they are seeing. But you don’t have to accept it. You don’t have to see through the eyes of others, hold on to yours, stand on your own judgment, you know what that is, IS – say it aloud, like the holiest of prayers, and don’t let anyone tell you otherwise.” – Ayn Rand

WAR! America Attacks Pakistan
Published: September 5, 2008
Drunk on the opiate of the McCain and Obama “We Can Change” conventions, the American press fails to notice the first attack involving American ground forces on Pakistani soil.

________________________________________________________________

The Money Matrix Series

America, Were Michael Phelps’ Eight Olympic Gold Medals Worth Winning?
Published: August 24, 2008
Michael Phelps and other American athletes are bringing back loads of Gold, Silver, and Bronze Medals from the Beijing Olympics. A young libertarian economist asks if it was worth it.

The Money Matrix – Prelude (PART 1/15)
Published: August 1, 2008
Prelude and Source List to a Series on Global Monetary Policy of Control and Explaining Big Government’s Finances

The Money Matrix – What is a Dollar Bill Worth? (PART 2/15)
Published: August 2, 2008
“Living so free is a tragedy when you can’t see what you need to see!” – Powerman 5000 ‘Free’

The Money Matrix – What Makes Money Money? (PART 3/15)
Published: August 3, 2008
A quick history of money per Rothbard followed by the properties of money per Ron Paul

The Money Matrix – If You Don’t Know Who the Sucker Is, Then It’s You! (PART 4/15)
Published: August 7, 2008
The Money Matrix series rolls on by asking ‘What are the Types of Money?’ and ‘What is the “Best” Currency and Why?’

The Money Matrix Explores Seigniorage – Do not give in to evil, but proceed ever more boldly against it. (PART 5/15)
Published: August 24, 2008
The Money Matrix explores Seigniorage as Legalized Silent Plunder with an introduction into medieval and modern banking.

Save Ron Paul’s Voice – A Money Matrix Addendum
Published: September 28, 2008
Learn how by reading. Article is intended as a poke-in-the-eye for members of the Ron Paul Revolution who complain about the bailouts and the financial, banking, and housing crises and do not realize that they may in fact be hypocrites.

A Money Matrix Addendum: Citigroup and GATA Call for an End to the Suppression of the Gold Market
Published: September 22, 2008
The Suppression of the Gold Market Goes Mainstream, Thanks to Citigroup. And a few interesting back-of-envelope calculations about where the price of gold could go.

Vern McKinley was up against a juggernaut in 28 year incumbent Frank Wolf so his landslide loss was not surprising. At least Vern had the guts to go up against this neo-conservative big government Republican and give true Reagan principled conservatives a voice in the election.

Vern and Amit are heroes of liberty and heroes of liberty are heroes of mine. Thank you both so much for the sacrifices you’ve made to give Virginia voters a true limited government choice.

So if you happen to be reading this and live in either the 8th or 10th district in Virginia. Get out and vote for Vern and Amit. I’ll write again once all the votes are counted tomorrow night.

Vern McKinley is a principled Reagan Republican. I’m talking about the Reagan running for office, not the Reagan who forgot about cutting spending as well as cutting taxes. I suppose his Congress could be blamed for that. Frank Wolf used to be a Reagan Republican. He even ran supporting term limits in 1980. Almost 28 years have passed and he is still in office. Wolf, from the very beginning couldn’t keep a campaign promise.

On to the issues. If an issue is not listed it means that both McKinley and Wolf generally agree on the issue with a bit of room for differences in the margins. The point is to show where the candidates truly have a different world view.

Earmarks (AKA “bringing home the bacon”): Wolf likes to tout his SAFE commission, which is yet another Wolf investigative committee like he has proposed so many times in the past without much to show for it. The idea is to “examine” earmarking and figure out methods to curb it. This, in my view, is an establishment politician trying to have his cake and eat it too. It looks good on paper, but why did Wolf propose and get over $200 million in federal money in earmarks last year? Just another sly Wolf-like move, I guess. I hope people are paying attention this time.

McKinley on the other hand is almost running his entire campaign on “earmark” reform. He rightly criticizes Wolf on earmarks, saying that states shouldn’t use the federal government as an ATM machine. Funds for local projects should be raised locally. There’s some true federalism for ya. Bravo Vern.

Grades: Wolf gets an ‘F’ for being a shyster. McKinley gets an ‘A’.

Second Amendment (…shall not be infringed): This one is more obvious. Frank Wolf voted against repealing the DC gun ban. Vern McKinley has promised to never do such a thing. He has a 100% rating from the Virginia Gun Owners Coalition. He also has the support from none other than Dick Heller, the plaintiff in the recent high profile Supreme Court case. The bottom line, if you believe in the Second Amendment, then you believe in voting for Vern McKinley.

Grades: Wolf gets an ‘F’ for being a failure. McKinley gets an ‘A’ for understanding the meaning of “shall not be infringed.”

Taxes and Spending (What? Did you say “and Spending”?): Frank Wolf (like many of his misguided brethren) loves to vote for lower taxes but is AWOL when it comes to cutting spending. Cutting taxes is popular. Cutting spending is a hard reality. Vern McKinley faces this reality in his career as an economist. He understands that cutting taxes without cutting spending only weakens America’s future by pushing us, our children, and generations to come, further into debt.

Grades: Wolf gets a ‘D’ for at least cutting taxes. McKinley gets an ‘A’ for facing reality.

“Democrat-like” (The liberal litmus test): Frank Wolf has a voting record that would make Ted Kennedy proud. He voted for the expansion of SCHIP. He voted for raising the minimum wage. He voted for the prescription drug benefit. He voted for “no child left behind”. He voted for keeping the DC gun ban in place. Mr. Wolf that’s an ‘R’ next to your name. It stands for “Republican” not “RINO”. Vern McKinley on the other hand opposes these leftist policies and is critical of them in just about every speech he has given to his future constituents.

Grades: Wolf, obviously an ‘F’. McKinley, obviously an ‘A’

The Constitution (AKA what you swore to uphold): Vern McKinley carries a pocket Constitution in his breast pocket. Frank Wolf drives a hybrid automobile sometimes. Vern McKinley quotes our founders regularly by memory. Frank Wolf runs on his record of continuously voting for more and more federal money for his district’s pet projects. Apparently, he believes the “supreme law of the land” is just a a marginal guideline only to be used when it politically suits him.

Grades: Wolf gets an ‘F’. Vern gets an ‘A’. (you see where this is going don’t you?)

Property Rights and Privacy (The long forgotten right in America): People praise Wolf for his “Journey Through Hallowed Ground” law being signed by President Bush. This law is nothing more than a federal land grab. Yet another law increasing the power and jurisdiction of the federal government at the expense of citizens and their property. Wolf likes to use the word “protect” the property. The last time I looked up “protect” in the dictionary it didn’t say “to steal”. McKinley has criticized Wolf for not respecting property rights with this law. There are many citizens of Virginia who agree with him.

Frank Wolf voted for the REAL ID Act. An act that 17 states have legislatively refused to implement due to privacy concerns. Vern McKinley adamantly opposes the REAL ID Act.

Grades: Wolf gets an ‘F’. McKinley gets an ‘A’.

Can you guess who’s getting my vote next Tuesday?

Here’s a hint: It’s certainly not Frank Wolf.

What was interesting to me as evidenced in the embedded video (thanks to Reason.tv) below is that Vern McKinley almost sounds more libertarian than some of the Libertarian candidates, most notably, Wayne Allyn Root. Check out the video below and realize it is time to figure out who you are going to support in the general election for President in lieu of Ron Paul. Writing in Ron Paul may make you feel good, but it will go nowhere. At least in Vern McKinley’s case you know you can support him as a “Ron Paul Republican”.

Frank Wolf is trying to have his cake and eat it too. In the very same email he advocates cutting spending and using those cuts for more spending. He, like many other elected officials, is trying to gain support for the projects he feels are most important. He advocates moving money from one area in to another, rather than actually cutting spending. It’s obvious to this 10th district voter he doesn’t really care about curbing spending overall. He puts a few good key words in this statement but in the end he’s not really advocating cutting anything. Here is the relevant quote:

Although we have been successful in raising awareness of the need for a strong STEM workforce and in authorizing innovative programs, we now face a serious challenge in funding these initiatives. As you will read, I believe that we must rein in explosive mandatory spending in order to ensure sufficient funding is available for this critical competitiveness initiative, among other programs. (Source: Wolf Email)

I don’t care how “good” the programs may or may not be. The point is Congressman Wolf is NOT interested in cutting spending. He’s only interested in continuing the budgeting shell game of typical establishment DC politicians. We need to replace him with someone with a fresh perspective on spending and government programs. Someone who will actually practice what he preaches. That person is Vern McKinley who is challenging him in the Republican Primary on June 10th in Virginia’s 10th District.

As a Ron Paul supporter of all the liberty minded candidates it greatly concerns me that Ron Paul has not endorsed some candidates who are close to 100% in line with his platform. A perfect example of this is the race in Virginia’s 10th District between Vern McKinley and incumbent Frank Wolf. Vern McKinley is about 90% aligned with Paul on the issues. Frank Wolf is an Iraq war supporter, who voted for both SCHIP and minimum wage increases along with the Democrats. Wolf voted against repealing the DC gun ban. Wolf voted for Bush’s prescription drug plan. Wolf just had a bill that he sponsored signed into law by President Bush that will make property rights advocates vomit.

Ron Paul has enthusiastically endorsed Amit Singh in Virginia’s 8th district. He appeared in a YouTube video with Singh endorsing him and helping him promote his money bomb on May 15: lunchbomb.com. Ron Paul is even going to appear at a fund raising event for Amit Singh on May 14th. I love Amit Singh as a candidate as much as I love McKinley. I encourage everyone to participate in his money bomb, but Amit Singh is not running against a GOP incumbent in the primary. McKinley is.

In 1998, Ron Paul cited Vern McKinley’s work in testimony on the Financial Freedom Act Of 1997. Yet he has yet to endorse McKinley for Congress?

Is Ron Paul playing party politics by not endorsing against Republican incumbents? I don’t know the answer to that, but the evidence suggests that he is. Vern McKinley is not the only GOP incumbent opponent without a Ron Paul endorsement. Brent Sanders, Greg Lewis, Joe Ferguson, Teresa Sheppard, Peter Vidrine, and Jason Thompson are all liberty minded Republican candidates running against neo-conservative GOP incumbents who have not received endorsements from Dr. Paul.

I’ve always admired Ron Paul because he seemed focused on the issues rather than playing political chess. This endorsement fiasco is exactly the type of thing I’d expect from other politicians, not Paul. Needless to say I’m disappointed. Hopefully, Ron Paul will end up endorsing some of these candidates. I would think he would make it a priority to endorse against GOP incumbents, not an exception.

After all, we can’t take the Republican Party back to the Constitution without unseating neo-conservatives with liberty minded Republican candidates.

Yet for some strange reason many conservative minded voters in his district (my district) think he walks in the shoes of Ronald Reagan. The simple truth is that many voters in this district just aren’t paying attention. A perfect example appeared today in the editorial section of the Great Falls Connection newspaper.

Frank declared: “We have 54 trillion in unfunded obligations. China holds 1 trillion of our debt, as do the Saudis and others …The Chinese cyber program is more aggressive than the former Soviet Union in the cold war … We’re selling a lot of weapons to countries that are our enemies … Sen. Warner says we’ll lose our 3A Bond rating by 2014, in 9 or 10 years … This is not only an economic issue but a moral one … What are we leaving our grand kids with rising food costs and spending out of control? This is a generational issue as well as a moral one …

First I must digress and ask, should we really trust a guy on economics when he can’t perform simple math? 2014 is 6 years from 2008. Not 9 or 10 years, Frank. The rhetoric certainly sounds good though. The editorial goes on.

“Passage of this bill will create more jobs and bring about a renaissance, a rebirth in our country … In 1647, a gentleman by the name of William Wilburforce spoke this warning to the British House of Commons: ‘… having heard all of this, you may choose to look the other way, but you can never say you didn’t know’.”

Anti-earmarks legislation? Sounds really important to us. Thank you for taking a minute to hear it from one of the best in Congress.

Hello delusion. Time for some reality. Frank Wolf loves introducing legislation that creates more government bureaucracy just so it looks like he’s doing something. Frank Wolf has continually requested earmarks for the 10th District over the years. This year, the very year he is supposedly now against earmarks, he requested over $250 million in earmarks. This is by far the highest amount among Virginia Republicans who have released their requests.

He talks like a limited government Republican but acts like a spendthrift Democrat. He argues that his earmarks are only for good things, but where does he draw that line? Why should taxpayers in Oregon pay one cent towards the Dulles Rail project here in Virginia?

Furthermore,  there is evidence his earmarks aren’t exactly for the good of the people in his district. Another article appeared today from the National Center For Public Policy Research revealing not only potential corruption with one of Wolf’s earmarks, but his opposition to property rights.

You see, Congressman Wolf slipped a $1 million dollar earmark in the 2005 federal transportation bill — buried among 6,372 other earmarks — for the Journey Through Hallowed Ground Foundation. This is the very group that has led the lobbying effort for Wolf’s bill. More unusual still is that at the time of the earmark, the foundation had yet to even be incorporated and was operating out of the personal post office box of its executive director, Cate Magennis Wyatt.

It appears as though Congressman Wolf used taxpayer money to fund the lobbying campaign for his own bill. (Read the entire article for more)

Hello corruption.

When Virginia 10th district conservative limited government Republicans go to the polls on June 10th they will have an actual choice. They can vote for a corrupt, gun grabbing, SCHIP loving, minimum wage raising, property seizing, earmark flip-flopping so called Republican named Frank Wolf. Or they can vote for an honest, limited government, Second amendment loving, property rights protecting, truly conservative Republican economist named Vern McKinley.

The choice should be clear, but the big bad Wolf has put a spell on his Little Red Riding Hood constituents. After 28 years, isn’t it time Republicans break that spell?

Do yourself a favor and check out Vern McKinley. He’s your true Reagan Republican choice for Congress.