Neil Bush – Photo Credit: Kiev Ukraine News Blog

On Thursday, May 31, former Massachusetts Governor Mitt Romney stood outside the abandoned headquarters of Solyndra, a bankrupt solar company that was backed by some $500 million in federal loan guarantees, and said, “free enterprise to the president means taking money from the taxpayers and giving it freely to his friends.”

What he didn’t say is, to the Republican Party, free enterprise is exactly that.

The very next day, Konarka, a Massachusetts-based solar manufacturer, announced that it was filing for Chapter 7 bankruptcy protection and would lay off all its employees.

That marks the second bankruptcy of a solar company that was backed by Governor Romney’s administration. The other company, Evergreen Solar, declared bankruptcy in August 2011.

Maybe Obama and Romney’s administrations should have been a little more careful about who got these loans, but that’s also part of free enterprise. Romney’s experience at Bain has undoubtedly taught him that sometimes bad investments happen.

Even so, the administrations didn’t do anything wrong by making these loans. It is common practice for federal and state governments to provide loans and loan guarantees to companies in fledgling industries such as renewable energy.

It is, however, downright hypocritical for Romney and the Republicans to try to make Solyndra into a campaign issue.

At this point, the more conservative among you are probably saying that it’s not the same because “Solyndra’s chief backer was George Kaiser, an oilman who made billions of dollars and was a big donor and fundraiser for the Obama 2008 campaign.”

Or they might point to Romney’s claim that Solyndra funds were steered to “friends and family, to campaign contributors.” This claim, by the way, was debunked in detail by ABC.

But it would be hypocritical for Romney and the Republicans want to talk about steering federal funds to friends and family if they’re guilty of the same thing, right?

Does anyone remember the Silverado Savings and Loan bailout? From Wikipedia:

Silverado Savings and Loan collapsed in 1988, costing taxpayers $1.3 billion. Neil Bush, son of then Vice President of the United States George H. W. Bush, was on the Board of Directors of Silverado at the time. Neil Bush was accused of giving himself a loan from Silverado, but he denied all wrongdoing…

As a director of a failing thrift, Bush voted to approve $100 million in what were ultimately bad loans to two of his business partners. And in voting for the loans, he failed to inform fellow board members at Silverado Savings & Loan that the loan applicants were his business partners.

Neil Bush paid a $50,000 fine, paid for him by Republican supporters, and was banned from banking activities for his role in taking down Silverado, which cost taxpayers $1.3 billion. A Resolution Trust Corporation Suit against Bush and other officers of Silverado was settled in 1991 for $26.5 million.

So Neil Bush almost single-handedly destroyed Silverado Savings and Loan, costing American taxpayers $1.3 billion under the Reagan administration’s savings and loan bailout program.

…And the Republicans accuse President Obama of “crony capitalism”?

What Romney should have said is, “free enterprise to the Republicans means taking money from the taxpayers and giving it freely to their families.”

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Image Credit Gage Skidmore

In the latest USA Today/Gallup poll, conducted May 10-May 13, 55% of respondents say that the economy will be better in a year if Mitt Romney is elected president, compared to 46% who say the economy will be better if President Obama is reelected.

These results are far from surprising. Nearly every poll since Romney became the presumptive Republican nominee has shown that Americans rate Romney better on the economy than Obama.

Just like Mitt Romney said in his April 24 speech, “it’s still about the economy, and we’re not stupid.”

But what has Romney done to prove that he would have handled the economy better than the President?

Over the next few posts, I’ll examine three of Romney’s most notable positions on the economy.

By the way, anyone who’s hoping to see another article about how Romney ruined companies and fired workers while he was CEO at Bain Capital will be sorely disappointed. This post isn’t about Romney’s record in the private sector. It’s about his record and statements on the economy and on the current state of economic stagnation.

Part 1: Foreclosures

In interviews and in the Republican presidential debates, Romney frequently said that the best thing for the government to do was stop intervening in the housing market with programs such as HAMP and HARP. According to him, the government should just let the foreclosure process run its course.

He said, “Allow investors to buy homes, put renters in them, fix the homes up and let it [the housing market] turn around and come back up. … The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”

Sounds good, right? He is correct that there is a “foreclosure overhang” in this country. A foreclosure overhang happens when so many borrowers are behind on their mortgages that banks just can’t keep up. The problem is, Romney’s plan would have made the foreclosure overhang much worse than it is.

Let me explain how.

If the government had allowed the foreclosure process to run its course, many of the estimated 14.7 million underwater homeowners would have been thrown out of their homes.

Ignore, for a moment, the immense human suffering this plan would have caused. Foreclosures on such an immense scale would have resulted in an even greater supply of distressed properties on the market and would have added to the already significant foreclosure backlog.

It would also have further depressed property values, making more homeowners underwater, and it would have made the road to recovery even longer and more treacherous than it already is.

The Obama administration’s HAMP and HARP programs, on the other hand, have kept borrowers in their homes and kept them paying their mortgages, thereby reducing banks’ foreclosure backlogs. Borrowers that aren’t being foreclosed upon or evicted are also more likely to spend money on “luxury” items (items not crucial for survival), which helps support the economy.

In other words, Romney’s plan would have added to the “foreclosure overhang”, while President Obama’s has reduced it by reducing the number of people who are behind on their loans.

Where did Romney think investors and aspiring homeowners would get the money to buy all those foreclosed properties, anyway? Banks have become extraordinarily risk-averse since the housing market collapsed, making it exceedingly difficult for even the most creditworthy borrowers to get loans.

Even with government intervention through programs like HAMP and HARP, US home prices are just beginning to stabilize (maybe). How much longer would it have taken if Mitt Romney had been President during the housing crisis?

Of course, Romney changed his mind later at a campaign stop in Florida, saying that banks should “move on and start over away from those debts”.

Mr. Romney, we’ve seen your record on foreclosures, “and we’re not stupid”.

Come back tomorrow evening for a discussion on the effect Romney’s Detroit bankruptcy plan would have had on the economy.