So my wife asked me a question this morning. She asked, ” I just heard that the US government is going to take control over Freddie and Fannie. Does that mean that we can discontinue paying our mortgage?” Well at first glance that doesn’t seem to be a great question, but since my wife asked it, I figured there must be some deeper meaning, so I thought about it for a while, and then realized she had a point. What’s the point you ask? We have officially buried the concept of individual responsibility.

The fact is that aside from terrible mismanagement ( Hey aren’t some of those credited with mismanagement actually economic advisors to Barack Obama?), the main reason that these agencies are on the cusp of bankruptcy is because of the whole mortgage market fiasco. There, as we all know, people who couldn’t afford to buy the homes they purchased, were bailed out by the government. Now the agency, that underwrote half of those mortgages is getting bailed out by the government. To me that means if you do something really stupid, have no fear, because it doesn’t matter, there will be no consequences to suffer because the ever present government will take care of you.

There is an article on Seekingalpha.com written by Matt Cooper ” Frannie Bailout: Private Profit: Socialized Risk” that has some interesting insight on the bailout. There happens to be a spot-on comment written by ‘lavalyn’ which says, “the complaint about “private profit, socialized risk” is simply that of moral hazard and double standards. If you or I were to open a business and lose our shirts the way the GSEs have, the banks would stop lending, and we’d probably lose everything… easily beyond shareholder capital.

This bailout is the taxpayer stepping in to cover for mistakes made, which is already dubious… and that’s before upper management taking in millions in bonuses, shareholders getting dividends… and them then not giving back. In the interest of “limited liability.” The GSEs have been riding the implicit (and now apparently explicit) government backing, while not giving the taxpayer/government any return for it.”

Bingo.

Anyway, since I don’t want to be the only sucker left  that makes monthly mortgage payments I am putting out a shout to Secretary Paulson, to contact me and take down my bank details to start making my monthly payments. Just one favor Mr. Secretary: Please make sure the payment is on time.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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So today the Manufacturers Association of Israel is out calling on the government to implement some kind of emergency rescue program to save the fledgling textile industry. They say that due to the Shekel strength over the last year or so, exports have fallen and about 5% of workers in the industry have lost their jobs in ‘08.

According to a report in Globes: “While textile exports fell 3.3% to $520 million in the first half in real terms, compared with the corresponding period, textile imports (especially from Asia), rose 18.6% to $656 million.”

Unfortunately what they neglect to say is that this is nothing new. Israel has lost textile market share for years, as even local producers have turned to Jordan and other countries with much cheaper production costs. Basically, due to the fact that many in the Israeli textile industry are unionized, they have succeeded in pricing themselves out of the market, forcing companies to turn to cheaper alternatives. It’s the Association’s own fault and now they want the government, i.e taxpayers, to bail them out. Sorry. If you can survive, great. If not, try producing something else.

I realize that government bailouts of certain sectors and populations has become the norm over the last couple of months, as governments in both the UK and the US, have bailed out banks that played fast and loose with their and depositor’s money. And let’s not forget homeowners in the US who were encouraged to purchase homes that they couldn’t afford, couldn’t make monthly mortgage payments, and are now getting bailed out by Congress, the same Congress that encouraged them to make the purchase in the first place. But why can’t we just let the market take care of itself.

If developing countries are able to produce goods on the cheap, let them. Developed countries should concentrate on what they do best, which is producing value-added goods and services. Each country should specialize in what they do best, thus we will get the best goods at the most attractive prices. I am not going to go into an analysis of Francis Fukuyama’s “End of History’ theory, but specialization does have advantages.

The Israeli government should stand strong, and not succumb to a bailout of the textile industry. Either the Israel textile industry should make the necessary changes needed to compete in a global economy, or they should face the music.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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