Jackson Free Press

Congressman Travis Childers just released a statement on why he voted against the $700 billion bailout today. Verbatim:

"Hard-working families are struggling in the face of job losses and home foreclosures resulting from overall economic instability. They are justifiably angry about a bailout that would require them to dig deeper into their pockets to rescue Wall Street from its own recklessness.

"Earlier this year, I voted against a budget that would raise the federal debt to an unprecedented level. Today, I was again compelled to vote my conscience against a massive debt increase. While I appreciate the bi-partisan effort to craft this legislation, at the end of the day, I could not, in good conscience, vote for a bailout of Wall Street that would increase our national debt by such magnitude and place such a heavy and undue burden on working families.

"However, there was considerable progress made by including provisions for oversight and accountability over the past week. While it was still not convincing enough for me or my constituents, I will keep an open mind as negotiations continue in hopes that a more fiscally responsible plan that ensures protection of hard-working Americans will be presented.

"A central concern is the fundamental issue of fairness. Asking every American to shoulder an additional $2,300 in debt because of Wall Street's reckless mistakes is incredibly unfair. Working families have been left on the sidelines for far too long as tax breaks and special treatment have been handed to the wealthiest and most powerful interests. The average American's stake in the economy needs to be protected.

"I look forward to negotiating a plan that makes sense for American taxpayers, and will continue to put North Mississippians first as the effort to reach a fiscally responsible, bi-partisan solution continues.

Previous Commentsshow

Powerful: A central concern is the fundamental issue of fairness. Asking every American to shoulder an additional $2,300 in debt because of Wall Street's reckless mistakes is incredibly unfair. Working families have been left on the sidelines for far too long as tax breaks and special treatment have been handed to the wealthiest and most powerful interests. The average American's stake in the economy needs to be protected. It's true. Republicans have made it harder for Americans to declare bankruptcy as tough times hit them, and don't want to raise the minimum wage, and gave tax cuts to the wealthy. Hey. Chickens, meet the Roost.

DonnaLadd

Sep 29 2008

"The average American's stake in the economy needs to be protected." That is a key provision that I feel needs to be there. Has anyone had a chance to read the bill to see if there was a provision (for an equity stake in troubled institutions) to enable taxpayer funds to be recovered when the market recovers? Average Americans WILL suffer if credit markets dry up, the economy contracts and even MORE jobs are exported.

FreeClif

Sep 29 2008

I was glad to see that the bailout plan failed, I hope all the others fail as well. These chickens belong to all of us, everyone who thinks that living beyond our means on borrowed money is a good idea. The Democrats made it easy for the banks to loan money to low income borrowers and opposed additional oversight of Fannie Mae and Freddie Mac when the Bush Administration proposed it in 2003. ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Representative Melvin L. Watt, Democrat of North Carolina, agreed. ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said. ~ Ny Times Sept 11, 2003 Notice how Barney Frank wants to protect "affordable housing" when in fact the very policies congress had enacted through the CRA had caused prices to inflate into the bubble that just burst. My point is that while, yea, there are certainly greedy Republicans to blame, there is plenty to go around to everyone on both sides. Senator Obama has his hands quite deep in it too and I am afraid they could cost him the Presidency if his ties to Franklin Raines are splashed all over the media a couple of weeks before the election.

WMartin

Sep 30 2008

Low Income borrowers ARE not the crux of the problem. That is the same mindset that wants to blame poor Mexicans for people losing their jobs. Look, if Fannie and Freddie had 5 billion dollars of sub-prime exposure and are the heart of the probleme then WHY is 700 BILLION dollars being requested and WHY are banks like Wachovia, Wash Mu, CitiBank and many others experiecing such great difficulty? IT is ALL the poor people's fault? You people are pathetic. A rich man's wealth makes many friends and the poor are always despised.

FreeClif

Sep 30 2008

The last report was that Fannie and Freddie held about 180 billion in sub-prime securities (not the actual mortgages). Why is 700 billion dollars (some estimate the need as high as 1.5 trillion) needed to bail the fincial markets out if it is all due to poor people getting loans they didn't deserve through Fannie and Freddie? Are not Fannie and Freddie actually barred from making "sub-prime" loans by federal regs? I believe they are. They got into trouble buying sub-prime securites based on mortgages that originated from places like COUNTRYWIDE, etc.

FreeClif

Sep 30 2008

They got into trouble buying sub-prime securites based on mortgages that originated from places like COUNTRYWIDE, etc. -Whitley THAT is the source of the problem - why were those "securities" so prevalent - a stupid, foolish and byzantinely structured product - so elaborate that the chief investment manager at State Farm insurance didn't buy ANY - he said, if I can't understand it, I won't buy it. I guess the name "securities" was a misnomer.

Izzy

Sep 30 2008

Low Income borrowers ARE not the crux of the problem. That is the same mindset that wants to blame poor Mexicans for people losing their jobs. I agree Whitley, to blame the poor people who actually took out the loans is to miss the point entirely. In many cases they were given awful advice by people who were supposed to know better. They were sold adjustable rate mortgages with the promise of the ability to re-fi if the rates were going go up. Well the rates went up and falling prices made them upside down with no ability to re-finance. But to simply blame Republicans also misses the point. Everyone had a hand in it. Bad public policy is the cause, pure and simple. Everybody wanted more people to own homes but the steps taken to get there were the wrong ones and as long as everybody was making money no one wanted to do anything about it. Now those same people who led us down this path want $700 billion maybe more to fix what they broke in the first place. I say no.

WMartin

Sep 30 2008

Marshall Ramsey proves a picture is worth a thousand words: http://www.clarionledger.com/apps/pbcs.dll/section?category=PluckPersona&U=1b147a797e9e46b884bd2455bcc15a67&plckPersonaPage=BlogViewPost&plckUserId=1b147a797e9e46b884bd2455bcc15a67&plckPostId=Blog:1b147a797e9e46b884bd2455bcc15a67Post:ceff4bcd-a0d3-44d4-8039-364e510a5c91&plckController=PersonaBlog&plckScript=personaScript&plckElementId=personaDest

FreeClif

Sep 30 2008

Whitley, the link above didn't work for me, but this one does.

Ronni_Mott

Sep 30 2008

This isn't a fake crisis. It came about because of the Clinton administration's push to allow everyone, including unqualified individuals, to purchase a home.

QB

Sep 30 2008

Harry, it's funny that you and Matt Allen are pushing the same talking point (which is rather lame, not that I'm a Clinton fan). I expect you to be that partisan, but not Matt, frankly.

DonnaLadd

Sep 30 2008

And be real careful guys, this talking point could get you in tricky territory, if you're not careful. So read the fine print before you pass along the new racist Republican talking point that tries to blame the crisis on black people and isn't even accurate: The New Talking Points, Washington Monthly: For about a week now, Republicans have been looking for a way to blame the crisis on Wall Street on Democrats. The search hasn't gone well... But conservatives kept on trying. In fact, the right seems to have finally come up with a new line: Democrats forced banks to give mortgages to low-income minorities, those low-income minorities couldn't keep up with their mortgage payments, and the banks struggled as a result. Voila! Blame the Dems! Fox News' Neil Cavuto helped get the ball rolling. Media Matters reported that Cavuto conflated giving home mortgages to minorities with risky lending practices...[...] For one thing, the timeline is ludicrous. The Community Reinvestment Act was passed in 1977. Are we supposed to believe that CRA was working smoothly throughout the Carter, Reagan, Bush I, and Clinton years and then only under Bush II did overzealous anti-"redlining" enforcement come into play, perhaps a result of Dubya's legendarily close relationship with ACORN? Or maybe overzealous enforcement back in the late 1970s is somehow responsible for a real estate blowout that only materialized 30 years later? It doesn't even come close to making sense. Beyond that, the mere existence of "subprime" loans -- i.e., mortgages given to less-creditworthy individuals at higher interest rates -- isn't the problem here. The problems have to do with what was done with the loans after they were packaged, sold and used to make leveraged plays. Sorry, conservatives, you'll have to keep looking for a way to blame Democrats for this mess. Good luck with that. I understand partisans trying to find a way to blame the other guy, but going down THIS road is treacherous, and could change people's opinions about you personally forever. Careful.

DonnaLadd

Sep 30 2008

Harry, what specific piece of legislation pushed by Clinton allowed unqualified homeowners to destroy the American economy? That is absolutely wingnutty unless there is a citation of some specific act or legislation. People are soon going to find out this is more than a sub-prime mortgage crisis. Wasn't there some deregulatory legislation sponsored by Phil Gramm back in the nineties that might be related?

FreeClif

Sep 30 2008

Whitley, see what I just posted. This is what the GOP home office is telling people to push, and I suspect our local boyz are putting it out there without understanding that they are pushing racism.

DonnaLadd

Sep 30 2008

key quote, esp. the bit at the end of this part: Bachmann … incorrectly points to the Community Reinvestment Act as a source of our current problems. CRA, originally passed in 1977, does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, federal law requires that CRA lending activities must be done consistent with safe and sound banking practices. In reality, most high-cost loans were originated by lenders that did not have a CRA obligation and lacked federal oversight.

Izzy

Sep 30 2008

From what I've read, the loans that caused this meltdown were originated between 2004 and 2007. More importantly, 80% of the loans that caused this meltdown were originated by entities that were NOT covered by CRA. Another popular talking point is that ACORN and Obama were joined at the hip in pressuring banks to approve risky subprime loans.

Jeff Lucas

Sep 30 2008

Right, Jeff, which is part of the racist meme. This is getting ugly. I doubt people passing along these talking points know what they're doing. I hope not. I did just get my editorial for this week, though. Thanks, Harry and Matt.

DonnaLadd

Sep 30 2008

That is true Jeff. I got an email from the Republican Party asking me for money. They asked for seven dollars :-). I couldn't make that up. I don't know if I should have felt insulted or felt sorry for them. It talked about how this is all the fault of ACORN and Obama!!! What happened to the idea that Obama never accomplished anything? Now he is "DESTROYER OF THE UNIVERSE (AND ACORN TOO)"? That is why they are called WINGNUTS! There is no substance to this. Lying is all they have left because they have ransacked America like the barbarians descended on Rome.

FreeClif

Sep 30 2008

More importantly, 80% of the loans that caused this meltdown were originated by entities that were NOT covered by CRA. Business week is reporting that also Jeff. http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

WMartin

Sep 30 2008

Good for Business Week. Meantime, I predict they're trying to set Palin up to go another sneering attack on "community organizing"—to try to blame ACORN and CRA for meltdown. Hopefully, this one will be thoroughly debunked by Thursday. We sure will do our part. I just finished my editorial. ;-) Thanks again, Harry, for urging me to Google to see where you were getting your talking point.

DonnaLadd

Sep 30 2008

Business Weeks nails this lie on the head: Community Reinvestment Act had nothing to do with subprime crisis Posted by: Aaron Pressman on September 29 Fresh off the false and politicized attack on Fannie Mae and Freddie Mac, today we're hearing the know-nothings blame the subprime crisis on the Community Reinvestment Act — a 30-year-old law that was actually weakened by the Bush administration just as the worst lending wave began. This is even more ridiculous than blaming Freddie and Fannie. The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it's even more ridiculous when you consider that most subprime loans were made by firms that aren't subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.” Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here). Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law's reach since the day it took office. More there to read. Please pass that link around. It kills me to see the GOP play the race card in such a disgusting way. And those of you passing it on ought to be furious at your party for arming you with such despicable garbage, knowing you would pass it around without checking it out. Just say no.

DonnaLadd

Sep 30 2008

Business Week links to this blog post, too: It's Still Not CRA.

DonnaLadd

Sep 30 2008

A MUST READ: http://query.nytimes.com/gst/fullpage.html?res=9c0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=all My apologies for butchering the URL. http://query.nytimes.com/gst/fullpage.html?res=9c0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=all

QB

Sep 30 2008

This Business Week article gives some insight into why the crisis will eventually be revealed to extend well beyond homes and how poor people or usually victims of lending predators: http://www.businessweek.com/magazine/content/07_21/b4035001.htm

FreeClif

Sep 30 2008

Harry, the fact that Fannie Mae encouraged lending to low-income folk and minorities does not mean THAT is the proximate cause of the current crisis. Fannie and Freddie are only tied to a minority fraction of the total of bad loans. I wonder what you guy's motivation is for wanting to pin the majority of blame for the crisis on low-income and minority borrowers? Do you just dislike low-income folk? The problem was not so much the bad loans themselves but the fact that deregulation pushed for decades by the wingnut free market worshippers allowed these bad loans to be bundled in ways few could decipher and traded as "securities" which were rated as good investments by corrupt rating agencies who are in the pockets of the companies whose securities they rate. The securitization of these risky debts reformulated as "good" investments with AAA ratings from Moodys et. al. is what led us to the house of cards that is now tumbling down.

FreeClif

Sep 30 2008

omg... Bill O' Reilly just used the same Barney Frank quote I did. I feel dirty now.

WMartin

Sep 30 2008

Quick, rub some aloe vera all over your body, WMartin, and I think you'll be OK.

DonnaLadd

Sep 30 2008

Harry, you're mixing apples and oranges a bit in your quest to blame non-whites for the crisis. It is not a secret that lendors made it easier for lower-income people to get loans, and because of our history, many non-whites have lower incomes. We can stipulate that. But that in no ways proves your original assertion or the talking point you got it from. But maybe you're just blinded by the word "minorities"? This must be one of the stupidest arguments I've ever been in the middle of. And saddest. We are actually sitting here arguing with people who are doing backflips to blame the crisis on people of another race. That would definitely qualify as an "-ism."

DonnaLadd

Sep 30 2008

Oh, and if you read the whole thing, that Times article disputes the notion that this crisis goes all the way back to Carter. Saying that minorities got more home loans in the 1990s is not the same as saying they weren't qualified for them, or that they were given then in a way that contributed to this crisis.

DonnaLadd

Sep 30 2008

WMartin what ties to Raines are you referring to? That accusation has already been investigated and has already been all over the media. Franklin Raines donated money to Obama. He is not an advisor to Obama. McCain has received money from people linked to Fannie and Freddie also. One of his top men was STILL getting thousands each month from Fannie Mae until a month or two ago. The guilt by association thing is not going to be any kind of bombshell "right before the election" anymore than they have already been trying to push it in advertisements. It hasn't gotten any traction because it seems to insubstantial.

FreeClif

Sep 30 2008

That accusation has already been investigated and has already been all over the media. Franklin Raines donated money to Obama. He is not an advisor to Obama. McCain has received money from people linked to Fannie and Freddie also. One of his top men was STILL getting thousands each month from Fannie Mae until a month or two ago. Right, this one has been thoroughly debunked, and the false ad the McCain ran about Raines (who is black) is probably what reminded The New York Times to look into McCain's connections to F and F and find out that his campaign manager, Rick Davis, was on their payroll until, well, the Times exposed it. In September. And he was on their payroll in order for them to have access to McCain. And he hasn't fired Davis YET. How's that for a reformer?

DonnaLadd

Sep 30 2008

I hope not. I finally got off the fence and came down for Obama. The ones you mentioned are the ties I am referring to. Obama has received hundreds of thousands from Fannie Mae and Freddie Mac also. The whole thing is a wash to me politically as far as the Presidential election goes. I think both parties share a lot of responsibility. I forget who said it but I think the quote is "A lie can go around the world before the truth can put it's shoes on." that's what I am worried about.

WMartin

Sep 30 2008

Their motto is, "The buck stops here (unless we can conjure up a vast gay, African American, illegal Mexican conspiracy)". In a September 25th blog post titled 'The Nation Will Right Itself If It Fixes Sex', Christian Civil League of Maine Executive Director Michael Heath writes that the financial crisis facing Wall Street is a symptom of America's sinful sexual culture, including the acceptance of gay unions. A related post by Center for Immigration Studies Executive Director Mark Krikorian at the National Review's website pushes a similar theme, focusing on Friday's failure of WaMu. Krikorian suggests the big bank failed because it was too accommodating to minorities, including gays, African-Americans and Hispanics. This is why they are called WINGNUTS.

FreeClif

Sep 30 2008

I agree that F and F have tried/hoped to influence both with contributions. That part is a wash. What is not a wash is having a campaign manager who is on the payroll and not doing anything about it. There is nothing "reform" about that. McCain and Palin are bastardizing the word "reform" and even "maverick" to the point that it will mean nothing by the end of this campaign cycle. And, yes, Whitley that crap is tried-and-true wingnuttery.

DonnaLadd

Sep 30 2008

Here's a blog entry I did two years ago about predatory lending. I see low-income homeowners as victims caught in the crossfire. They're just seeking the American dream, and it is unfair to blame the victims for being swindled. If you've ever been to a closing, you'll see the 20,000 sheets of paper you have to sign to get a mortgage finalized, and then the real estate lingo and legalese makes it difficult for the average person to interpret.

LatashaWillis

Sep 30 2008

WMartin wrote Obama has received hundreds of thousands from Fannie Mae and Freddie Mac... The L.A. Times reported on 9-9 that Obama received 112,000 from Fannie Mae and Freddie Mac EMPLOYEES. More from those employees than any other candidate. To say it came from Fannie Mae is misleading. Several people where I work have donated to a particular candidate, but it would be inaccurate to say that our employer donated to that candidate. $112,000 is not "hundreds of thousands". Obama has raised more money than any other candidate. What is your source that it is "hundreds of thousands" (that makes me envision over $500,000 and the flaunting of campaign donation limits!)?

FreeClif

Sep 30 2008

I thought that number was high, too, but didn't take time to factcheck it.

DonnaLadd

Sep 30 2008

Here is the equity language in the rescue plan that Obama insisted on to protect taxpayers: Per the plan, the government MUST receive equity (a "warrant" is an instrument that is convertible into equity) in the financial institution participating in the Bailout, unless the financial institution is not traded on a national exchange (i.e., NYSE, NASDAQ, etc.). If not traded on a major exchange, the government will receive a senior debt instrument. For all intents and purposes, however, all of the financial institutions that would participate in this program are publicly traded on a major exchange. So, what this means is that the government will get equity in exchange for purchasing assets from the banks. To the extent that stocks of the banks that participate in the program rise, the government (and presumably taxpayers) will benefit from that. The government will be able to sell these securities over time gradually to get our money back. It is NOT structured as a giveaway: WARRANTS AND DEBT INSTRUMENTS: (1) IN GENERAL.—The Secretary may not purchase, or make any commitment to purchase, any troubled asset under the authority of this Act, unless the Secretary receives from the financial institution from which such assets are to be purchased: (A) in the case of a financial institution that is registered (or approved for registration) and traded on a national securities exchange or a national securities association registered pursuant to section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3), a warrant giving the right to the Secretary to receive non-voting common stock or preferred stock in such financial institution, as the Secretary determines appropriate; or (B) in the case of any financial institution other than one described in subparagraph (A), a senior debt instrument from such financial institution, as described in paragraph (2)(C). (2) TERMS AND CONDITIONS: The terms and conditions of any warrant or senior debt instrument required under paragraph (1) shall meet the following requirements: (A) PURPOSES: Such terms and conditions shall, at a minimum, be designed (i) to provide for reasonable participation by the Secretary, for the benefit of taxpayers, in equity appreciation in the case of a warrant, or a reasonable interest rate premium, in the case of a debt instrument; and (ii) to provide additional protection for the taxpayer against losses from sale of assets by the Secretary under this Act and the administrative expenses of the TARP. (B) AUTHORITY TO SELL, EXERCISE, OR SURRENDER: The Secretary may sell, exercise, or surrender a warrant or any senior debt instrument received under this subsection, based on the conditions established under subparagraph (A). (C) CONVERSION: The warrant shall provide that if, after the warrant is received by the Secretary under this subsection, the financial institution that issued the warrant is no longer listed or traded on a national securities exchange or securities association, as described in paragraph (1)(A), such warrants shall convert to senior debt, in an amount determined by the Secretary. (D) PROTECTIONS: Any warrant representing securities to be received by the Secretary under this subsection shall contain antidilution provisions of the type employed in capital market transactions, as determined by the Secretary. Such provisions shall protect the value of the securities from market transactions such as stock splits, stock distributions, dividends, and other distributions, mergers, and other forms of reorganization or recapitalization…

FreeClif

Sep 30 2008

I originally saw these numbers...According to OpenSecrets.com, from 1989 to 2008, Dodd received $165,400 in Fannie Mae and Freddie Mac campaign contributions, including contributions from PACs and individuals, followed by Obama, who received $126,349 in such contributions since being elected to the Senate in 2004. And also: Here are the top recipients of campaign contributions from Fannie Mae and Freddie Mac, 1989-2008: 1. Dodd, Christopher J D-CT $133,900 2. Kerry, John D-MA $111,000 3. Obama, Barack D-IL $105,849 A little more looking and I found this: On the Freddie and Fannie question, it as McCain said: Obama is No. 2 on the list, with $126,349, right after Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, who had $165,400. But the list requires a few notes of explanation. Corporations cannot give to candidates, so the center's list adds up contributions from Fannie and Freddie employees and their families. Obama has received a lot of money during his presidential campaign, though, and Fannie and Freddie don't make his list of top 20 companies. (The top three companies with employees donating to Obama are Goldman Sachs, University of California, and Citigroup, according to the center.) The New York Times looked at contributions from Fannie and Freddie's boards of directors and lobbyists, who are technically not employees. That analysis found Fannie and Freddie-related contributors gave $169,000 to John McCain and his related committees, compared with $16,000 to Obama and his related committees. I didn't mean to make it seem as if Obama had broken any laws but I knew it was over a hundred thousand.

WMartin

Sep 30 2008

OK, that makes more sense. I really didn't think "hundreds of thousands" sounded right. Look, no one hates the campaign-contribution system more than I do, which means that all candidates get money from corporations and organizations hoping to influence them. And when it turns out later that a person or group was rotten (see: everyone Scruggs donated to), then everyone tries to paint the candidate with that brush. (And it can become important to then disavow, or even return some of the money, depending on the circumstances). However, that is *very* different from your campaign manager being on the payroll of a group like that just to gain access to you at some point -- and the candidate either not knowing or not caring (which is worse: not knowing or not caring? Toss up.). It is still befudding that Davis would approve that ad against Obama knowing what he was up to himself, which was much worse. Does he think the media are stupid?

DonnaLadd

Sep 30 2008

No, they think there are enough stupid Americans to get elected.

FreeClif

Sep 30 2008

OK, I've posted our editorial about the racist Carter-Clinton-CRA talking point. Also ... The business media are continuing the effort to debunk this racist GOP talking point. Thomas Frank today in the Wall Street Journal: On economic questions the standard exculpatory maneuver is even simpler. When some free-market scheme blows up, one needs only find an institution of government in close proximity to the wreckage and commence accusing. Thus we hear from some on the right that the disaster on Wall Street was the handiwork not of those with unbridled pecuniary motives but of Fannie Mae and Freddie Mac, which were government-sponsored enterprises and therefore partially exempt from market discipline and of theoretical necessity the sole culprits. There is no doubt that Fannie and Freddie enabled the subprime neurosis, but for certain conservatives they are virtually the only malefactors worth noting. The dirge goes like this: Fannie and Freddie were buying up subprime mortgages, and they were doing it for (liberal) political reasons. Mortgage originators thus had no choice but to hand out mortgages like candy. Had market forces been in charge, loans would, no doubt, have been administered with a rigor and sternness to make John Calvin blanch. I asked Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on the Savings and Loan debacle of the 1980s, what he thought of the latest blame offensive. He pointed out that, for all their failings, Fannie and Freddie didn't originate any of the bad loans -- that disastrous piece of work was done by purely private, largely unregulated companies, which did it for the usual bubble-logic reason: to make a quick buck. Most of the mistakes for which we are paying now, Mr. Black told me, were actually made "by four entities that under conservative economic theory should have exercised effective market discipline -- the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities." Instead of "disciplining" the markets, these private actors "served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble." It is they, Mr. Black says, who "turned a crisis into a catastrophe." Ah, but truth is no ally to a conservative with his back to the wall. So much more helpful are the trusty narratives on which the movement was built. So when we have dispatched this first canard, we learn from other conservatives that it is the sub-prime people who are to blame; that by taking out loans they couldn't possibly pay off, these undesirable borrowers have ruined us all. There is no way to measure the number of people who took out mortgages they knew they couldn't afford, of course, but for what it's worth, a 2007 report by the Mortgage Bankers Association reports that the FBI estimates "80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders." That means the lenders, not the borrowers.

DonnaLadd

Oct 1 2008