A few common talking points of the right in recent days are that:<\/p>\n
1) The efforts of the left to occasionally let poor people (Some of whom were probably black<\/em>, can you imagine?) buy some homes is a big part of what lead to the current financial dire straits we find ourselves in.<\/p>\n 2) Fannie Mae and Freddie Mac were a big part of the problem, and since they were government-sponsored, this is certainly<\/em> not a failure of the free market and there’s no need whatsoever for more regulation and everything’s fine with our economic theories and oh look a bird.<\/p>\n In an opinion piece in the Wall Street Journal<\/a>, of all places, Thomas Frank lays that crap to rest.<\/p>\n First, Fannie and Freddie:<\/p>\n 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.<\/p><\/blockquote>\n Now, of course, that’s not to say that they weren’t part of the problem . . . certainly they were, but they didn’t create<\/em> the problem. They just, like virtually everyone else, made it worse.<\/p>\n But what about ‘the greed of the borrowers’?<\/p>\n 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.<\/p>\n 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.<\/p><\/blockquote>\n Huh. Now, that’s fascinating. I wonder who Professor Black thinks actually is<\/em> at fault?<\/p>\n 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.”<\/p><\/blockquote>\n Weird.\u00a0 I totally wouldn’t have guessed that an army of rational private actors acting in their own self-interest would have lead us directly to the brink of financial ruin in the absence of strong government regulation.<\/p>\n I guess you learn something every day.<\/p>\n Don\u2019t comment unless you accept the basic dignity, equality, and inherent worth of all people.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" A few common talking points of the right in recent days are that: 1) The efforts of the left to occasionally let poor people (Some of whom were probably black, can you imagine?) buy some homes is a big part … Continue reading