Fannie Freddie and Friends
While the Democratic nominee dined at a $28,000 per plate dinner, assuring his tuxedo and evening gown clad adorers, with nary a hint of parody, that his opponent is the one out of touch with the people, banks collapsed on Wall St.
Most assuredly Obamtoinette and friends dined on cake.
We are witnessing the inevitable collision between economic illiteracy and historic ignorance, and same geniuses who charted the course will be left to clean up the mess. This should be interesting.
One side claims the crisis is the result of too little regulation while the other insists it is the result of too much. They can't both be right.
Let's look at the history shall we? The private/public half-breeds Fannie Mae and Freddie Mac, deformed step-children that they are, were born under FDR and LBJ. They are the resulting offspring of the shotgun marriage of private and public sectors, the pure manifestation of regulation - - institutionally realized, whose maturity was only possible, and demise prolonged, solely because of the monopolistic protections by Uncle Sam, you know, the guy with the shotgun.
I tend to abide by the libertarian credo that there is nothing the government can do, with the possible exception of large scale war operations, that the private sector can't do better and more efficiently. The FEDFRAN mess bares that out in spades. In government bad investments pay off, or at least are given life support under the guise of the "public good" In the private sector bad investments have real results, ranging from profit loss to bankruptcy.
Dean Barnett of the Weekly Standard blog, put it ever so succinctly:
What makes me laugh – ruefully, I assure you – is when our office seekers trot around the country promising “accountability” for Wall Street. Lehman just went bankrupt – in a market economy, things don’t get more “accountable” than that.
TRWT http://www.weeklystandard.com/Weblogs/TWSFP/TWSFPView.asp
The only thing that kept Fannie Freddie alive this long is their Potempkin status as a "government" entity. (it's sorta like National Public Radio, who certainly gets more prestige out of the "National" in their name than the "public" which only provides a measly 14% of their funding, but I digress).
With the protection from market rules, and along with it common sense business practice, FANFRED is instead a political tool to control the first, housing, of the neomarxists trifecta that comprises all that stuff between the cradle and grave, the other two being education, in progress if you can call it that, and healthcare, next on the agenda. Yet somehow I doubt this example will be used as an argument against universal health care.
As explained more thoroughly in the Investors Bushiness Daily linked below, highly recommended, (actually sent to me by several different readers) these problems started under Bill Clinton whose Secretary of HUD mandated, under the ever-so-well-intentioned guise of fair housing, that banks must lend to those not previously qualified. In essence, the Fed forced banks to make loans their own private profit-oriented in-house rules would never allow.
But let's not go crazy and assume banks were entirely innocent. The lure of easy money through compliance to stupid mandates was just too irresistible for some, and they deserve what they get as per the accountability Barnett describes above. But what about government accountability? So far it looks like all calls for investigative commissions are aiming at Wall Street only, when at least half the blame resides in DC. Call it the home court advantage of rulemakers. Chickens, roost, you know the rest. It was only a matter of time.
The whole thing is a very interesting read:
INVESTOR’S BUSINESS DAILY: The real culprits in the subprime mess ...
The only thing more solidly predictable about the eventual collapse of FREDFAN is how Democrats would blame everyone but themselves for its demise. (truthfully I believe most democrats actually view its nationalization as a good thing, seeing how it is so in line with their socialist tendencies and all) The best argument they can come up with for anything these days is the Tourette's syndrome blurt they use in every soundbite; "it's all Bush's fault". Well, in a way I have to agree with them. Bush DID assume good faith in dealing with them after all.
A brilliant piece by Robert Higgs at the Independent Institute blog Sept 10, Ticking Time Bomb Explodes, Public Is Shocked Explores this even further. A tasty snippet:
Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.
This is worth a read and a reread, if for no other reason than to see how he develops the hotel metaphor. Like I said, brilliant.
Hat tip to Rush Limbaugh on this one. I don't listen regularly but I caught him reading some of this on air the other day. Like his style or not he is a damn good source for sources. I will definitely be bookmarking the Independent Institute..
Most assuredly Obamtoinette and friends dined on cake.
We are witnessing the inevitable collision between economic illiteracy and historic ignorance, and same geniuses who charted the course will be left to clean up the mess. This should be interesting.
One side claims the crisis is the result of too little regulation while the other insists it is the result of too much. They can't both be right.
Let's look at the history shall we? The private/public half-breeds Fannie Mae and Freddie Mac, deformed step-children that they are, were born under FDR and LBJ. They are the resulting offspring of the shotgun marriage of private and public sectors, the pure manifestation of regulation - - institutionally realized, whose maturity was only possible, and demise prolonged, solely because of the monopolistic protections by Uncle Sam, you know, the guy with the shotgun.
I tend to abide by the libertarian credo that there is nothing the government can do, with the possible exception of large scale war operations, that the private sector can't do better and more efficiently. The FEDFRAN mess bares that out in spades. In government bad investments pay off, or at least are given life support under the guise of the "public good" In the private sector bad investments have real results, ranging from profit loss to bankruptcy.
Dean Barnett of the Weekly Standard blog, put it ever so succinctly:
What makes me laugh – ruefully, I assure you – is when our office seekers trot around the country promising “accountability” for Wall Street. Lehman just went bankrupt – in a market economy, things don’t get more “accountable” than that.
TRWT http://www.weeklystandard.com/Weblogs/TWSFP/TWSFPView.asp
The only thing that kept Fannie Freddie alive this long is their Potempkin status as a "government" entity. (it's sorta like National Public Radio, who certainly gets more prestige out of the "National" in their name than the "public" which only provides a measly 14% of their funding, but I digress).
With the protection from market rules, and along with it common sense business practice, FANFRED is instead a political tool to control the first, housing, of the neomarxists trifecta that comprises all that stuff between the cradle and grave, the other two being education, in progress if you can call it that, and healthcare, next on the agenda. Yet somehow I doubt this example will be used as an argument against universal health care.
As explained more thoroughly in the Investors Bushiness Daily linked below, highly recommended, (actually sent to me by several different readers) these problems started under Bill Clinton whose Secretary of HUD mandated, under the ever-so-well-intentioned guise of fair housing, that banks must lend to those not previously qualified. In essence, the Fed forced banks to make loans their own private profit-oriented in-house rules would never allow.
But let's not go crazy and assume banks were entirely innocent. The lure of easy money through compliance to stupid mandates was just too irresistible for some, and they deserve what they get as per the accountability Barnett describes above. But what about government accountability? So far it looks like all calls for investigative commissions are aiming at Wall Street only, when at least half the blame resides in DC. Call it the home court advantage of rulemakers. Chickens, roost, you know the rest. It was only a matter of time.
The whole thing is a very interesting read:
INVESTOR’S BUSINESS DAILY: The real culprits in the subprime mess ...
The only thing more solidly predictable about the eventual collapse of FREDFAN is how Democrats would blame everyone but themselves for its demise. (truthfully I believe most democrats actually view its nationalization as a good thing, seeing how it is so in line with their socialist tendencies and all) The best argument they can come up with for anything these days is the Tourette's syndrome blurt they use in every soundbite; "it's all Bush's fault". Well, in a way I have to agree with them. Bush DID assume good faith in dealing with them after all.
A brilliant piece by Robert Higgs at the Independent Institute blog Sept 10, Ticking Time Bomb Explodes, Public Is Shocked Explores this even further. A tasty snippet:
Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.
This is worth a read and a reread, if for no other reason than to see how he develops the hotel metaphor. Like I said, brilliant.
Hat tip to Rush Limbaugh on this one. I don't listen regularly but I caught him reading some of this on air the other day. Like his style or not he is a damn good source for sources. I will definitely be bookmarking the Independent Institute..
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