This week we have witnessed the nationalization of the largest insurance company in the world AND the assumption of an unknown amount of really bad debt (I’m guessing a trillion dollars) by the United States government. This means you.
In some ways this is poetic justice, since it’s the government that caused the problem, no matter what discussion of greed on Wall Street may issue forth from the Obama or McCain campaigns. This means you are experiencing poetic justice.
Americans have voted, over many years, for the people who created this mess. Americans don’t know their de Tocqueville.
The prospects for a successful democracy might be defined in modern terms as directly proportional to the percentage of informed citizens who look to their self-interest beyond the next paycheck divided by the percentage of all those who view themselves as “victims.” Call it the democracy/personal accountability acceptance ratio.
There is no country with a high rating, and ours continually degrades. This was a week where some vultures came home to roost.
As John McCain lurches from one contradictory position to another, forgetting even the minimal credentials he once had on economic issues, Barack Obama remains bereft even of “principles” among which to vacillate. The credit market crisis has been illuminating.
On the moderately statist wing, McCain’s deregulation credentials have been tossed under the bus in a fit of panic where he pretended calling for the firing of the SEC head actually contributed to discussing the problem. And where’s the guy standing up for his vote for Gramm–Leach–Bliley, a deregulation that arguably helped in the current crisis (see the 3 previous links)?
In the statist wheelhouse, Obama hasn’t had to distance himself from Franklin Raines (economic advisor) or Jim Johnson (resigned head of VP search committee), both former Fannie Mae CEOs. He hasn’t had to answer any questions about lobbyists, despite being recipient of the 3rd largest amount of Fannie/Freddie campaign contributions in his short and unexceptional career as Senator.
The Federal Reserve, the SEC, and especially Fannie Mae and Freddie Mac didn’t work right. We had sufficient regulation in place, but populist politics, not the market, trumped common sense.
For example, both McCain and Bush called for reform of Fannie and Freddie as early as 5 years ago.
Here’s the lead of a New York Times story on Sept. 11, 2003: “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”
Bush tried to act. Who stopped him? Congress, especially Democrats with their deep financial and patronage ties to the two government-sponsored enterprises, Fannie and Freddie.
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Rep. Barney Frank, then 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.”
It’s pretty clear who was on the right side of that debate.
As for presidential contender John McCain, just two years after Bush’s plan, McCain also called for badly needed reforms to prevent a crisis like the one we’re now in.
“If Congress does not act,” McCain said in 2005, “American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Sounds like McCain was spot on.
But his warnings, too, were ignored by Congress.
The “reform” that did occur was watered down by Barney Frank (see also), who has a lot to answer for.
While we’re on Democrats who have a lot to answer for, and while the entire mess can’t be blamed on the Carter era Community Reinvestment Act, that Democrat inspired law was the genesis of most of today’s credit market problems. It required lenders to issue the type of loans now defaulting. Add to that overly-cheap credit from the Federal Reserve for overly-long, laxity at the SEC in administering leveraging rules for Merrill, Goldman, Morgan Stanley, Bear Stearns, and Lehman, and frost it with cozy government “run” “lenders” encouraging corporatists like Angelo Mozilo.
There was plenty of “regulation,” but typically, it was a lack of regulation of politicians that caused the problems. Not the market. Not capitalism.
The regulation of politicians is provided for in the Constitution. It’s why they ignore and denigrate it. American’s populo-tropism enables them, and it’s at the bottom of this reality check. That’s why McCain and Obama both took refuge in Huey Long territory in a crisis. That’s where the votes are.
So, Obama and McCain each get 50 bozos for their stupid populist pandering.
Obama gets bonus bozos for Raines, Johnson (5 each), his $105,000 in campaign contributions from Fannie and Freddie (2 each) and his redistributionist “tax-cut for 95% of the middle class” when only 40% of those he targets even pay taxes (5 for the socialism and 5 for the newspeak he applies to the term “tax-cut”).
McCain gets another 5 for pushing me back toward a 3rd party vote. He reminded me why I dislike him so much: When he self identifies with any problem, there’s no limit to his abandonment of principle – including the Constitution (which he’s seen fit to trash in the past). A call for regulation from John McCain is a call for the pragmatic suspension of civil rights.
