Bailout Skepticism

October 1st, 2008at 11:35am Posted by Eli

Thomas Frank is skeptical about the causes:

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.

(…)

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.

(…)

Just imagine the flights of fancy that the theory of borrower malevolence and Wall Street victimization requires conservatives to take: All these no-account folks, you see, got together and forced investment banks to engineer subprime mortgages into highly leveraged securities. Then they tricked all manner of hedge funds and pension funds and financial institutions into buying these lousy products. Just for good measure, these struggling homeowners then persuaded bond-rating agencies to misrepresent the risk associated with these securities.

Ah yes, the all-powerful liberals and poor people who secretly control our government and force it to screw them over again and again to camouflage their influence.  Diabolical.

And Dean Baker is skeptical about the effects:

While all right-thinking people might know we need the bailout, just about all right-thinking people don’t have a clue as to what they are talking about.

….No one has yet sketched out the sequence of events that will give us ten years of double-digit unemployment. But hey, if the scare story helps get the bailout passed — and gets those uneducated skeptics in the hinterlands to buy it — why not talk about the Great Depression?

(…)

It is remarkable how the contemptuous comments that the elites have directed at the masses for opposing the bailout can be so much more accurately directed back at themselves. In fear and anger they have embraced a bailout that makes little sense in the context of the economic crisis facing the country. Rather than listening people who actually understand the economy (I doubt a single economist in the country believes that the bailout is the best way to help the economy) they have shouted down and shut out critics of the bailout and have been willing to spread all manner of outlandish scare stories to advance their case.

Just like being in favor of invading Iraq instead of focusing on where the terrorists actually live was (and possibly still is) a sign of Seriousness, so too is being in favor of a gargantuan, crippling “bailout” that wouldn’t actually fix the problem, and would cripple the government’s ability to enact reform for the next 10-20 years.

But what do I know, I post Mr. T videos and stories about Bat Boy.

Entry Filed under: Corruption/Cronyism,Economy,Politics,Republicans


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