Crime & Federalism

I am becoming increasingly bitter.  It's because I've realized that almost everyone has a religion.  With the Right, it's a belief in holy ghosts that are so powerful that religious people go see doctors for the latest product of rationality.  With the Left, it's a belief in Political Correctness.  Neither group is open to persuasion, since neither side analyzes issues based on facts.  Instead, either side has their articles of faith. You simply cannot have a rational conversation with 90% of the population.  So why bother? 

I've been in several heated discussions with well-educated but ignorant people about Fannie Mae's and Freddie Mac's role in the market meltdown.  "It wasn't their fault," they say.  "It was Wall Street.  It was the private-sector subprime lenders!"  This is a totally moronic argument unworthy of serious discussion.  Yet we live in a society where people want to teach children the world is but 6,000 years old.  What can one expect? 

For those interested in facts rather than revelations from the gods of Political Correctness, here is how the leading subprime lender - Countrywide (yes, that Countrywide) - felt about Fannie Mae and Freddie Mac.  This is from 2005:

NYT: While he is sanguine about the stock price, [Countrywide CEO] Mr. Mozilo remains volatile about so much else. Particularly irksome are calls by Alan Greenspan, the Federal Reserve chairman, to shrink Fannie Mae and Freddie Mac, the quasi-government institutions that buy huge numbers of mortgages from financial institutions, notably from Countrywide.

"Fannie and Freddie are a threat to his banks," Mr. Mozilo said of Mr. Greenspan, whose agency regulates big bank holding companies. By buying his mortgages and thus freeing up his capital to solicit even more business, Fannie and Freddie are a big reason Mr. Mozilo has driven Countrywide past the Citigroups and the Wells Fargos to the top of the mortgage heap. "If it wasn't for them," he said of Fannie and Freddie, "Wells knows they'd have us."

Here is more.

The Wall Street Journal collects some Democrats' quotes about Fannie and Freddie.  Story here.  I guess no Republican ever praised Fannie and Freddie, since the WSJ only repeats what Democrats said.  Oh, wait, here is what President George W. Bush said in a speech to Fannie and Freddie:

Freddie Mac recently began 25 initiatives around the country to dismantle barriers and create greater opportunities for homeownership. One of the programs is designed to help deserving families who have bad credit histories to qualify for homeownership loans.

In case the WSJ editors are dense: That translates to "subprime loans." 

Democrats deserve much - indeed, most - of the blame.  But let's not pretend that Republicans are blameless.

Yet another amazing video that exists only because of the incredible Internet Age we live in:

Here is a music video I can rock out to:

Fairness alert: The video neglects to mention that John McCain's campaign manager, Rick Davis, was also in bed with Fannie and Freddie. 

The American Enterprise Institute is a free-market think tank.  In 2005, this AEI publication tried to save us from the Fannie-Freddie-induced meltdown.  It's outstanding reading, especially in light of what happend in the three years after the article appeared.  The publication saved the best (or worst?) for last:

If Congress cannot take this essential step, however, no amount of additional authority--given to a purported "world class regulator"--will significantly change the course of events. Fannie and Freddie will continue to grow, and one day--as Alan Greenspan has predicted--there will be a massive default with huge losses to the taxpayers and systemic effects on the economy.

Who fought against these reforms?  I've been blogging about the "who" all weekend.  Just follow this link to solve the mystery.

If you are interested in understand why we are in such a mess, check out this article. It makes a compelling case against the Democrats.

Here is what I want to know.  Many liberals have blamed capitalism and free markets for the current mess.  Many have asked that the head of CEOs be served on a platter.  Well, now what?

In light of overwhelming evidence that Democrats are at least as blameworthy as fat-cat capitalists, liberals are now saying.... Well, they aren't suggesting that Democrats be held accountable.  Why not?

I really am reminded why I don't often blog political issues.  It's next to impossible to have an intelligent political conversation.  If you want to speak beyond "Bush is evil," or "Activist judges are legislating from the bench," good luck finding someone to talk to.

The real evil is in group formation.  Extensive research shows that when someone becomes a member of a group, that person cannot see the weaknesses of his group's position.  A group member will evaluate evidence differently. 

If you are a Republican, you will read that article and think, "Yeah, that's so true!"  You'll ignore that the bundling of these bad loans also caused the problems we're facing.  There were substantial market failures.  But you'll ignore that, since that goes against the "Free markets uber alles" narrative.

If you're a Democrat, you'll ignore the evidence in the article altogether.  The evidence is too powerful to explain away.  And you can't say: "Well, the people who bought these bad loans in the free market are also at fault."  That's because you'd first be forced to recognize that the bad loans existed because of Democrats.

All Republicans and Democrats are, at root, collectivists.  Consciously or not, they subjugate their will to that of the group.  It is unfortunate that so many people are so willing to surrender their minds to others.

I have always been a Nietzsche fan - now, more so than ever.  We suffer from cognitive bias because of our evolutionary roots.  In order to survive, we had to form groups.  Lone wolfs do not live long in the wild. 

It is literally our humanity that causes us to become ranting morons.  When Nietzsche said that "Man is something to be overcome," I think he anticipated evolutionary psychology.  That which exists because of our humanity must be overcome.  Otherwise, we are nothing more than slaves to partisanship and groupthink.

If I were Barack Obama, this would be my new campaign slogan: "Seven-Hundred Billion for Wall Street, Zero for Healthcare."  Since the New York Times has concluded that Obama is a "made man," they wouln't point out that Obama and other Democrats protected Fannie Mae and Freddie Mac.  And that Obama was on the Fannie-Freddie payroll:

The top three U.S. Senators getting big Fannie and Freddie political bucks were Democrats and No. 2 is Barack Obama.

More here.

In 2003, Senator John McCain co-sponsored the Federal Housing Enterprise Regulatory Reform Act of 2005. (Text of bill and related information.)  The reform, due to Democratic resistance, never became law.  Here was a statement John McCain made in support of the Federal Housing Enterprise Regulatory Reform Act of 2005:

Statement by John McCain Sen. John McCain [R-AZ]: Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 1 90, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, 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. I urge my colleagues to support swift action on this GSE reform legislation."

This legislation went nowhere, thanks to Barack Obama and other Democrats.

I am not a partisan person.  That said, I am surprised this 2003 (yes, 2003!) article from the New York Times is not getting more attention:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

Who opposed these reforms?  Democrats:

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''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.

Oh, there was a shell game going on.  It wasn't, however, the kind that Rep. Watts claimed.

People are saying that the "free market" caused the problems we are facing today.  They want the heads of the CEOs who are responsible.  Where are those same people calling for the heads of Barney Frank?

I'm not partisan, because partisanship, like fear, is the mind killer.  That said: It's now as clear as freshly-washed windows that the Democrats are the ones most responsible for this mess.  Let them suffer the consequences.

UPDATE: Thanks to slominshield for this video.  It's a bit too partisan for my tastes, the original footage is must-see:

After watching that video and reading the 2003 article, I can now say that I am no longer an undecided voter.  McCain is a war monger.  He does not support gay marriage.  Yet did the War in Iraq cause nearly the chaos that Barack Obama's Fannie-Freddie policies are causing?  As between a country that has gay marriage, or a country that is going through a Great Depression; I'll choose the latter. 

There is no way that I can, in good conscience, vote for Obama.  He and his party have done enough damage to this country.  Obama will no doubt destroy this country's economy.