Here we go again

The only joy of being the minority party, especially one that has very little power, is that you don't have to accomplish or do anything. This is true no matter who is in power. However, it appears our current day nay-sayers are going overboard to rewrite history. I mentioned earlier their attempt to rewrite history. This concept is getting played out vis-a-vie Fannie Mae and Freddie Mac. It is almost impossible to hear a conservative or a republican commentator or politician speaking about the housing crisis without the the F words coming out of their mouths.

House Minority Leader John Boehner leads the way with such statements as

"Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?" House Minority Leader John A. Boehner (R-Ohio) said in a statement.

There are two main reasons the conservatives of the world such as Larry Kudlow like to spew this talking point. The first is the continued attempt to de-legitimzie the successes of the New Deal. Fannie was established as a New Deal program to stabilize the housing market. Secondly This fits into their dis-proven narrative that the whole economic mess is a result of mean old democratic politicians forcing companies to give loans to poor, lazy, no good people. "See what happens when you let people interfere with the invisible hand of the market". My understanding of the invisible hand of the market works to prevent business from doing bad things because they won't have any customers after a while, Hmmmm. Also when customers do find out all the trouble that has been inflicted on the general market, customers will punish them by not utitlizing their services causing the business financial hardship, double Hmmmm.


http://www.salon.com/tech/htww/2008/09/08/fannie_and_freddie_bail_out/


"A point that gets easy to miss in the current hullabaloo over the bailout is that Fannie and Freddie were not primarily responsible for either the housing boom or its bust. That responsibility is more fully borne by the non-government sponsored enterprises who play in the real estate market -- the private mortgage lenders, commercial banks, investment banks and myriad institutional and hedge fund investors who engaged in an orgy of exotic mortgage loan and mortgage security innovation and speculation. Toward the very end of the boom, Fannie and Freddie did begin to get more involved in subprime loans and related derivative markets, but that was because they were losing market share to the fully private sector."


Something else that falls into this logic is that it was a terrible thing that over the past 15 years or so the home ownership rates have increased from a historical average of 64% to around 70-72%. This additional 6 - 8 % of home ownership was a bad thing. I am guessing the thinking is that these additional percentages were the lazy, no good people getting into the market and screwing it all up for the rest of us.

Now I do agree that a big part of the housing problem was people getting into mortgages that they could not handle. Although I question, that all of this was the last 6 - 8 %. It seems to me that a lot of people who got caught up in these bad mortgages, were people who were looking to upgrade. I am guessing a lot of middle income people saw the shining new house and the hill and decided they could make it work. They would just get a ARM and refi when it was time. Then when it was time they eventually found themselves in trouble.

So to suggest that this trouble was brought on by the bottom rungs of the housing customers is suspect. I do believe in general it is better for more people to own their homes. It is just as important that all people can afford the homes they own.



Another important note on this fallacy that is being shouted from every roof top. Fannie and Freddie are owned by.....You and Me (otherwise known as the taxpayers).