November 22, 2012

NOEMIE EMERY ON THE HOUSING CRASH:

Twice, Bush tried to rein in Fannie Mae and Freddie Mac, and twice Democrats (Obama included) moved in to stop him. Especially culpable were Barney Frank and Chris Dodd. Dodd claimed that the institutions were “fundamentally strong,” and Frank said he wanted to “roll the dice a little bit more in his situation” rather than impose stricter regulation on Fannie and Freddie. He did roll those dice, and they came up snake eyes at the end of the Bush years. The same could have just as easily happened in the Gore or Kerry administrations, had they existed, and it would not have been due to their policies, either. It was due to bad sense, bad judgment, greed and a lot of misguided good will.

Bush didn’t create the conditions that led to the crash; he inherited them from Bill Clinton, and a large cast of thousands all played their own parts. Republican policies had no role in the crash; and the Democrats’ policies would have had no role, either.

This was not a case of free markets run wild; it was a case of government policy distorting the markets by removing their built-in restraints. This case has been made by a handful of columnists and two serious books — “Reckless Endangerment” by Gretchen Morgenson and Joshua Rosner, and “Fannie Mae & Freddie Mac” by Oonagh McDonald — but not yet by the silent and clueless Republican Party. How many more times must it lose till it does?

Plus, a mention of “Reynolds’ Law.”