The Subprime Mortgage Crisis - The Blame Game
It has come to my attention that this talking point has, of late, started to descend (or ascend?) into blame game shifting tactics.Having read some stuff, here are my thoughts.
The Subprime mortgage crisis cannot be blamed on poor or minority homewoners. It cannot be blamed on Jimmy Carter's Community Reinvestment Act of 1977. Poor or minority homeowners actually have far better default rates than rich white people. It cannot be entirely blamed on Fannie and Freddie. The CRA act, Fannie & Freddie, none of these things were directly responsible for things like "No Money Down Mortgages" or banks not verifying income or payment history of mortgage applicants. That is ridiculous. Read this and this.
Some theorists think that the bailout was always implicit, that Fannie & Freddie were always working under an implicit Government guarantee and that this is part of the problem. Maybe. But Fannie & Freddie certainly cannot be blamed for the whole fiasco.
Wondering where the blame should lie? Apart from all our collective stupid heads and the heads in the financial institutions how about this?
"Three officials, more than any others, have been responsible for preventing effective regulatory action over a period of years: Alan Greenspan, the oracular former Fed chairman; Phil Gramm, the heartless former chairman of the Senate banking committee; and Christopher Cox, the unapologetic chairman of the Securities and Exchange Commission. Blame Greenspan for making the case that the exploding trade in derivatives was a benign way of hedging against risk. Blame Gramm for making sure derivatives weren't covered by the Commodity Futures Modernization Act, a bill he shepherded through Congress in 2000. Blame Cox for championing Bush's policy of "voluntary" regulation of investment banks at the SEC." [Slade]
Slade in fact does bring up an interesting point. Libertarians and economic rationalists are the ones that are running around playing the blame game with anything and anyone apart from the obvious. Deregulation and lack of oversight. No matter how much we pretend that markets are perfect without government intervention and that Adam Smith's invisible hand is strong enough to carry us all... it just ain't true people.
"The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school. Like other ideologues, libertarians react to the world's failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout."[Slade]
Labels: sub-prime mortgage crisis and aftermath, world happenings
posted by LX @ 9:51 PM
Comments: 2
