Saturday, February 21, 2009
Phil Gramm Goes On The Offense
Former Senator Phil Gramm, favorite whipping boy of the left and unabashed free market conservative, takes to the offense today to provide some clarity to the story of where we went wrong in housing.
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9 comments:
I like that he's a VP with UBS -- one of the poster children for greed and general bad behavior in the last several years. It makes it harder to forget that he's wrong in every way.
No matter how many times he repeats it, Fannie and Freddie weren't the problem. CRA wasn't the problem. Lehman, Bear, and the other investment banks didn't fold like a rusty beach chair because some government bureaucrat asked them nicely -- hell, even jumped up and down and screamed at them -- to forge loan applications and give money to those who could never afford to pay it back.
Fannie and Freddie were some part of the problem, surely, but to single them out as THE CAUSE is to be either wildly misinformed, delusional, or deceitful. (In Graham's case, I suspect it's a dose of all three.)
http://economistsview.typepad.com/economistsview/2008/09/it-wasnt-fannie.html
http://economistsview.typepad.com/economistsview/2008/09/it-wasnt-the-co.html
http://www.mcclatchydc.com/251/story/53802.html
http://economistsview.typepad.com/economistsview/2009/02/john-stewart-explains-economics-to-john-sununu.html
http://baselinescenario.com/2008/12/16/community-reinvestment-act-housing-crisis-aei/
This bugs me because if we can't diagnose where we've been, we have absolutely no hope of preventing this in the future.
Well Skonesam, if I'm going to take anyone's word on this, it'll be Phil Gramm.
You write, "This bugs me because if we can't diagnose where we've been, we have absolutely no hope of preventing this in the future." Yet you seem to indicate that to your understanding, Lehman, Bear and others were in the mortgage business. They weren't. They were in the business of securitizing the paper behind the mortgages, made by banks and others with the complicity of Fannie and Freddie.
Seriously? You're going to take Phil's say-so over the dozens of prominent economists that disagree... and can back their assertions up with actual numbers? (The irony of Phil's op-ed appearing on the same day his company's name graces the front page for a mushrooming tax-evasion racket is a rich backdrop to the revisionist history he's peddling.)
Your point proves mine, btw. Bear, Lehman, et al, were going to fail regardless of what Fannie and Freddie did -- because other banks were in the subprime game to a far, far larger extent than Fannie/Freddie.
It's going to be a cold day in hell before you can convince me that the good-hearted investment banks were simply bamboozled by a bunch of people with no income and the (knowing or unknowing) complicity of the GSEs. They were in it for the profits -- subprime makes for great securities, far better than prime loans -- and they got in over their heads.
Like I said before, GSEs were a part of the problem. But to single them out is simply absurd.
I was thinking about this more, and I have one last point before I let the topic drop. Here's the state of play as I see it:
-On one hand, we have Fightin' Phil, VP of a bank that has far-reaching interests in the issues under discussion, and widely cited as one of the people who assisted in driving the world economy into shoal water.
-On the other, we have many renowned economists (both academic and practicing), including at least one Nobel Laureate (Krugman) who don't have any obvious axes to grind.
I like to play the "what's more likely" game in situations like this. Is it more likely that an individual would seek to revise history such that he's not culpable in global financial collapse... or that there's some kind of conspiracy among a widely disparate group of experts to show that some politician that most Americans forgot about 15 minutes after his term ended (if they knew he existed at all) was involved heavily in the worst decisions leading up to this crisis?
(Sorry for the run-on sentence). Just in case I didn't load the question enough, I'm thinking "revisionist history" is the more likely answer.
Thank you, Skonesam, for your view.
Skonesam do you honestly believe that Krugman has no ax to grind? C'mon.
As far as Krugman's Nobel prize, the Nobel has become the way that European socialists can reward their comrades on this side of the Atlantic. It has been reduced to the same status as a Golden Globe or an Oscar.
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