Speaking to a crowd of 1,500 supporters in Costa Mesa, California, about the bonuses given to employees of 80% taxpayer owned AIG, President Barack Obama said: “I know a lot of you are outraged about this. I’m outraged, too.” We’ll leave for others to decide the level of Obama’s outrage, especially considering reports this morning that the Obama Administration found out about the bonuses on February 28, not March 10, as they originally claimed. But what we would like to see some genuine outrage over are the millions of taxpayer dollars going …
The Bush administration is hopping mad at the New York Times for a story the Gray Lady published Sunday, “White House Philosophy Stoked Mortgage Bonfire.” The White House will have to defend itself on this one, but we are concerned that the Times, in its partisan desire to tarnish President Bush, provides far too narrow a focus on the government’s central role in creating the current crisis. By pretending troublesome government policies that contributed to the housing bubble began with Bush, the Times makes it easier for those inclined to …
At the height of the campaign season, House Oversight Committee chair Henry Waxman (D-CA) held a number of hearings on the burgeoning financial meltdown including investigations into the bankruptcy of Lehman Brothers, the bailout of AIG, The Breakdown of Credit Rating Agencies, and The Role of Federal Regulators. The purpose of all of these hearings was to blame deregulation and Wall Street greed for the markets downturn. Not until the election was safely over did Waxman manage to hold a hearing on the role government intervention played in the disaster. …
Reporting on Fannie Mae’s and Freddie Mac’s new program to reduce monthly mortgage payments for those people who have missed at least 90 days worth of payments, The San Francisco Chronicle’s Kathleen Pender reports: Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their …
Could the current crisis usher in a new “New Deal”, with a new brand of corporatism to replace the free market system? Certainly European leaders are arguing that case. The current economic “crisis,” may itself have been caused by bad policy. Yet, is provides a great pretext for an expansion of government. During the 1930s, as part of the New Deal, Franklin D. Roosevelt nationalized banks, set prices, wages and work hours, and promoted public works programs to employ the unemployed. The New Deal, or the National Industrial Recovery Act …
Since the housing bubble first began to burst, we have been quick to note the integral role that government-sponsored entities Fannie Mae and Freddie Mac played in distorting the housing market. However, we have also been skeptical of some claims that the Community Reinvestment Act (CRA) played in facilitating the crisis. The more we study, though, the more we see how the CRA, Fannie and Freddie, and now ACORN, all worked together to get us where we are today. Stanley Kurtz connects some dots in the New York Post: The …
The Detroit News’ Henry Payne is always a must read but he really hit a home run last week with this cartoon on Fannie and Freddie: (posted with permission from Henry Payne)
Congress is lining up the list of suspects to assign blame for the financial crisis. However, all of the obvious suspects — the Fed, Fannie and Freddie, mortgage companies, banks and borrowers — have been players in the mortgage market game for years. Why is there a crisis now? Perhaps it was because they were playing by a new set of rules. To make sense of real world events, economists commonly study the interactions between people or groups through the lens of game theory. Many may be familiar with game …
Nobel Laureate Paul Krugman did some fine work on international trade theory 20 years ago. When he writes about economic policy today, however, he often just gets his facts dead wrong. This past summer Krugman devoted an op-ed to exonerating Fannie Mae and Freddie Mac from their key role in the current financial crisis. We called him out on it at the time. This past Friday, National Journal‘s Stuart Taylor finally got around to noting where Krugman erred: Fannie and Freddie appear to have played a major role in causing …
The Washington Post has a fine editorial on the current financial crisis first noting: As financial panic spread across the globe and governments scrambled to contain the damage, reality seemed to announce the doom of U.S.-style free markets and President Bush’s ideology. But this is wrong in two ways. The deregulation of U.S. financial markets did not reflect only the narrow ideology of a particular party or administration. And the problem with the U.S. economy, more than lack of regulation, has been government’s failure to control systemic risks that government …
