The Freakonomics clowns have been mostly merely annoying. But being a mainstream conduit for fatuous wingnut talking points is just beyond the pale, man.
[T]here is no doubt at all about how we got into this mess...[A]t the heart of the problem is Congress and its deeply corrupt relationship with Fannie Mae and Freddie Mac. Congress was equally at the heart of the savings and loan disaster 20 years ago and, obviously, learned nothing from it.
The author, like all the other purveyors of this and other similar dumbass notions, fails to explain the mechanism by which the GSEs ruined America. He harps on poor and corrupt management, accounting scandals and skeezy congressional ties - all of which existed. But zero evidence is provided for the core implication that Fannie Mae and Freddie Mac stampeded Wall Street into making bad loans to the shiftless underclass.
That's because no such evidence exists. The GSEs followed Wall Street into subprime late in the game, and held only a tiny fraction of the junk. This is proof that the management was exceptionally stupid - the object of a pyramid scheme is to be the first to join, not the last - but it is not confirmation that the GSEs were the "heart of the problem." Just the opposite, in fact.
These facts also put lie to the corollary wingnut talking point that McCain was prescient in predicting the financial crisis. The accounting scandals he rightly railed about had nothing to do with either
the need for GSE privatization (poorly worded) for why the GSEs failed and certainly not the broader housing fiasco. And McCain said absolutely nothing about the subprime recklessness that the rest of Wall Street was engaging in, and that the GSEs would not dabble in for another year.
The bottom line is that Wall Street did not embrace risky credit because of any government housing mandate or competition from government-sponsored enterprises. It embraced risky credit 1) because there was no regulation standing it its way and 2) because it thought it could make mo' money off po' people by charging usurious interest rates.
...one other point. If the conservative argument is that, more broadly, the GSEs distorted the housing market by creating artificial demand, then I expect they will also come out against the mortgage interest tax deduction. Riiiiight.
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