More on Freddie and Fannie

The outrageous scam perpetrated by the GSEs has predictably become a blame game, finger pointing typical Washington big government indictment.  Unsurprisingly Nan Pelosi has her footprints all over the history rewrite that has been going on in an attempt to deflect responsibility from the political class to the Wall Street bankers.  This article in the WSJ catches this unscrupulous politician in the act:

The SEC's case should embarrass Congress's Financial Crisis Inquiry Commission, which spent 18 months looking at the evidence and issued a report in January 2011 that whitewashed Fan and Fred's role. Speaker Nancy Pelosi created the commission to prosecute the Beltway theory of the crisis that private bankers caused it all, and Chairman Phil Angelides delivered what she wanted.

Wall Street's runaway greed which resulted in balance sheet leverage of up to 50 to one surely deserves some of the blame for the debacle, however the major fault lies with the politicians (Carter Administration) who created the CRA back in the '70's. and those who hyped it later on (Clinton Administration with a little contribution by Bush Administration) and the nefarious managers at the GSEs who hid and multiplied the risks to the point the program was bound to fail.  Hopefully as this article suggests this case will go to trial which would give everyone the opportunity to focus on the real culprits.  At the very least his example of political intervention in the economy should become a central issue in the upcoming presidential campaign.  However since the Republicans' hands are at least soiled, chances are this important issue will not be raised.  Meanwhile the depression will continue until all the toxic paper clogging up the credit machine is finally written off.  The Austrian economics school economists predicted all of this but of course have never been listened to for fear their philosophy would end the drunken party.  Jim Whelpley also saw this coming but, unfortunately or fortunately, did not live to see the chaos it caused.

Newt's not the guy

that The "insider" complaint about Gingrich as the nominee for the Republican Party is his undoing.  Since his ignominious removal as Speaker of the House in 1999, Gingrich has enriched himself as a consultant for various corporations and GSEs including Freddie Mac.  His defense of his activities is that he never lobbied any government agency on behalf of his clients.  This is, at best, a highly dubious claim.  Can anyone with a straight face suggest that one with Gingrich's background and history would be hired for any other purpose than to influence some government entity on behalf of his client?  And influence peddling is the operative definition of lobbying, no matter any of the so-called nuanced explanations being floated in Gingrich's defense.   Since the Tea Party, big government, and anti Obama sentiment prevalent today are all predicated on distrust and disgust with Washington and cronyism, it's hard to see how Gingrich can avoid this backlash.  Romney will likely win the nomination as the last guy standing and because he has the least amount of big government/Washington taint.  This outcome is probably for the best for conservatives and Republicans since of the two leading  candidates Romney is the steadier, more rational and has more appeal among swing voters.  Buckley's dictum of choosing the most conservative candidate who can be elected, is just about right in this case.

Another Nobel economist with feet of clay

Here a quote from Instapundit blog:

"Speaking before a group of protesters in Zuccotti Park, Nobel economics prize winner Joseph Stiglitz urged on the crowd, telling them they are “right to be indignant.” Professor Stiglitz goes on to explain, correctly in my view, that we have a financial system of socialized losses and privatized gains.

What the good professor fails to mention is only a few years ago, for what I understand was a nice paycheck, he was denying this very fact. In 2004, along with Jonathan and Peter Orszag, Professor Stiglitz wrote a paper for Fannie Mae in which he “estimated” that the “risk to the government from a potential default on GSE debt is effectively zero.” The paper goes on to argue “that the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is just $2 million.” Now I understand his Nobel is in economics, not math, but $2 million sounds no where near the actual cost so far of $160 billion.

Certainly there was a time where some could be forgiven for not really understanding the nature of Fannie and Freddie, but this was published after Freddie’s accounting scandals came to light and while Fannie itself was being investigated.

So yes, you do have a right to be indignant. Especially at those “academics” who sold their work to the highest bidder defending the system and now pretend to be shocked at how everything turned out."

Ah yes, just another  "expert" is exposed with feet of clay.

McCain's Early Recognition of Fannie/Freddie Crisis

It is beyond distressing that the democrats have essentially avoided responsibility for the financial meltdown caused by their complicity in preventing the reforming of these GSEs over the years.  The record is right here for everyone to see.  No media weighed in on this scandal except Fox News and perhaps even they could be faulted for not making an even bigger deal out of this issue on an ongoing basis.  What's to be done if clowns like Barney Frank and Chuck Schumer continue to get reelected (which they did) and wield great influence in the Congress (which they still do) even after evidence of their horribly bad judgement and outright incompetent leadership?  Until people like this are expunged from key decision making positions in our government, we are all doomed.