The left loves the financial crisis because it supports their view that the free market doesn’t work and justifies their anger at capitalism. Here’s the clincher ~ George Soros, Congressional Socialists, through the British monarchy ‘designed this failure’. In their mind, as how they have been mislead, this is exactly what happens when you follow a policy of deregulation and tax “giveaways” to the rich. Their only fix is to get rid of the corporations, the executives, the investors, free trade, property rights, and everything else that has given us the highest per-capita GDP in the world of any large country and replace it all with central committees straight out of the Cuban Revolution. The patient has the flu and their cure is the guillotine.
The mainstream media love the financial crisis for the same reason that they love any disaster. Will you and your children be forced to live in a tent city surrounded by trash with no running water or bathrooms? We’ll tell you just how bad it is going to get and what you can do right after this commercial break.
CNBC loves the financial crisis. Their ratings are up 30%, and that’s before the Santelli tea party.
Fox News loves the crisis because it belongs to Barack now.
My friend from high school loves the financial crisis and hopes it gets 100% worse. “I’ve been poor all my life,” he says. “Everyone should know how it feels.”
Senator John McCain loves the financial crisis because he can talk about how wasteful earmarks are and make fun of the worst, like the pig odor study. Senator, you’re a genuine war hero who brought tears to my eyes when you asked me to stand up for America. Is that really your best issue?
The Democrats love the financial crisis because they can push their agenda through Congress by playing Good Samaritan — i.e., we’ve got to help all of those hardworking folks on Main Street. In their version of the parable, the Samaritan helped his fellow traveler on the side of the road by raising the minimum wage, forcing him to join a union, taxing carbon dioxide, and telling him to learn Spanish.
Iran, Venezuela, al-Qaeda, and the rest of America’s enemies love the financial crisis because not only have we lost our credibility, but foreign policy issues have completely fallen off the agenda.
Senator Ron Paul, Glenn Beck, and the “hard money” guys love the crisis because they have been predicting that our free spending ways would eventually collapse the financial system. While you are all absolutely right that the first thing the U.S. needs to do is to put the shovel down and stop digging, this is just the warm-up. The real crash won’t hit until all of the boomers have retired and start cashing their Social Security and Medicare IOUs.
Michael Moore loves the financial crisis. His next film is all about how Americans are getting screwed by the financial industry. If you’re one of those poor unfortunates who got a home loan despite having no job, income, or assets, please send your tale of woe to bailout@MichalMoore.com.
Paul Krugman of the New York Times loves the financial crisis. He gets to write daily op-eds about how the Obama administration should spend even more money. Publicly disagree with him, and he gets to write another op-ed in which he calls you a bonehead. This bonehead — I mean, Nobel Prize-winning economist — has calculated that for every $1 the government spends, $1.50 in new GDP is created. By that logic, the government should spend all of its money to buy paper, ink, and printing presses and then just as the kids say, make it rain up in here.
Comedians love the financial crisis because it’s the gift that keeps on giving. Have you heard about Ford’s new car? It’s a hybrid that runs on a combination of gas and bailout money (David Letterman). And you know Guantanamo Bay’s going to be closed. Yes, the economy’s so bad that even the terrorists are losing their homes (Jay Leno).
Rush Limbaugh loves the financial crisis. Rush has been on top of his game ever since the Democratic primaries, and now that the party is in control and recycling its failed “War on Poverty” policies and breaking its centrist campaign promises, there has never been a better time for him to ask America if this is what they voted for, and articulate alternatives. We can only hope that the White House attacks that have very likely doubled his audience in just the past few weeks help to create a grassroots conservative monster.
Hamas also loves the crisis. In October, Prime Minister Ismail Haniyeh said that the U.S. financial collapse was a punishment from Allah because we supported the Gaza siege. Now that we’re paying $900 million to rebuild Gaza and giving scholarships to Palestinian students, I assume that Allah will spare us.
Rahm Emmanuel and Hillary Clinton love not just the financial crisis, but any crisis. And why shouldn’t they? They’re not the ones who get stuck with the check when the government screws up.
Those infamous “community organizers” love the crisis. Perhaps you were wondering what ever happened to those rock throwing delinquents that have followed the World Trade Organization, the World Bank, and the G8 everywhere they’ve gone since 1999. (Except to Singapore. Nobody messes with Singapore.) Now they’re shutting down Greece, ousting prime ministers in Iceland, rioting in Eastern Europe, torching BMWs in Germany, targeting foreclosure auctions in New York and CEO’s homes in Connecticut, striking and picketing parliament in London, and waving the hammer and sickle in Moscow. Track their progress here. And 2.5 million people are striking in France, proving that it is possible to actually surrender to a recession.
Nouriel Roubini loves the economic crisis. Nicknamed Dr. Doom, he is interviewed by Forbes, Bloomberg, CNBC, and other news media whenever they want a dire prediction of multi-trillion dollar banking losses. We can assume that book sales and consulting revenues are up. His claim to fame is that he predicted the real estate crash and stock market collapse. Kudos to financial writer Eric Tyson for noting that this college professor, who has no special access to economic data, also predicted a recession in 2004, 2005, 2006, and 2007. Of course, he is just one of many analysts that have been forecasting financial Armageddon for years and are now enjoying the spotlight.
Even some banks love the financial crisis. Northern Trust, fed up by government condemnation of a lavish party that they threw in February, decided to give their TARP money back and said that they didn’t even want it in the first place. Northern was founded in 1896 and has a reputation for conservative management. It survived the Great Depression with no government assistance. And now, this medium-sized Midwestern bank is worth more than Citigroup and half as much as Bank of America. Perhaps instead of criticizing them, Congress should be asking for their advice.
And I love the financial crisis because I can write articles like this. Does anyone else love the financial crisis? Let me know.
Tristan Yates is an investment analyst and the author of Enhanced Indexing Strategies. His articles and research have appeared in the Wall Street Journal, Yahoo!, and many other publications.
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.
But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.
Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.
The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Rainesthat Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”
What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
TEA BAGGER BARNEY FRANK
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.
But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”
Mounds of Materials
Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.
Oh, and there is one little footnote to the story that’s worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.
(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)