Everybody is looking for a scapegoat to put on the spit
Everybody is reflecting on the financial meltdown and casting about for scapegoats. A week ago The New York Times weighed in with their usual telegraphed punch blaming President Bush for everything except Somali pirates and fallen arches. Investor’s Business Daily, as noted in a previous posting under this blog, countered with a snappy rejoinder that included prophetic quotes from none other than a 1999 New York Times story on the topic of Fannie Mae being in trouble.
The parrots at the Las Vegas Sun chimed in later in the week with a me-too version of the Times’ slapfest.
But then a Cato Institute briefing paper plopped on my desk. Though it is dated Nov. 18, it adds a dimension worth noting.
Author Lawrence H. White, the F.A. Hayek Professor of Economic History at the University of Missouri-St. Louis, dismisses quickly one of the canards from the election season in which everyone blamed free-floating greed for everything.
“Some commentators (and both presidential candidates) have blamed the current financial mess on greed,” professor White writes. “But if an unusually high number of airplanes were to crash this year, would it make sense to blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of financial crashes is higher than usual. There has been no unusual epidemic of blackheartedness.”
Professor White goes on to cite the root of the problem back in the early 1990s when Congress pushed Fannie and Freddie to increase purchases of mortgages for low-income buyers, even setting a target in 1996 of 42 percent of mortgages going to people with income below the median in their area.
And when efforts were made to stanch the bleeding, White quotes what Rep. Barney Frank, D-Mass., had to say: “I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet the goals of affordable housing and to set reasonable goals.”
The bailing out of failures is also bemoaned by our professor, who compares the rescue of Freddie Mac and AIG to an American Idol contest in which the poorest singers never are sent packing.
White concludes that both cheap-money policies of the Fed and the imposing of affordable housing mandates are at the root of the problem.
There is enough blame to go around.
