Commentary Magazine


Topic: Fannie

Ezra Klein: The Foreclosure Made Him Do It

Ezra Klein is one of the lefty horde of bloggers the Washington Post has taken on board in an effort to remain relevant. Or get eyeballs on the Internet. Or something. Anyway, he writes mostly on domestic policy. I think that’s a good idea, if his latest offering is any indication.

It is, in a few short graphs, the perfect distillation of the left’s cockeyed take on terrorism, the nature of man, and evil. (I will assume Klein is not a clever comic out to skewer his ilk.) He writes: “The arrested subject of last weekend’s Times Square bomb plot is a homeowner in the midst of foreclosure.” Citing an MSNBC story, he notes that Faisal Shahzad bought a house in 2004 and was foreclosed.” (He leaves out the part that the home was abandoned “months ago.” More on why he actually stopped paying his mortgage later.) And what conclusion does Klein reach?

This guy is like string theory for the media: He brings together the seemingly incompatible stories that drove the past decade. That said, you of course don’t want to speculate on why someone “really” did something. The hearts of men are opaque, and motives are complex. But it’s a reminder that foreclosures generate an enormous amount of misery and anxiety and depression that can tip people into all sorts of dangerous behaviors that don’t make headlines but do ruin lives. And for all that we’ve done to save the financial sector, we’ve not done nearly enough to help struggling homeowners.

Thunk. Where to begin — how about the explanation for why he quit his job, stopped paying his mortgage, and started buying propane tanks, wires, and such? He stopped living a normal life — and paying his mortgage — to become a terrorist and train in Pakistan. Oh, yes. That. (His own paper has a fairly good account of the sequence of events, as does the Wall Street Journal, which notes that he hated Preisdent George W. Bush. I await his column excoriating Keith Olbermann for fomenting violence.)

But the disinclination to accept the obvious — as we saw in the Fort Hood shooting — is strong. “The hearts of men are opaque, and motives are complex,” Klein waxes lyrical. Do we really think a man who travels to Pakistan to get bomb training has an opaque heart? Really, maybe he was upset about global warming. Animal rights?

And the defense lawyer should take note. Klein presents the closing summation for the jury: “It’s a reminder that foreclosures generate an enormous amount of misery and anxiety and depression that can tip people into all sorts of dangerous behaviors that don’t make headlines but do ruin lives.” (Who knew that all those risky Fannie and Freddie loans to uncreditworthy buyers were breeding terrorists?)

This is the mentality that cheers ideas like closing Guantanamo, eschewing enhanced interrogation (if they had captured the suspect and the location of the bomb had been unknown, would the administration have stuck to the Army Field Manual?), Mirandizing terrorists, and tying ourselves in knots to avoid identifying the enemy as Islamic fundamentalists out to butcher Americans. Nothing opaque about that.

Ezra Klein is one of the lefty horde of bloggers the Washington Post has taken on board in an effort to remain relevant. Or get eyeballs on the Internet. Or something. Anyway, he writes mostly on domestic policy. I think that’s a good idea, if his latest offering is any indication.

It is, in a few short graphs, the perfect distillation of the left’s cockeyed take on terrorism, the nature of man, and evil. (I will assume Klein is not a clever comic out to skewer his ilk.) He writes: “The arrested subject of last weekend’s Times Square bomb plot is a homeowner in the midst of foreclosure.” Citing an MSNBC story, he notes that Faisal Shahzad bought a house in 2004 and was foreclosed.” (He leaves out the part that the home was abandoned “months ago.” More on why he actually stopped paying his mortgage later.) And what conclusion does Klein reach?

This guy is like string theory for the media: He brings together the seemingly incompatible stories that drove the past decade. That said, you of course don’t want to speculate on why someone “really” did something. The hearts of men are opaque, and motives are complex. But it’s a reminder that foreclosures generate an enormous amount of misery and anxiety and depression that can tip people into all sorts of dangerous behaviors that don’t make headlines but do ruin lives. And for all that we’ve done to save the financial sector, we’ve not done nearly enough to help struggling homeowners.

Thunk. Where to begin — how about the explanation for why he quit his job, stopped paying his mortgage, and started buying propane tanks, wires, and such? He stopped living a normal life — and paying his mortgage — to become a terrorist and train in Pakistan. Oh, yes. That. (His own paper has a fairly good account of the sequence of events, as does the Wall Street Journal, which notes that he hated Preisdent George W. Bush. I await his column excoriating Keith Olbermann for fomenting violence.)

But the disinclination to accept the obvious — as we saw in the Fort Hood shooting — is strong. “The hearts of men are opaque, and motives are complex,” Klein waxes lyrical. Do we really think a man who travels to Pakistan to get bomb training has an opaque heart? Really, maybe he was upset about global warming. Animal rights?

And the defense lawyer should take note. Klein presents the closing summation for the jury: “It’s a reminder that foreclosures generate an enormous amount of misery and anxiety and depression that can tip people into all sorts of dangerous behaviors that don’t make headlines but do ruin lives.” (Who knew that all those risky Fannie and Freddie loans to uncreditworthy buyers were breeding terrorists?)

This is the mentality that cheers ideas like closing Guantanamo, eschewing enhanced interrogation (if they had captured the suspect and the location of the bomb had been unknown, would the administration have stuck to the Army Field Manual?), Mirandizing terrorists, and tying ourselves in knots to avoid identifying the enemy as Islamic fundamentalists out to butcher Americans. Nothing opaque about that.

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Obama’s Economic Policy: Crony Capitalism

The so-called financial-reform bills now working their ways through each house of Congress are, like the health-care-reform bill before them, not about reform at all. They do not reform anything. Instead, they make the federal government the major player in a major industry. Just as the health-care-reform bill will transform private insurance companies into the equivalent of public utilities, whose every major decision needs government approval and whose returns on capital are more or less guaranteed, these bills would do the same for big banks and other financial institutions.

President Obama gave a typical speech yesterday in the same room where, a 140 years ago, Abraham Lincoln gave a most untypical speech. Well, perhaps typical for Lincoln: eloquent, tightly reasoned, profound, and consequential in its effect. (As an aside, I have spoken in the Great Hall of Cooper Union myself and had a powerful feeling that I was standing upon holy ground while I did so; Obama, I suspect, felt he was only adding to its sanctity.) Obama’s speech was typical in that it set up straw men, fearlessly knocked them down, assigned blame without evidence, told falsehoods while demanding that others stop lying, and asked for discussion as long as every discussant agrees with him. Everyone else and every other opinion is “illegitimate.”

Wall Street was hardly blameless regarding the financial crisis of 2008 and reforms are necessary to prevent the same things from happening again. Niall Ferguson and Ted Forstmann explain what’s needed in today’s Wall Street Journal. (In a nutshell: moving derivatives trading from back rooms to exchanges and limiting the leverage that banks can use.)  The Senate bill wouldn’t do that. Instead it would move most derivatives trading to exchanges but allow the chairman of the Commodity Futures Trading Commission to decide what derivatives can still be traded over the counter. Does anyone see there a hugely empowered federal official (not to mention a golden lobbying opportunity for banks and members of Congress alike)? Is a back room at the CFTC an improvement over a back room at Goldman Sachs?

And Fannie and Freddie? They were at the heart of the mortgage meltdown and political piggy banks that were so badly (and corruptly) regulated that they are likely to cost the taxpayers $400 billion when all is said and done. But neither of these bills even mentions them. Fannie and Freddie are classic examples of crony capitalism, where government and business are in bed together. Obama wants to expand that disastrous model to the likes of JPMorgan Chase and Goldman Sachs.

It is the business of business to take risk and seek profit. It is the business of government to regulate business to ensure that the public interest is not put at risk. That’s exactly what government failed to do before 2008. As Judge Richard Posner put it in his most recent book, The Crisis of Capitalist Democracy, “Calling bankers greedy for taking advantage of profit opportunities created by unsound government policies is like calling rich people greedy for allowing Medicare to reimburse their medical bills.”

The Obama administration’s ruthless pursuit of ever greater concentration of power in Washington — and calling it reform — just keeps getting scarier.

The so-called financial-reform bills now working their ways through each house of Congress are, like the health-care-reform bill before them, not about reform at all. They do not reform anything. Instead, they make the federal government the major player in a major industry. Just as the health-care-reform bill will transform private insurance companies into the equivalent of public utilities, whose every major decision needs government approval and whose returns on capital are more or less guaranteed, these bills would do the same for big banks and other financial institutions.

President Obama gave a typical speech yesterday in the same room where, a 140 years ago, Abraham Lincoln gave a most untypical speech. Well, perhaps typical for Lincoln: eloquent, tightly reasoned, profound, and consequential in its effect. (As an aside, I have spoken in the Great Hall of Cooper Union myself and had a powerful feeling that I was standing upon holy ground while I did so; Obama, I suspect, felt he was only adding to its sanctity.) Obama’s speech was typical in that it set up straw men, fearlessly knocked them down, assigned blame without evidence, told falsehoods while demanding that others stop lying, and asked for discussion as long as every discussant agrees with him. Everyone else and every other opinion is “illegitimate.”

Wall Street was hardly blameless regarding the financial crisis of 2008 and reforms are necessary to prevent the same things from happening again. Niall Ferguson and Ted Forstmann explain what’s needed in today’s Wall Street Journal. (In a nutshell: moving derivatives trading from back rooms to exchanges and limiting the leverage that banks can use.)  The Senate bill wouldn’t do that. Instead it would move most derivatives trading to exchanges but allow the chairman of the Commodity Futures Trading Commission to decide what derivatives can still be traded over the counter. Does anyone see there a hugely empowered federal official (not to mention a golden lobbying opportunity for banks and members of Congress alike)? Is a back room at the CFTC an improvement over a back room at Goldman Sachs?

And Fannie and Freddie? They were at the heart of the mortgage meltdown and political piggy banks that were so badly (and corruptly) regulated that they are likely to cost the taxpayers $400 billion when all is said and done. But neither of these bills even mentions them. Fannie and Freddie are classic examples of crony capitalism, where government and business are in bed together. Obama wants to expand that disastrous model to the likes of JPMorgan Chase and Goldman Sachs.

It is the business of business to take risk and seek profit. It is the business of government to regulate business to ensure that the public interest is not put at risk. That’s exactly what government failed to do before 2008. As Judge Richard Posner put it in his most recent book, The Crisis of Capitalist Democracy, “Calling bankers greedy for taking advantage of profit opportunities created by unsound government policies is like calling rich people greedy for allowing Medicare to reimburse their medical bills.”

The Obama administration’s ruthless pursuit of ever greater concentration of power in Washington — and calling it reform — just keeps getting scarier.

Read Less




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