It frustrates conservatives no end to hear John McCain (and his loyal running mate) ape the Democrats’ line that it is Wall Street greed that caused our current woes. It wouldn’t be so bad if they at least realized that this is one limited part of a tremendous social engineering experiment gone bad with a dose of Congressional malfeasance thrown in.
Russell Roberts explains in convincing fashion how we got from noble goals of “expanding affordable housing” to a market meltdown. He concludes:
Fannie and Freddie played a significant role in the explosion of subprime mortgages and subprime mortgage-backed securities. Without Fannie and Freddie’s implicit guarantee of government support (which turned out to be all too real), would the mortgage-backed securities market and the subprime part of it have expanded the way they did? Perhaps. But before we conclude that markets failed, we need a careful analysis of public policy’s role in creating this mess. Greedy investors obviously played a part, but investors have always been greedy, and some inevitably overreach and destroy themselves. Why did they take so many down with them this time? Part of the answer is a political class greedy to push home-ownership rates to historic highs — from 64% in 1994 to 69% in 2004. This was mostly the result of loans to low-income, higher-risk borrowers. Both Bill Clinton and George W. Bush, abetted by Congress, trumpeted that rise as it occurred. The consequence? On top of putting the entire financial system at risk, the hidden cost has been hundreds of billions of dollars funneled into the housing market instead of more productive assets.
Throw in some egregious interference by Congressional benefactors of Freddie and Fannie who blocked real reform and you have the current mess. So why is that so hard for McCain to explain?
It happens to be right and it might just help him win, against a guy who is, after all, a Senator from the party who protected and abetted Freddie and Fannie. Many find it mindboggling that he won’t do it. Does he really not believe that much of the fault lies with Congress or can’t he bring himself to accuse his dear colleagues?
Whatever the reason unless he comes to terms with the real and compelling reasons for our current crisis he won’t be in any position to win and try to set things straight. And if he thinks Barack Obama has the will or ability to defy his own party and clean out the Congressional and regulatory stables, there’s a Bridge to Nowhere he can buy.